Golden Rules: The Origins of California Water Law in the Gold Rush

Golden Rules: The Origins of California Water Law in the Gold Rush

by Mark Kanazawa

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Fresh water has become scarce and will become even more so in the coming years, as continued population growth places ever greater demands on the supply of fresh water. At the same time, options for increasing that supply look to be ever more limited. No longer can we rely on technological solutions to meet growing demand. What we need is better management of the available water supply to ensure it goes further toward meeting basic human needs. But better management requires that we both understand the history underlying our current water regulation regime and think seriously about what changes to the law could be beneficial.

For Golden Rules, Mark Kanazawa draws on previously untapped historical sources to trace the emergence of the current framework for resolving water-rights issues to California in the 1850s, when Gold Rush miners flooded the newly formed state. The need to circumscribe water use on private property in support of broader societal objectives brought to light a number of fundamental issues about how water rights ought to be defined and enforced through a system of laws. Many of these issues reverberate in today’s contentious debates about the relative merits of government and market regulation. By understanding how these laws developed across California’s mining camps and common-law courts, we can also gain a better sense of the challenges associated with adopting new property-rights regimes in the twenty-first century.

Product Details

ISBN-13: 9780226258706
Publisher: University of Chicago Press
Publication date: 07/10/2015
Series: Markets and Governments in Economic History
Sold by: Barnes & Noble
Format: NOOK Book
Pages: 336
File size: 7 MB

About the Author

Mark Kanazawa is professor of economics at Carleton College.

Read an Excerpt

Golden Rules

The Origins of California Water Law in the Gold Rush

By Mark Kanazawa

The University of Chicago Press

Copyright © 2015 The University of Chicago
All rights reserved.
ISBN: 978-0-226-25870-6



I think that I may without vanity affirm that I have seen the elephant. — Louisa Clappe

1.1 Introduction

There is an age-old parable that goes something like this. An elephant wanders into a village in which there live some blind men. The blind men, who did not know what an elephant was, go to investigate, and each one touches a different part of the elephant. The one who touches one of the elephant's ears concludes that an elephant is like a fan. The one who touches the tail concludes that an elephant is like a rope. The one who touches the elephant's flank concludes that an elephant is like a wall. Each one draws a different conclusion on the nature of "elephantness."

The blind men were, of course, behaving kind of like social scientists. Each one was collecting evidence and drawing a conclusion based upon that evidence. The problem was that each one was basing his conclusion on extremely limited and selectively chosen evidence. And it comes as no surprise that they arrive at completely different conclusions.

For a book on water rights in Gold Rush California, this parable is appropriate for two reasons. The first is that there is a long tradition in Gold Rush history in which elephants figure prominently. When the gold seekers set out for California, many of them told their friends and family that they were going to "see the elephant." The expression came from a popular tale that circulated when traveling circuses commonly brought elephants with them to the towns where they performed. According to the tale, a farmer was on his way to town with a horse-drawn wagon full of vegetables and decided he wanted to go see the elephant. When he saw it, he thought it was a wondrous thing. His horse, however, was frightened out of his wits at the sight of the elephant and bolted, strewing the farmer's vegetables all over the ground. But when his friends commiserated over his misfortune, he replied: "I don't care, for I have seen the elephant." From that tale, "seeing the elephant" came to mean a once-in-a-lifetime experience that was, however, fraught with danger, hardships, and potential disaster. For many gold seekers, this seemed to describe perfectly the prospect of going to California to seek their fortunes.

The second reason I choose to tell this parable here has to do with the challenges of Gold Rush scholarship. It is hard and fraught with dangers because there is so much evidence available for scholars to consult and evaluate, including news stories, miner's diaries, government reports, state executive documents, court rulings, mining codes, county histories, statutes and their legislative histories, company records, and previous scholarship. The sources of information are many, and the information they provide is rich and detailed, almost an embarrassment of riches. But not all of the available evidence seems to be conveying the same message: indeed, sometimes different bits of evidence seem to be saying very different things. Like the blind men of the parable, every Gold Rush scholar runs the danger of drawing the wrong conclusions by sampling the wrong evidence. And just like touching a tail tells you something different than touching an ear, reading a mining code may tell you something different from reading a miner's journal. Reading one miner's journal might tell you something different from reading another miner's journal. To get the story straight, much evidence should be consulted and careful judgment exercised regarding the reliability of the evidence and once one is convinced, to make sure one is applying the correct interpretation.

