The Case for the Homestead Act

by Will on September 10, 2010

I posted some time ago wondering if the Homestead Act might have contributed to the plight of the Farmer between 1870 and the 1930s. When my Grandmother saw me, she said, “you know, if it weren’t for the Homestead Act, you wouldn’t be here today.” That’s quite true. And it’s a pretty good argument for the Homestead Act. But there’s an even better one.

Think of the feudal system. The peasant toils and toils, working his patch of land to produce crops that people want to buy. Every year, he must give a huge portion of these crops to his landlord, the Lord, in exchange for the pleasure of using the land. The Lord has a bunch of peasants working his land, so he gets way more crops every year than any individual peasant. He makes a ton of money, while they make just enough to mostly not die.

The peasant is working really hard and producing goods that people want. He is getting virtually no reward. The aristocrat is getting a huge reward for doing… what exactly? He’s mostly having fancy parties, glamorous affairs, drinking maraschino liqueur and Bordeaux wine, honing his joisting skills, socializing with the monarch’s family, and occasionally having wars. If you ask him what value he’s adding, he will say that he’s “defending the land.” But who’s he defending the land from? From other landed aristocrats who would use it exactly as he is using it, and who would exploit the peasants in the same exact fashion.

The Lord is just skimming value off the peasants’ production. If he were not around, if the king sent him packing and instead assigned the land to peasants by lottery or by the firmness of their handshake, and let them sell their entire crop yield themselves, individual peasant could lower their crop prices to compete with other peasants. Consumers would end up paying less for crops, and could spend more of their income on other things. This would make ventures other that crop-growing profitable, so that the more ambitious peasants could go into another line of work, selling their land to the peasants efficient enough to run profits or qualify for loans. Economic growth, greater social mobility, and general human betterment would result if that damn Lord would just go away. I learned this from David Hume, the earliest economist in the modern tradition, whom I’m re-reading today. I promise this will be the last Hume quotation:

Deprive a man of all business and serious occupation, he runs restless from one amusement to another; and the weight and oppression, which he feels from idleness, is so great, that he forgets the ruin which must follow him from his immoderate expences. Give him a more harmless way of employing his mind or body, he is satisfied, and feels no longer that insatiable thirst after pleasure. But if the employment you give him be lucrative, especially if the profit be attached to every particular exertion of industry, he has gain so often in his eye, that he acquires, by degrees, a passion for it, and knows no such pleasure as that of seeing the daily encrease of his fortune. And this is the reason why trade encreases frugality, and why, among merchants, there is the same overplus of misers above prodigals, as, among the possessors of land, there is the contrary.

What the Homestead Act did was to upend the feudal tradition of land ownership, so that farmers could enjoy the full fruit of their labors. This was a good thing for our country’s poor and working families. A privileged, monied class was still able to emerge via the formation of monopolies and by leveraging investment money, but it traditionally did not have as much sway with the State as the aristocrats of Europe once had. Whatever unintended consequences it may have had, it was good policy.

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