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Unformatted text preview: Cal Stress & Dev . OUTLINE, AND ROUGH DRAFT Economic Development as Response to Stress (Evidence from California, 1846-1991) Mason Gaffney Revised 22 Dec 91; Material added 26 Sept 92 This version edited 4-27-09, for Econ 148. Materials on water resources are singled out by underlining and bolding , so readers can follow the thread of water resource law and development. Proposed paper is a case study drawn from a broader, book-length thesis, applied to the world economy, that the stress of warfare stimulates development. A corollary is that "peace dividends," releasing stress, often lead either to stagnation, or in dynamic economies to boom-slump cycles, e.g. 1713-1720, 1815-1819, 1865-73, and 1918-29. Prosperity, free of international stress, seems to lead to crash, slump, and/or stagnation. This is not wishful thinking, obviously, for most of us would wish it otherwise. I certainly would. The thesis springs from observation through time, arrived at grudgingly. Another corollary thesis is that warfare (hot or cold) promotes egalitarian institutions. Peace dividends, by the same token, are not equally shared. They are mostly captured by rent-takers, partly by market action premised on property entitlements, partly by political actions that "hasten history along." The results are socially divisive, and also often unstabilizing economically, as in the dates noted above. The mechanism of boom and slump is mooted, but there is a working hypothesis here. It is that the cycle results from a sequence of sellers' overpricing land, which in turn shapes investment in peculiar ways to a) substitute capital for overpriced land; b) "enhance" land, i.e. convert it to higher uses; c) link lands, as by extending rails and highways; and d) capture new lands (rent-seeking). All those absorb capital at slow rates of payback, leading to capital shortage and a slump. A number of sub-theses are invoked or developed, too, as noted below. The present paper surveys California history in terms of those hypotheses, with special reference to the role of water development. This is not alleged to be always dominant; it is used as a unifying theme, and for local reference. 1 Cal Stress & Dev . A. Early history Long history of irrigation by Indians, Spaniards, Mexicans, Mormons, briefly referenced. 1823, independence from Spain. 1834-37, missions secularized, opening door to secular grants. 1837-46, secular grants, becomes cattle country. B. Boom, 1846-57 1. 1848, Guadelupe-Hidalgo, U.S. acquires, recognizes old grants (subject to verification, which opened door for extensive legalistic chicanery). Russians and Mormons withdraw (Deseret still an independent nation, or thought it was)....
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