There is a logical meta-question, which may not have occurred to the blind men: Why is it important to study the Gold Rush? The answer the blind men might have given is curiosity, pure and simple. As far as I can tell, nobody ever asked them why they wanted to know the nature of the elephant. They just did. But it turns out that there are good reasons to study the Gold Rush for someone like me, who has spent much of his professional career trying to understand the economic rationale for the rules governing water development and water use that have emerged in the American West. First and foremost, it turns out that the development and use of water was a central part of the story of how gold mining was done. This is because of the nature of the mining process itself and the way it evolved during the decade of the 1850s. From the very beginning, water was a virtually indispensable part of the process, and it became only more so over time. This meant that miners and ditch companies were continually and persistently engaged in efforts to define and clarify rights to available water supplies. Because of this, a clear and detailed picture emerges of the nature of the disputes that arose and the strategies adopted by competing claimants to water.

Second, the peculiar circumstances of the Gold Rush provide an unparalleled natural experiment in which to study the evolution of legal rules. The discovery of gold in California in 1848 set off a chain of events that can only be described as a massive exogenous shock to the California economy. Within two years, the nonnative population of the state had increased more than six -fold. Within five years, the state had undergone a major structural transformation from a largely pastoral economy to one in which gold production was the leading industry. And as water was integral to producing gold, the demand for water skyrocketed virtually overnight, along with its value. The result was predictable: numerous disputes over water that raised a whole host of issues that required resolution, and a sore need for ways to resolve those disputes quickly and consistently. The gold discovery and its aftermath generated enormous pressures for the creation of legal rules to accomplish these things. Very rarely do we have the opportunity to observe the process of rule creation where the connection to economic pressures is so rapid, strong, and obvious.

Third, the development of legal rules governing water development and use in early California had consequences going far beyond its own narrow slice of time and place in history. The basic precepts that emerged from the gold fields would comprise the fundamental principles of water law in California that continue to this day. To read the California water code of today is to catch a glimpse of the disputes over water that occurred in the gold fields in the 1850s. Because economic change typically occurs slowly, it is often difficult to discern the economic rationale for the water rights observed to exist, which are the end result of an evolutionary path-dependent legal process with roots in the past. Examining in detail the economic currents that gave rise to those principles in their infancy helps to make economic sense of the laws in their current form.

1.2. Origins of California Water Law: 1849–1860

Prior to the discovery of gold in California in January of 1848, the California economy was a largely pastoral, heavily agriculture-based economy. A large number of Native American tribes occupied the region for some fifteen thousand years before the coming of the Spanish in the mid-sixteenth century. The Spanish gave way to Mexican rule in the early nineteenth century, which lasted for about twenty-five years until American takeover as spoils of the Mexican War in 1848. Under Mexican rule, large ranchos, commonly as large as tens of thousands of acres, dominated rural life, especially in the southern part of the region. Agriculture thrived, especially cattle production on the ranchos as well as irrigation-based production of wheat, barley, corn, fruits, and vegetables.

The discovery of gold triggered a mass-migration of gold seekers to the region from all over the world, resulting in massive population growth within an extremely short period. Our best guess is that the nonnative population of California increased from around 14,000 in mid-1848 to nearly 100,000 by the end of 1849, a figure that rose to one quarter million by the time a special census was taken in 1852. The rise of the new gold mining industry generated a dramatic increase in demand for water as gold production rose and as water was used heavily in gold processing. Thus, the local value of water increased dramatically practically overnight, giving rise to strong pressures to create legal rules to define and enforce property rights to water. At the same time, the unique nature of water as a flowing resource created externalities resulting from its development and application to gold mining, which in turn gave rise to specific rules that established principles for resolving the disputes generated by those externalities.

As this book will document, water rights during this period were largely created in the courts, influenced by rules for self-governance written by the miners themselves in a network of extralegal mining camps that emerged spontaneously in the gold fields. These rules, set out in mining codes, originated in the basic social and cultural attitudes of miners as formed elsewhere and imported into the region when they emigrated to California. As a consequence, they partly embodied the collective interest of miners in allocative fairness. However, they were mainly shaped by the economic realities of gold mining on the ground once they arrived, including the value of water in mining, which determined the propensity to invest in water development and use and the appropriate scale of individual mining operations. These factors in turn influenced the extent of division of labor and the adoption of water-using techniques.

The water rights that emerged from this period had certain distinctive features that would form the fundamental basis for the present-day doctrine of prior appropriation that governs surface water rights not only in California but in many other parts of the arid American West as well. Among these were several principles that will be an important focus of the analysis of this book. Perhaps the central principle defining appropriative rights is first-in-time is first-in-right, the rule that (senior) claimants who perfect their rights at a particular point in time enjoy rights that are superior to subsequent (junior) claimants. Another key principle is the ability of claimants to divert water for use at locations away from the river or stream in which it flowed, to which was later appended the rule that such use had to be beneficial. A third is the very nature of the right itself as a quantified use (usufructuary) right, as opposed to a right to ownership of the corpus of the water itself. A fourth is that claimants had to actually use the water that they claimed or risk forfeiting it, the principle of use-it-or-lose-it. By examining the manner in which these principles were laid down in the conditions of mining in early California, we can better understand the economic rationale for present-day water law.

