The Wrongs of Property Rights: The Erosion of Indigenous Communal Land Rights and Its Welfare Consequences

I propose a theoretical economic model in which privatizing an Indigenous reserve by dividing it up into individual fee simple plots can lower the welfare of Indigenous groups. Drawing on the demonstrated effects of the erosion of Indigenous culture and communal property rights, I suggest one partial explanation for why the self-assessed subjective well-being of Indigenous Peoples in North America is the worst among all demographic groups. Although recognizing the complex nature of Indigenous economies, for analytic purposes I set out a simple model with only two produced goods, food and a cultural good. I show that a community's well-being can be higher with communal property than with private property, despite the standard free-riding problem associated with communal property - a result that is consistent with the Theory of the Second Best. This theory suggests why the 1887 Indian General Allotment Act (Dawes Act) in the United States and similar attempts in Canada reduced the welfare of Indigenous individuals and have lessons for current policy initiatives in Canada, such as that pertaining to Indigenous land rights policy. I also argue that the consequences of privatizing Indigenous reserve land could be far more serious than what can be captured in the simple model presented here using neoclassical tools.