The French Revolution, Property Rights, and the Coase Theorem with Noel Johnson

Episode Summary

Executive Summary: Noel Johnson explains how the French Revolution’s confiscation and auction of church land lowered transaction costs, improved property rights, and boosted agricultural productivity in affected districts. Using a natural experiment across French regions, the paper finds that areas with more church land saw higher wheat yields, more irrigation, and larger farms, supporting a Coasean view that initial property allocation matters when transaction costs are positive.

Main Topics: Pre-revolutionary feudal property rights (Priority: 5/5): Johnson describes the Ancien Régime as a system of overlapping, fragmented rights held by church, nobles, and other stakeholders, making land transactions and productivity-enhancing investment costly and difficult. French Revolution as institutional break (Priority: 5/5): The 1789 abolition of feudalism and confiscation of church property created a sharp institutional change, replacing feudal constraints with more modern property rights by the Napoleonic era. Church land auctions as natural experiment (Priority: 5/5): Because only some districts had significant church property to confiscate and auction, the reform lowered transaction costs unevenly across France, allowing comparison of treated and less-treated districts over time. Productivity and investment effects (Priority: 5/5): Districts with more initial church land experienced higher wheat productivity, more irrigation investment, less fallow land, and greater use of protein-enhancing crops, suggesting real agricultural gains. Coase theorem and transaction costs (Priority: 4/5): The episode is used to illustrate that in a world with positive transaction costs, the initial distribution of property rights matters greatly for long-run efficiency outcomes. Inequality and farm size mechanism (Priority: 4/5): The paper links higher land inequality after redistribution to larger farms and higher physical-capital investment, consistent with theories that inequality can encourage investment in capital-intensive production. Data and identification strategy (Priority: 5/5): Johnson details the archival sources, market-access controls, fixed effects, instrumental variables, and placebo tests used to address endogeneity and support causal interpretation.

Key Arguments: Feudal France had overlapping and costly property rights, with multiple actors claiming different privileges over the same land, which discouraged investment and productivity growth. The revolution’s confiscation and auction of church land reduced transaction costs in specific districts, creating useful variation for studying institutional change. Areas with more confiscated church land later showed substantially higher wheat yields, irrigation investment, and reduced fallow land, indicating that institutional reform translated into measurable agricultural improvements. The goal of the auction system was mainly to raise cash quickly for the revolutionary state, not to redistribute land for equality; this makes the setting especially useful for studying efficiency rather than egalitarian motives. Speculation in the initial auctions does not undermine the result because an active secondary market likely reallocated land to those who valued it most, preserving the efficiency logic. Higher inequality in land holdings after redistribution may have encouraged physical-capital investment in an era before modern financial institutions and corporations could pool capital cheaply. The Coase theorem should be understood in a positive transaction-cost world: if transaction costs are high, the initial allocation of rights matters a great deal for final outcomes. Several controls and robustness checks reduce the risk that church land areas were simply better land to begin with, including soil suitability, market access, fixed effects, an instrument based on proximity to bishoprics, and a potato placebo test.

Data Points: Church land availability: 194 of about 534 districts - Sample with data on confiscated church land used in the analysis Geographic units in France: about 534 districts - French districts at the time of the Revolution Treatment effect on wheat productivity: about 8% to 9% higher wheat productivity - Districts with 10% more church property initially Initial church property increase: 10% more church property - Example comparison used to describe the headline estimate Agricultural survey years: 1841, 1852, 1862 - Key outcome and farm-size data sources used in the paper Farm-size data aggregation: department level, about 80 regions - 1862 agricultural survey on average farm sizes Property-value controls: about 4,000 separate properties - Auction-book valuations collected for robustness controls Transport-network grid: 5 by 5 kilometer grids - Used to calculate market access across France Wheat/market controls: 12 region fixed effects - Main regressions absorb regional differences in productivity and institutions Bishopric dating: established by 1200 AD - Instrumental variable based on proximity to bishoprics Distance to bishopric: no district more than 55 kilometers away - Johnson notes a strong negative correlation between distance and church land Black Death mortality: about 40% of Europe’s population - Used to explain why older church geography may be less tied to 19th-century outcomes Potato relative acreage: about 10 times less acreage than wheat - Why potato productivity is used as a placebo outcome Church land summary outcome: higher irrigation, less fallow land, more protein-enhancing crops - Secondary agricultural outcomes associated with more church land Historical period of analysis: 1841 to 1852, with later decline - Productivity gains are strongest in mid-19th century and fade later in the century

Pivotal Quotes: "when people think about the Coase theorem, I think it is very important to think of it as a positive transaction cost world" — Noel Johnson: Closing summary of the paper’s theoretical takeaway "the initial allocation of property rights matters a lot to the efficiency of the eventual outcome" — Noel Johnson: Explaining why church land auctions are economically important "we run a regression where we want to find that the dog doesn't bark" — Noel Johnson: Describing the potato placebo test used to check for spurious land-quality effects

Implications: The episode suggests that institutional reforms can raise productivity only when reallocation costs are low enough for markets to work. It also implies that historical land reform and inequality debates should focus on transaction costs, not just who formally owns the land.