Controlled and Indiscriminate Land Demarcation: The Rectangular Survey versus Metes and Bounds

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Controlled and Indiscriminate Land Demarcation
The Rectangular Survey versus Metes and Bounds

• Gary D. Libecap
• University of California, Santa Barbara
• National Bureau of Economic Research
• and
• Dean Lueck
• University of Arizona

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Rectangular Survey versus Metes and Bounds

• The beauty of the land surveywas that it made
  buying simple, whether by squatter, settler or
  speculator. The system gave every parcel of
  virgin ground a unique identity, beginning with
  the township. Within the township, the thirty-six
  sections were numbered in an idiosyncratic
  fashion established by the 1796 Act, beginning
  with section 1 in the north-east corner, and
  continuing first westward then eastward, back and
  forth,.And long before the United States Postal
  Service ever dreamed of zip codes, every one of
  these quarter-quarter sections had its own
  address, as in ¼ South-West, ¼ Section
  North-West, Section 8, Township 22 North, Range 4
  West, Fifth Principal Meridian. Linklater (2002,
  180-81).

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Rectangular Survey versus Metes and Bounds

• There is a growing literature on the nature of
  property rights in contributing to different
  patterns of economic growth across countries.
  Much of this literature has focused on the
  investment effects of differences in legal title
  to land, but the empirical findings have often
  been limited by endogeneity in the data and small
  differences in the title systems under study.
• The key econometric design issue is to define a
  setting for which fundamental property systems
  are exogenous to the agents in the data. The
  institutional analysis provided in this paper
  meets these criteria.

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Rectangular Survey versus Metes and Bounds

• In this paper we examine the impact of two
  different decentralized or uncontrolled and
  centralized or restricteddemarcation of property
  boundaries metes and bounds (MB) and the
  rectangular survey (RS).
• MB--competitive land claimants define property
  boundaries to capture valuable land and to
  minimize the individual costs of definition and
  enforcement. No prior survey, no standardized
  method of measurement or shape. Property
  boundaries follow the natural contours of the
  land and are described in terms of local,
  idiosyncratic features (e.g., trees, streams,
  rocks). In perfectly flat, unbroken terrain,
  property claims will be rectangular but not
  systematic or necessarily aligned.
• RS--rectangular plots are defined systematically
  and allocated to claimants after survey.

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Rectangular Survey versus Metes and Bounds

• RS lowers the costs of land development and
  exchange through its measurement, enforcement,
  and incentive effects as compared to using MB.
• MBvague and imprecise (four paces from the most
  northerly rock pile), temporary (trees
  disappear, stream beds change, so that boundary
  markers had to be periodically investigated to
  insure that they were still visible),
  idiosyncratic (different terms used locally).
  Subject to dispute and conflict. The
  idiosyncratic nature of measurement limits the
  size of the land market because remote purchasers
  have little knowledge of local land features and
  have to rely on localized interpretation of their
  meaning for property boundaries. Infrastructure
  development, such as for roads, is more costly
  because of the inexact nature and multitude of
  land boundaries that must be crossed. Further,
  where incongruent individual plots collide, there
  are gaps of unclaimed land that remains
  essentially under open-access conditions. As
  these land gaps ultimately became valued they
  were inevitably subject to competing and wasteful
  claims by the adjacent parties.

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Rectangular Survey versus Metes and Bounds

• RS reduces the costs of measurement, enforcement,
  and exchange. By bearing upfront costs of
  systematic survey prior to occupancy, individual
  plots are aligned. Boundaries are clear, precise,
  and uniformly positioned. Hence, properties are
  identified and broadly understood for extending
  the market. There is less opportunity for
  confusion and dispute. Land titles are clearer
  adverse possession conflicts are more limited
  and overall land exchanges promoted, encouraging,
  where optimal, farm consolidation and overall
  improvements in productivity, especially if
  capital investment requires minimum farm and
  field sizes. Centrally-defined survey and
  allocation provides for coordination in
  infrastructure development. The centralized
  system itself is public good (much like a library
  catalog system) so that the market for land is
  expanded dramatically.

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Rectangular Survey versus Metes and Bounds

• Substantial advantages in developing societies
  where land is the most important asset.
• Even more important in urban development where
  coordination is necessary for infrastructure
  investment and property consolidation is
  necessary.

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Rectangular Survey versus Metes and Bounds

• Beginning at two sugar trees and a Buckeye,
  upper corner to Philip Slaughters survey, No.
  588, running with his line N. 66 degs. W. 290
  poles, to a lynn sugar tree and ash, in the line
  of said Slaughters survey. 14 Ohio 13 Wyckoff v
  Stephenson.
• RS found in much of US, Canada, parts of
  Australia, NZ, and South Africa, not in Brazil,
  Argentina, other frontier societies.
• RS found in most designed newer cities, as
  compared to older, spontaneously settled urban
  areas.

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Rectangular Survey versus Metes and Bounds

• RS Land Ordinance of 1785 that required that the
  federal public domain be surveyed prior to
  settlement and that it follow a rectangular
  system. Land sales were to be the primary source
  of revenue for the federal government, and the
  government bore the upfront costs of survey prior
  to allocation in order to provide for a uniform
  grid of property boundaries that were standard
  regardless of location and terrain.

