Journal of Real Estate Finance and Economics, 19:2, 165±167 (1999)
# 1999 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.
The Costs of Free Land: The Oklahoma Land
CECIL E. BOHANON AND PHILIP R. P. COELHO
Department of Economics, Ball State University, Muncie, IN 47306-0340
Noel Campbell's comments on our paper raise several issues about the Oklahoma land
allocation. We agree with his observation that why speci®c methods of land allocation
were used is an interesting and important question. Second, we recognize that, as
Campbell points out, the risk preferences of potential settlers do matter. The problem is
that it is not clear how to falsify assumptions about risk preferences in any but an heuristic
way. These explanations are inevitably ad hoc, always capable of being replaced by
another set of equally plausible speculations. Finally, we disagree with Campbell's
assertion that our analysis ``underestimates the cost of the land rush by the amount of the
cheating or odds-altering expenses.''
Addressing these points in reverse order, Campbell is absolutely correct in asserting that
the odds-altering expenses of the land rushes were social costs. Indeed, the Oklahoma land
rush is a classic example of a prisoner's dilemma: If all the Oklahoma Boomers had agreed
to walk, (not run or ride horses) into the new territory, signi®cant resources would have
been saved. Nevertheless any individual Boomer would have wrested a great advantage by
cheating. The lack of an enforcement mechanism coupled with individually self-interested
behavior would inevitably have led to a breakdown of the resource saving covenant.
Moreover, investments in odds-altering expenses were not a part of a land lottery, as he
rightly notes. What Campbell fails to note, however, is that such expenses were part of the
private costs of the land rush participant. Indeed, such odds-altering expenditures are one
of the reason the costs of a land rush was greater than those of a lottery per participant.
Campbell's observations about speci®c odds-altering expenditures, although interesting
and informative, do not undermine our basic observation that rent-dissipation is likely in
any non-price competition for valued lands. With risk neutrality, if costs in any
competition are uniform over participants then rents are fully dissipated. The rent
dissipation constitutes a social cost. In the land rushes the social costs were accounted for
by higher participant costs, partly because of the odds-altering expenses as alluded to in
Campbell's examples. In the land lottery, where odds-altering expenditures were
forestalled by the structure of the competition, rent dissipation was simply taken up on
another margin: excess participation. That the participation rate in the land lottery
exceeded that of the land rushes corroborates the point.
Campbell's second point is about the risk preferences of participants in the various land
allocation schemes. Whether the participants were risk neutral, risk averse, risk loving, or
some combination is an interesting question. But the issue is probably unsolvable given