1.3. Existing Interpretations of Early California Water Law

Though the basic facts regarding the origins of California water law in the demands of mining in the very first years of statehood are not in dispute, the specific drivers of this law have been the subject of a long-running and vigorous interpretive debate among historians, economists, and legal scholars. The oldest scholarly tradition ascribes the creation of appropriative rights largely to climate. Early in the twentieth century, such eminent legal scholars as Clesson Kinney and Samuel Wiel argued that it was the aridity of the west that necessitated the creation of new water rights. This notion was popularized by Walter Prescott Webb in 1931 in his classic book The Great Plains, when he argued that

The justification of the arid-region doctrine is found in the physical conditions of the country in which it has been adopted.

As late as the 1980s, the aridity argument found its proponents in the writings of the eminent western historians Robert Dunbar and Gordon Bakken.

In the 1980s, however, some historians began to question the basic aridity story. While not rejecting aridity as a central factor, they began to emphasize economic, social, and cultural factors in the creation of the new water rights. Scholars began to explore more deeply into human intentionality in devising water rights to meet their needs. In 1985, Donald Worster, drawing upon the previous work of Wittfogel and Morton Horwitz in other contexts, advanced the argument that appropriative rights were the result of an ascendant capitalist culture dedicated to dominance over nature. At around the same time, Donald Pisani advanced the very different notion that appropriative rights largely reflected a number of local factors associated with the complex circumstances surrounding the prosecution of mining in 1850s California. To Pisani, the early decisions creating appropriative rights were dominated by the immediacy of balancing competing needs for water under frontier conditions, leavened to some extent by early judges' sensitivity to charges of improperly ignoring precedent or judicial overreach. Douglas Littlefield echoed Pisani when he argued that judges' rulings, particularly at the local level, could be heavily swayed by public pressures.

Early economic historians pursued the aridity story down a different path, emphasizing the importance of water value in determining the ultimate form assumed by property rights in water. In 1967, Harold Demsetz advanced the highly influential notion that property rights were endogenous to changes in economic conditions that increased the value of natural resources such as water or that resulted in uses that imposed additional external costs on others. According to Demsetz, changes in property rights would occur in the form of measures that permitted greater extraction of value or internalized these externalities. In 1975, Terry Anderson and P. J. Hill extended Demsetz's argument by emphasizing the importance of property rights enforcement in influencing the form taken by rights to natural resources. According to Anderson and Hill, we can expect to observe greater efforts made to enforce property rights in resources as either the benefits of enforcement increased, say, from increased value, and/or the costs of enforcement decreased. The creation of appropriative rights is then seen as the end-result of a process of redefining property rights to permit greater extraction of value.

This basic dynamic that emphasizes value and enforcement costs in the creation of seemingly more-clearly defined water rights has been refined by Carol Rose, who does not view the creation of well-defined individual water rights as being the necessary end game of this process. Rose points to the emergence of riparian rights in the eastern United States as evidence of the feasibility of a stable legal regime based upon group-based rather than individual rights. In her view, the differences in eastern and western water rights that emerged over time occurred as a consequence of fundamental differences in the historical uses to which available waters have been put. In the early nineteenth century, when riparian rights were being defined in the eastern United States, surface water in that region was largely being used for powering water mills, a process that largely did not consume the water that was being used. Consequently, water use possessed important public good characteristics and it was sensible that the water rights that emerged would accrue to the group of users, as riparian rights did. However, in the western United States, the dominant uses, such as mining and irrigation, largely did consume the water, so that the water used by one claimant effectively deprived others of water. In this case, water assumed the features of private goods, and it is sensible that the emergent water rights would accrue to individuals. Thus, Rose speculated that the consumptiveness of use was an important determinant of the ultimate form taken by water rights.


Excerpted from Golden Rules by Mark Kanazawa. Copyright © 2015 The University of Chicago. Excerpted by permission of The University of Chicago Press.
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Table of Contents

Chapter 1: Introduction
Chapter 2: Economic Theory and the Evolution of Water Law
Chapter 3: Water and the Technologies of Mining
Chapter 4: Watering the Diggings: The Development of the Ditch Industry
Chapter 5: The Informal Law of the Mining Camps
Chapter 6: Origins of the Common Law of Mining and Water Rights
Chapter 7: The Origins of Prior Appropriation
Chapter 8: Water Quality and the Law of Nuisance
Appendix A
Chapter 9: Bursting Dams and the Law of Nuisance
Appendix B
Chapter 10: Conclusions

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