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«Emergence of Endogenous Legal Institutions: Property Rights and Community Governance in the Italian Alps MARCO CASARI This article examines changes ...»

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Emergence of Endogenous Legal

Institutions: Property Rights and

Community Governance in the

Italian Alps

MARCO CASARI

This article examines changes in institutions that protected property rights in the

Alps between the thirteenth and the nineteenth century and, in particular, alternative management systems adopted for the common pastures and forests in

about 200 communities. Over time, private-order institutions in the form of charters replaced informal arrangements sustained by the long-run interaction among villagers. Although costly to run, the charters accomplished several tasks that increased resource use efficiency.

T his article examines changes in institutions that protected property rights and regulated their use in the commons in the Italian Alps and, more specifically, in the Trentino region, which is situated at the linguistic border with the German-speaking South Tyrol. We study the alternative management systems adopted for the common pastures and forests through medieval and modern times (1200–1800). It is well known that when a group of users harvest a natural resource without regulations, they end up overexploiting it in comparison to the socially optimal use.1 This overexploitation of a natural resource is known as the The Journal of Economic History, Vol. 67, No. 1 (March 2007). © The Economic History Association. All rights reserved. ISSN 0022-0507.

Marco Casari is Assistant Professor of Economics, Krannert School of Management, Purdue University, 403 West State Street, West Lafayette, IN 47907. E-mail: casari@purdue.edu.

This article has developed from a chapter of my Ph.D. dissertation written at the California Institute of Technology. I wish to thank Douglas Allen, Jose Apesteguia, Benito Arruñada, Jeremy Atack, Marco Bellabarba, Giangiacomo Bravo, Lance Davis, Paolo Ghirardato, Alvaro Gonzalez Staffa, David Haddock, Peter Hill, Philip Hoffman, Fred McChesney, Larry Neal, Rosella Nicolini, Isan Tunali, Charles Plott, Andrew Seltzer, Simon Wilkie, Dean Williamson, and three anonymous referees for their valuable comments. This work has also benefited from the comments of participants to presentations at Northwestern University, University of Bologna, Workshop on Institutional Analysis, Barcelona, Royal Holloway, London, Autonoma University of Barcelona, Simposios de Analisi Economica in Salamanca and Sevilla, Simon Fraser University, Koç University, Sabanci University, TUFTS, Caltech, University of Trento, European Historical Economics Society Summer School, Sweden, and the IASCP conference at Indiana University. Help to access original documents and other data was provided by Simonetta Cova, Mariano Devigili, Maurizio Erlicher, Fabio Giacomoni, Filippo Militello, Enrico Recla, Marco Stenico, Gian Maria Varanini. Thank you also to Luisito Bertinelli and Anya Savikhin for the technical and editorial assistance. All remaining errors are mine.

Gordon, “Economic Theory”; and Clark, Mathematical Bioeconomics.

Casari tragedy of the commons and it has interested economic historians arguably since the debate over the English common fields.2 This article combines empirical data and the theory of infinitely repeated games for the study of historical institutions. There are only few studies along this line and they have analyzed the organization of merchants.3 This study focuses on the institutions set up by the users of common forests and pastures. Although in principle there existed many governance regimes to manage the land under communal property, we focus on the choice between the two regimes of private-order governance and informal enforcement. The private-order governance took the form of a legal institution, called Carta di Regola or “charter,” that a community adopted to define and enforce locally property rights on the land. Starting in the thirteenth century, we see the emergence of charters in communities throughout the Trentino region. There is evidence that for centuries forests and pastures were managed by the community in a peculiar manner. We collected data about the timing of charter adoption, population, location, and land uses of more than 200 communities and discover that by 1805, when this system was forcefully abolished by Napoleon, about two-thirds of them had adopted a charter.4 Instead of building a charter, communities could have relied on informal enforcement. Because of the long-term interaction among community members, one would expect that users could have exercised mutual restraint in harvesting the commons and achieved full efficiency.

