Solving problems 'the easy way' today can trap your community in poverty for the next 200 years.
April 16, 2026
Original Paper
Informal Property Rights and Long-Run State Capacity: Evidence from Local Governments in Newfoundland
SSRN · 6576871
The Takeaway
When frontier settlers in Newfoundland used informal 'handshake' deals for land rights, it seemed like an efficient way to survive in the wild. But those early shortcuts created an 'institutional scar' that prevented formal local governments from ever forming properly centuries later. Because they relied on informal rules for so long, they never built the 'muscle' for taxes, public services, or official governance. It turns out that being 'scrappy' in the short term can permanently stunt a society's ability to modernize and grow. For policy makers, it’s a warning that the most efficient solution for right now might be a poison pill for the future.
From the abstract
This paper studies how informal property rights regimes that emerge in frontier environments affect the long-run formation and performance of local states. I examine this question in the context of British colonial settlement, using Newfoundland as a laboratory. During early settlement, economic activity relied on an informal property rights regime governing access to coastal infrastructure in the fishery. I measure exposure to this regime using geographic variation in proximity to flat shorelin