The View from the Airplane Window Seat

This fascinating article asks and answers a question that has puzzled me for years, and maybe it’s puzzled you too: “Have you ever wondered, as you have flown across the United States, why the land far below is organized into square grids?”

The author of the piece, property rights expert Gary Libecap, traces the origin of those square plots of land back to the founders: 

These rectangular patterns emerged by design, not by accident. The U.S. Land Law of 1785, drawn up by Alexander Hamilton, Thomas Jefferson, and others in the Continental Congress, decreed that all federal lands were to be surveyed into rectangles of 640 acres bounded by range and township lines prior to settlement and sale. Range and township lines were tied to latitude and longitude with a principal meridian.

Something so simple as arranging land in square plots–giving land clear and defined borders–can have an enormous impact on economic growth:

To see just how much the rectangular survey mattered for the American economy and whether the country’s founders in the Continental Congress had it right when they enacted the property legislation, economic Dean Lueck and I located an area in south central Ohio of 4.2 million acres (about one sixth of the total state’s acreage) called the Virginia Military District (VMD).

This region was claimed by Virginia, and in 1784 Congress granted the state the right to use those lands to compensate its Revolutionary War veterans. Virginia used the old metes and bounds demarcation system in the VMD. Surrounding it, however, were federal lands demarcated by the rectangular system defined by the 1785 Land Law. Otherwise these two sample areas were identical and, in any event, we could gather information on topography, river density, and land quality to control for any differences between the regions. This natural experiment allowed us to analyze how the rectangular property institution, implemented by the Continental Congress over 200 years ago, affected property rights to land, land values, and economic performance.

Using census data, we examined land values in the VMD and adjacent counties in two ways. First, we gathered land values, land characteristics, and individual owner attributes from the 1850 and 1860 censuses. Then we gathered land values for the same regions from 1850 through 1950 (the census changed the way it collected data after that so we could not go through 2010). We found that, controlling for land and owner characteristics, land values were around 25 percent higher under the rectangular system than under metes and bounds in 1850 and 1860. Further, extending the analysis for 100 years revealed that these land value differences persisted!

Pretty interesting, isn’t it? You can read the full article here.