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Rectangular Survey versus Metes and Bounds

• Start where non-cooperative agents claim and
  enforce separate plots in order to maximize the
  value of their land net of demarcation and
  enforcement costs.
• Large area of open land available to all
  potential claimants
• Each claimant chooses the amount of acres to
  claim and the amount of border to enforce in
  order to maximize the profits net of enforcement
  costs ai is the area claimed, pi is the plot
  perimeter, n is the number of neighbors on the
  plot border, yi(ai,pi) is the total value
  function that depends on the acres claimed and
  the perimeter, ci(ai,pi,n) is a border
  demarcation and enforcement cost function that
  also depends on a and p.
• The noncooperative Nash equilibrium solution to
  this problem is the optimal size (a) and
  perimeter (p) pair ---- which implies a specific
  plot shape.

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Rectangular Survey versus Metes and Bounds

• Case where claimants have the same productivity
  and the same enforcement costs seek to minimize
  the border demarcation and enforcement costs. The
  question is what shape and by implication what
  perimeter will minimize these costs for a give
  area? Circle.
• But the demarcation and enforcement cost function
  is likely to be more complex, for example,
  circular plots leave unclaimed land open for
  intruders to threaten the border of the circular
  plot adding to the costs of demarcation and
  enforcement. Many-sided regular polyhedrons
  (e.g., decagons) would eliminate the unclaimed
  parcels but lead to many shared borders. A
  square with a side length of s, has a small
  perimeter per area and just four shared borders.
• A plausible Nash equilibrium in land claiming is
  a pattern of square parcels on a flat landscape.
  
• But not aligned.
• Adding heterogeneous land, changes the shape of
  the claim.

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Rectangular Survey versus Metes and Bounds

• With RS, survey prior to claiming. Upfront costs.
  
• RS creates borders that are fixed (compared to
  the impermanent borders in metes and bounds).
  The RS creates a public good information system
  that expands the market. As such the RS system
  is generally expected to minimize definition and
  enforcement costs.
• Surveys are standardized and aligned, no
  unclaimed gaps in property claims with uniform
  boundaries, there are fewer property boundary
  disputes with holdings designated by external
  coordinates, remote potential buyers can identify
  properties land markets are expanded with
  coordinated boundaries, infrastructure investment
  in roads is expanded productivity advances
  because farms and fields can be adjusted to
  optimal size for adoption of technology.

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Rectangular Survey versus Metes and Bounds

• Prediction 1 Compared to RS, the land holdings
  under MB will be more varied in size and shape.
• Prediction 2 - There are fewer legal disputes and
  less litigation over boundaries and tites under a
  RS system compared to MB.
• Prediction 3 Because the costs of transacting
  land is lower under RS and because the market is
  larger under RS there we be more land
  transactions such as conveyances and mortgages
  under RS. It is also expected that land values
  will be higher under RS compared to MB.
• Prediction 4 - There are expected to be more
  roads under a RS system because roads can be
  built more cheaply along uniform property
  boundaries.

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Rectangular Survey versus Metes and Bounds

• Qualitative evidence on the history of the
  Northwest Ordinanceeffort to raise land values
  for government revenues. Similar with land
  companies.
• Qualitative discussions of gaps and gores.
• Quantitative data1860 and 1870 Censuses, state
  reportsland transactions, values, land size
  distributions, roads.

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Comparison of Land Value/Acre in VMB (MB)
Counties Relative to those in Adjacent Counties
(RS)
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Rectangular Survey versus Metes and Bounds

• Legal Analysis
• Generally argued qualitatively that there are
  more land disputes over titles and boundaries in
  the VMD than the rest of Ohio.
• To test that we examined compendiums of all Ohio
  court cases in the 19th century
• Survey Issues
• Boundary Issues
• Adverse Possession
• Validity of Deeds/Patents
• Then accessed the cases via Westlaw and
  Lexus/Nexus to determine the nature and location
  of the case.

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Rectangular Survey versus Metes and Bounds

• Concluding Remarks
• Evidence that the MB system reduces land values
  by limiting market transactions, increasing land
  disputes, adding uncertainty of ownership and
  hence, incentives to invest. Loss of the capital
  gains to land is a major source of wealth loss.
• Losses persist and can be pervasive in developing
  societies.

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Rectangular Survey versus Metes and Bounds

• The VMD has lower levels of urbanization than the
  rest of the state, with no major cities, even
  though the terrain and land quality do not vary
  importantly between the VMD and other nearby Ohio
  counties.
• Although we have not yet performed econometric
  tests of the long-term impact of the MB system,
  the evidence is suggestive of a major drag on the
  economy.
• In a rich surrounding society, the effects can be
  relatively benign. In a poor society, however,
  the inability to precisely define and enforce
  property rights to land can be a major barrier to
  economic growth and progress.
• This study provides empirical detail to the more
  aggregate findings of the importance of secure
  property rights to promoting economic welfare.