[sudo-discuss] Goldrush Operations Research Pod (GORP)

[Eddan Katz]

Dear Sudo folk -

In anticipation of the Oakland Wiki Edit-a-thon this Sunday -- 

12-1p: Brown Couch Cafe noontime meet-n-greet
1-5p: Oakland History Room, 2nd floor of Oakland Public Library (main branch)

-- eddan.com is pleased to announce the first meeting of the Goldrush Operations Research Pod (GORP), which will take place immediately following the aforementioned event.

After the Edit-a-Thon wraps up, those interested in taking part in the exploratory committee to establish GORP will all head on over to Lake Chalet for food, drink, and a great view of Lake Merritt (http://www.thelakechalet.com/), which is about half a block from the Oakland Library.


As one possible branch of research focus, I'd like to propose seeking historical evidence of the extent of violence in those early Wild West days of the California Goldrush. If you were to base your knowledge of what it was like then entirely on movies and TV shows, you'd likely conclude that it was a very violent place. You'd think that everyone always felt in danger of being robbed or bullied, that justice was meted out instantaneously by shoot-out, and it would seem like there couldn't have been much time left over for gold mining. 

Turns out that this period was relatively peaceful, especially during the first year before the hoards came from all over the world. When you think about it, the cost to the miners of forming agreements could not have been so high that it was more economical to compete through fighting than to collaborate and divvy up the spoils. John R. Umbeck, in A Theory of Property Rights: With Application to the California Gold Rush (1981), works through the choices that these gold-miners had in entering into a contract with one another rather than resorting to the use of violence. 

He breaks down this process of contract formation into 3 closely related, yet logically distinct choices:
Individuals must decide whether or not they want to enter into a contract with others.
If they decide to form some contractual arrangement, the next decision is what rights or constraints they will place on resource use. 
Finally, they must agree on how these rights will be distributed or which individuals will be allowed the rights to use and derive income from the resources.
He argues that you can actually come to an equilibrium of relative peace when most of everyone's efforts go into productively mining for gold through the prudent administration of property rights. In order to maximize the chance of these optimal conditions, the total amount of mining land would, he concludes, best be divided evenly among competing miners. This is basically the theoretical model supporting the evidence of sharing contracts in the historical analysis of early gold miner agreements. 

From a wealth-maximizing reasonable person point of view, he suggests that all exclusive rights are ultimately based on the threat or the use of violence. I think there's something sadly true about that. Whenever a group of individuals agrees to some system by which exclusive rights to scarce resources will be rationed, they are implicitly agreeing not to use violence. Even when one excludes the use of weapons, the contract must provide for the use of violence in order to punish any member who does not follow the rules; and it must maintain the rights of members against attacks from non-members.

If the group is not willing or able to use violence in either of these two situations, their property rights over resources will be lost to those who are. To clarify - by violence, Umbeck means the labor time allocated to the use of physical force against another miner. So this isn't just about gun fighting and theft, but rather also includes such activity as building walls for protection or even making threats to allocate labor to these uses.

For those graphically inclined, the diagram below from his chapter on Violence and Property Rights Contracts might make more sense. Miners X and Y are each willing to allocate AQ/BA labor to exclude other miners from a marginal unit of land. Miner Z, with no land, is willing to use DO/O labor to exclude X or Y from the unit of land.



The horizontal axis measures the ratio of land to labor as inputs in the mining process. The vertical axis measures the marginal product of land (∂G/∂h) and labor (∂G/∂L). Ignoring any work-leisure tradeoffs, this individual has a fixed amount of labor (L) that he is willing to allocate to mining in this time period. Suppose ∂G/∂h = AC = 10 gold units; ∂G/∂L = AB - 1 unit. 

An extra unit of land would increase the miner's wealth by 10 units of gold, while the extra labor unit would increase it by only 1. He would be willing to allocate up to 10 labor units to violence if it would get him an additional unit of land. Equilibrium will only be reached when X, Y, and Z all have the same land/labor ratio, OP. Here, they are each willing to allocate PT/PS labor to violence, so any additional conflict will result in a draw. With OP land and L labor, each miner will be producing ODTP units of gold. 


sent from eddan.com
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://sudoroom.org/pipermail/sudo-discuss/attachments/20130111/ff5b62fc/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: violence_and_land_3miners.jpeg
Type: image/jpg
Size: 78046 bytes
Desc: not available
URL: <http://sudoroom.org/pipermail/sudo-discuss/attachments/20130111/ff5b62fc/attachment.jpg>