by Jim Rose in development economics, law and economics, property rights Tags: Australia, colonisation, property rights, rhino

Doug Allen in The Rhino’s Horn explains why owners sometimes reduce the value of certain attributes of their property because this reduces the incentives for others to steal it. These attributes may be of little value to you but of much greater value to those seeking to steal it.

The rhino’s horn is cut off to stop poaching. The horn is a mass of hair so removing it is painless. This is much cheaper than hiring bodyguards for every Rhino.

My garage door was tagged last year. I do not have this small tag cleaned-off because it would just invite another tagger to have a go.

Allen argued that it is cheaper to reduce the value of that part of the asset that others want to steal than spend a fortune defending it against potential theft. With regard to Australia, he said:

The country had, ironically, been discovered and claimed ﬁrst by the Dutch, who at the time were a signiﬁcant force in the region. Starting in 1772, the French began their ﬁrst claim to the territory. Although ignored by the British, the French sent expeditions in 1785 and 1792, making signiﬁcant explorations of southern Australia and Tasmania. The French did not cease these efforts until the 1820s.

Australia was first colonised in 1788 as a penal colony. Very expensive to do, but it did fill-up the only valuable part – Sydney harbour – with 60,000 mainly riffraff and low life. This penal colony for a number of decades made the only valuable part of Australia more unattractive to other European powers to conquer. Allen explains:

In the case of Australia, the hypothesis might appear silly. How much reduction in the ﬁrst-best value to a continent can come from 60,000 convicts? However, one must keep in mind that the only value of Australia at the end of the eighteenth century was from Sydney Harbour, Norfolk Island, and a few other strategic locations. On these margins, the convicts could lower the value considerably … After the War of 1812 Britain realized the strategic signiﬁcance of Bermuda and subsequently established a penal colony there.

A prosperous colony is an attractive colony to conquer so imperial army and navy resources would have deployed to defending it. Prosperous locals and locally recruited troops can switch loyalties.

An empire full of prosperous colonies makes you an attractive target for other European powers to gang up on and divide the spoils. This may explain why some colonial powers had mixed feelings about developing their colonies. Robert Lucas observed that:

Stagnation at income levels slightly above subsistence is the state of traditional agricultural societies anywhere and any time. But neither did the modern imperialisms—the British included—alter or improve incomes for more than small elites and some European settlers and administrators.

France lost its once vast North American colonies through wars. Many colonies changed hands after the countless European wars as part of peace settlements.