A Millennium of Common Mountain Pastures in Iceland, by Eggertsson

Intwnational Review ofLaw and Economics (1992) 12, 423-437 Analyzing Institutional Successes and Failures: A Millennium of Common Mountain Pastures in Iceland THR.&INKECCERTSSON Department qf Economics, University of Iceland, Reykjauik, Iceland 1. Introduction Throughout their history, the island economies of the North Atlantic have relied to a large extent on common property resources both in agriculture and in the hsher- ies.* It is well established that the sharing of resources need not always lead to a full- scale dissipation of wealth, the tragedy of the commons, when certain conditions are met.’ However, it is also well known that communities often fail to establish institutions for restricting entry to the commons, and, even when they exist, these institutions are often fragile structures, vulnerable to pressures from population growth, technological change and shifts in political power and processes.’ Therefore, it is of considerable interest to examine the evolution of property rights to natural resources in the North Atlantic communities, such as Iceland, Greenland and the Faroes, and to investigate whether institutions did emerge in these societies that effectively regulated entry and prevented the dissipation of their natural resources. The present study is concerned with the law and economics of Icelandic agriculture, specifically with the institutions that for more than a thousand years have regulated the use of the country’s extensive common mountain pastures. Icelandic agriculture dates back to the rapid settlement of the country in the ninth century A.D.3 In their ships the settlers brought with them cattle, sheep, horses, *I thank my research assistant, Th6rarinn Pbtursson, for valuable help. 1 also would like to thank various Icelandic scholars f.or sharing theit- thoughts and research findings with me. The paper uas originally pre- sented in Copenhagen at the 1991 meeting of the European Association of Law and Economics. I have received valuable comments from David Haddock, Arthur Denzau and two anonymous referees. The paper has also benefitted from comments by workshop participants at the University of Iceland, The Copenhagen School of Business, Washmgton University, University of Illinois at Urbana-Champaign and the Indiana University at Bloomington. ‘For instance, see E. CIstrorn, Covrrnzng thP Commm. Thr Evulut~on of Inst~tutmu for Collertw Artwn, Cambridge University P1-e5s (1990). ‘For the problems of contracting for property rights in various env~ronmrnts. see G.D. Lihecap. Con~rur~~gfor Pm/w/~ Rzghts, Cambridge University Press (1989). “Medieval texts say that the settlement of the country was completed in 60 >ears from about 870 to 930 A.D. See J. Benediktsson, “Land&m og upphaf allsherjarrikis.” [The Settlement and the Origins of the C:ommon- wealth.] In S. Linda1 (ed.), Sngn l~land.\ I, Hid islenska h6kmenntaf6lag (Reykjavik, 1974). For an account in English of the early history of Iceland, see J. J o‘h annesson, A Hutory of lhe Icelnndzc Cmmonwunllh, transl. hy H. Besaason, University of Manitoba Press (1974). 0 1992 Butterworth-Heinemann 424 Iceland common mountain pastures goats, pigs, geese, chicken and dogs, and found that the local environment invited the raising of livestock rather than the cultivation of fields. The conditions for grazing were ideal, and, as there were no wild mammals, except the fox, the herds could graze unattended in mountain pastures during the summer months.” In Iceland the farmland and home pastures are primarily in locations all around the coast. Rising above the farmland are the mountain pastures, while a third of the country’s 103,000 square kilometers is wilderness with no vegetation.” The mountain pastures are sometimes continuous green areas but often include cliffs, rocks, sands and waste- land interspersed with vegetation, and, therefore, the grazing animals often must roam far and wide.” The early settlers appear to have claimed land as far as the wilderness of glaciers, sands and lava in the interior, and initially appropriated the mountain pastures that in Icelandic are called afrittir (singular aft-ittur). In fact, some mountain pastures always have remained exclusive private property, but generally the ownership of the afrettir evolved into communal property. No documentation, however, exists that throws light on how the pastures were divided among the different communities.’ In spite of considerable scholarly interest in the question of the commons, the institutional arrangements of the afrittir in Iceland have not been studied by econo- mists, as far as we know. It is almost trite to argue that reliance on common property arrangements may end in a tragedy, and Icelandic society certainly had its share of tragedies. Long-term economic decline, probably beginning in the thirteenth century, hit bottom in the eighteenth century, when the Icelanders came close to extinc- tion.’ Furthermore, at the beginning of the twentieth century the country’s green areas are conservatively estimated to be one half of their size at the time of the settlement in the ninth century, and the annual production of vegetation is estimated to be only one third of the ninth century level.” Historians have blamed centuries of economic decline on foreign rule, adverse external trade relations, volcanic erup- tions, pests and plagues, and cooling climate, but the role of the system of property rights in agriculture has received little attention.“’ “See vol. 3 in T. Thoroddsen. L$zng i&nrlJ, Lnndbtir&ur d i~landi I-H [A Portrait ot Iceland: Icelandic Agri- culture I & II] (1919, 1921). Thoroddsen’s two volumes are still the hest available history of Icelandlr agriculture. 51hid., pp. I-30 “Ibid., pp. 175-213. ‘Ibid., p. 184 “The economic history of the country is reflected in the average height of the population: “From the age of the settlement down to the 16th century stature remained more or less constant, or about 172 cm. In rhe 18th century it fell to 167 cm, and about the middle of the 20th century it rose again to 176.8. In other wordr in a period lasting 400 years at the outside, or in the course of 16 generations. the mean statux of the population first falls about 5 cm and then rises 10 cm again, a variation of 1 cm a genwation on the average.” p. 44 in J. Steffensen, “Stature as a Criterion of the Nutritional Level of Viking Age Icclandera,” in K. Eldj;lrn (cd.), Arhdk hiny iclmskn fordrlfaf&q~. /jlgzrz/ [Yearhook of- the Icelandic Archeological Society. Supplementl, 1958. “See pp. 32-33 in S. Fridriksson (1986), “Factor.\ Affwting Pwductivity and Stahihty of Northern E<o~yatems.” in 6. Gudmundsson (ed.), GraziTlg Rvsrarch a/ Norfhmn Latz~udus, Plenum Publishing, New York. “‘The drop in temperatures “happened most frequently during the 13th and 14th centuries and during the so-called little ice age in the period between 1600 and 1900.” S. Fridriksson, ~upra at note 9, p. 32. “In these periods the average air temperature may have been 1.5 to 2°C lower than it is today in good years, \+hich may have caused a 50% drop in primary production of the grassland compared with the yield as it had heen in good years.” Ihid., p. 35. T. ECGERTSSON 425 In this paper we limit our attention to the structure and consequences of property rights in the communal mountain pastures. We are concerned with the following questions: (1) Why were the afrettir used communally and not divided into exclusive plots for each user? (2) Was the environment of the Icelandic farm districts likely to encourage collective action, and how were the afrettir regulated? (3) Are the rules governing afrettir an example of a tragic solution to the commons problem rather a first-best or second-best solution? We proceed in our examination by first briefly introducing certain theoretical con- cepts before turning to each of the questions above. The theoretical analysis draws on recent work by Ostrom (199(l), Field (1986) and others.” The empirical part is based on various published documents, such as the old law codes, records of deeds and .judgements, regulations from various periods, a computer search of the Ice- landic Sagas, studies by historians and by experts on agriculture, climate and vegetation and, finally, personal interviews in Iceland with agriculturalists, natural sci- entists and historians. We find (a) that .joint utilization of the mountain pastures is economically rational when allowance is made for transaction costs (costs of exclusion and internal gover- nance), (b) that the social and economic environment of Icelandic farm districts was suitable for collective action, and there is evidence, extending back through the en- tire history of the country, of elaborate rules for preserving the jointly used afrettir and (c) that open access problems in the common mountain pastures are not an important explanation of centuries of economic decline in Iceland. 2. A Note on Theory The economics of property rights and, generally, the economics of institutions in- volve several levels of analysis. A useful initial approach, which I have referred to as the naive model, ignores the supply side and only considers the demand for property rights. I2 The naive approach suggests< that institutions that restrict access to a common property resource tend to emerge when there are net aggregate gains to the community from internalizing the external effects that are associated with open access.” The theory predicts that, given measurement and enforcement costs (transaction costs), an institutional structure will emerge that maximizes the value of the resource. The theory also suggests that overuse and dissipation of a valuable resource will occur when the costs of measurement and enforcement exceed the potential gains from restricting access. A complete model of institutions requires that we add a supply side to the naive model and, thereby, introduce issues concerning the provision of property rights.

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