Political Economy of Railroad Land Grants: Legal Uncertainty & Development of Irrigation in Colorado and Montana

Eric C. Alston (University of Colorado)
Steven M. Smith (Colorado School of Mines)

Abstract: While property rights scholarship recognizes that economic development can be stymied when rights are not well-defined, displaying this phenomenon empirically poses several challenges. Identifying appropriate comparative contexts where economic activity is sufficiently sensitive to comparable property rights structures, as compared to other forces determining economic outcomes, is no easy task. Similarly, measuring economic outcomes with a sufficient level of granularity poses data requirements that are often insurmountable. Our analysis follows in the lengthy tradition of considering property rights and economic development along frontiers. In the context of the US West, economic historians have long argued that the economic benefits of the railroads outweighed the costs of incentivizing development with federal land grants and loans. However, the way these land grants were awarded was not uniform in process or timing; we argue that uncertainty surrounding the development of the Northern Pacific in Montana created the right historical context within which to examine the effects of uncertainty to title on one costly economic activity along the frontier, irrigation development. Montana’s irrigation development generally lagged that of Colorado and we create a spatially granular data set of land patents and water rights for PLSS sections that yields a variety of evidence that uncertainty surrounding railroad land grants in Montana specifically contributed to delaying and stunting settlement and irrigation development in the state.

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