Private Self-Ordering Isn't Maximally Efficient

The tradeoffs between efficiency and inequality are long standing. This case study illustrates the inefficiency of private ordering, contrary to the prevailing lassiez-faire instinct of economics.

We use a dataset of the entire population of English Parliamentary enclosure acts between 1750 and 1830 to provide the first causal evidence of their impact. Exploiting a feature of the Parliamentary process that produced such legislation as a source of exogenous variation, we show that Parliamentary enclosures were associated with significantly higher crop yields, but also higher land inequality. Our results are in line with a literature going back to Arthur Young and Karl Marx on the effects of Parliamentary enclosure on productivity and inequality. They do not support the argument that informal systems of governance or “private orderings”, even in small, cohesive, and stable communities, were able to efficiently allocate commonly used and governed resources.

Leander Heldring, James A. Robinson & Sebastian Vollmer, "The Economic Effects of the English Parliamentary Enclosures" NBER WORKING PAPER 29772 (February 2022) DOI 10.3386/w29772