These small settlements in the mountains, where families’ roots in the community extended back for several generations, may be one of the closest situations one can find in the field for the infinitely repeated interaction required to apply the so called “folk theorem.”5 “The folk theorem can be interpreted as a statement about the power of social norms in small groups.”6 If the users of a common resource knew one another well, could observe one another’s behaviors, and anticipated a continuing relationship with one another, then social norms could sustain any pattern of group harvesting of the common resource, including the optimal one.

McCloskey, “Enclosure”; and Clark, “Commons Sense.” Milgrom et al., “Role”; Greif, “Contract Enforceability”; Clay, “Trade”; and Okazaki, “Role.” See the Appendix for a more detailed description of the data.





Friedman, “Non-Cooperative Equilibrium.” “In the 1950s, several game theorists had conjectured that rational players should be able to cooperate—for example in the... prisoners’ dilemma—if the game would only continue long enough.... Its folklore flavor is the reason why the result came to be referred to as the ‘Folk Theorem’” (Royal Swedish Academy of Sciences, “Robert Aumann’s and Thomas Schelling’s Contributions”).

Myerson, Game Theory, pp. 349–50.

Emergence 193 Why would the villagers choose to build costly private-order institutions when informal cooperation through repeated interaction was available? We exploit the differences in characteristics of the about 200 communities and their different timing of charter adoption (or nonadoption) to understand the reasons behind the choice of governance regime on the land under communal property. This article finds, in particular, that the likelihood of a legal institution’s being established increases with a community’s size, its proximity to other settlements, and the amount of its common resources. Contiguous effects were not important in the timing of adoption. The empirical analysis includes an event history model, a technique that is widely used in demographic studies and other survival analysis studies, but with only few applications in economic history.7 From a game-theoretic perspective the charters may have improved efficiency in the use of the communal resources. From the empirical analysis we find that the emergence of the charters is compatible with Demsetz’s intuition that institutions change in response to the benefits the change entails.8 In the balance of the paper we first introduce the Trentino economy and the charter system. Other possible governance regimes on the common land are then described along with the game-theoretic issues for the application of the folk theorem. A specific discussion is reserved to the transitioning from one management regime to another. The empirical evidence presented here includes both details on the institutional structure and an econometric analysis, where the latter consists of a static and a dynamic models. The static model studies why a community ever adopted a charter before 1800. The dynamic model employs an event history estimation that aims at explaining both whether and when a community adopted a charter. At each point in time we consider only those communities who have not yet adopted a charter and model the likelihood that a charter will be adopted in the future.

THE CARTE DI REGOLA SYSTEM IN THE ITALIAN ALPS

Trentino is a mountainous area of about 2,400 square miles situated to the northwest of the Republic of Venice. It is in the Romancespeaking area of the Alps, and includes parts of the Dolomite Mountains and of the Garda Lake. There were a few hundred, very small communities For demographic studies, see Tuma and Hannan, Social Dynamics; Forster and Jones, “Role”; and Honjo, “Business Failure.” For economic history applications, see Tunali and Pritchett, “Cox Regression.” Demsetz, “Toward a Theory.” Casari

–  –  –

Notes: Not to scale.

Sources: Drawn by the author.

scattered all over the region. According to the 1810 census, the median population of a village was 410 people.9 Within a village, houses were grouped together around the church and the main square.10 Each village was surrounded by an area cleared from forest. Traveling between communities was sometimes slow because of the need to cross mountain ranges along winding routes. Although there were three rivers used to transport goods, most communities were far from any of them (Figure 1).11 The biggest city, Trento, never went beyond the role of local capital—with the exception of the years of the Catholic Church Council—and, even in 1800, its population was no more than 7,000 (Bairoch et al., Population).

The prevalent pattern is nucleated communities and not houses scattered and surrounded by their own estate. For an interesting comparison with the neighboring German-speaking communities see Cole and Wolf, Hidden Frontier.

The Adige river was navigable and connects the region to large Italian cities such as Verona and ends in the Adriatic sea. Even one of its minor affluents, the Avisio river, had been improved to carry timber logs. Finally, the Mincio river leaves the Garda lake for Mantova and then ends into the Po river, connecting Trentino to Ferrara and to the Adriatic sea. As early as the fourteenth century, export of timber reached the Adriatic sea, where it was used for ship building (Patitucci, “Vie d’acqua”).

Emergence 195 The Trentino climate exhibits dramatic variations, mostly depending on the altitude of the location, which varied between 220 and 12,349 ft.

The climate sharply constrains the potential uses of the land. For instance, vineyards, which supplied a valuable tradable product, can grow at altitudes only up to 2,500 ft., ruling out more than 70 percent of Trentino. Sites above 5,000 ft. are characterized by a short season without snow and—provided they are not bare rocks—can only sustain pastures or forest. Another important feature of the land is its slope. Grains were cultivated where the slope was gentle, but arable framing on steeper land exposed it to the erosion of the rain and to the risk of landslides. As a result of the double constraints of altitude and slope, arable land accounted for only 8 percent of the regional surface in 1897.

Whereas vineyards and arable land were mostly individual property, forest, meadows, and pasture were mostly communal property. Forests covered about half of the area and were a precious source of firewood to warm up houses during the long and cold winters, and of timber to build houses and craft furniture, and of litter for the animals kept in stalls.

Moreover, logging could be carried on in winter, the off-peak season for labor demand on the fields. Timber was also a traded commodity, provided that transportation was not too costly. The other important activity on the commons was cattle grazing. During the summer, cattle could graze on the high mountain pastures, while villagers mowed the hay on the lowest meadows. Meadows and pastures covered about one-third of the land surface of the region. When fall came, the cattle were moved onto the low pastures and, after harvest, onto the arable land. During winter, the animals were kept inside stalls and fed with the hay stored in the barns, and, as soon as the season got better, they were brought outside to graze on the arable land that was waiting for seeding time.12 Starting from the thirteenth century we see the emergence of the Carte di Regola (or rural charters), which are legal documents for the management of the community resources.13 After six centuries more than two-thirds of the Trentino communities had adopted a charter (Figure 2). Charters were generally granted by the Prince-Bishop of Trento, who was jointly appointed by the Emperor of the Holy Roman Empire and by the Pope for a lifetime term. This political structure lasted from 1027 until 1796, when Napoleon invaded the region and then abolished the charter system in 1805.

The arable land was planted with vineyards or grains of various kind (rye, wheat, barley, oat, and others minor grains). Other crops such as cabbages, turnips, or broad beans were also present, although not very common. Corn was introduced in the mid seventeenth century, and the potato only in the early nineteenth century.

Written documents become common in Trentino starting from the eleventh century.

Casari No.of Charters 1200 - 1250 1251 - 1300 1301 - 1350 1351 - 1400 1401 - 1450 1451 - 1500 1501 - 1550 1551 - 1600 1601 - 1650 1651 - 1700 1701 - 1750

–  –  –

Source: Database constructed by the author, see the text and the Appendix.

The rural charters were a codification of the rules established by the community assembly for managing the economic resources of the community. The charters restricted individual resource use, in the form of individual quotas, time, and place restrictions. Such rules were intended to exclude nonowners from the use of the land and, in various ways, limit the exploitation level of the resources held in common.

There are clear statements about this latter goal regarding pasture usage in the form of “wintering rules.” According to the rule, if a villager could not feed his animals during the winter with grass from his own meadows, the animals were not allowed on the common pastures in the summer.14 The tragedy of the commons for forests was more locationspecific. Because of the high costs to transport timber, without regulations the forest closer to the village definitely had a problem of being overused. Similarly, the closer to rivers or roads, the more a forested area was subjected to overharvesting. For remote locations the danger was less pressing.



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