Abstract: When Transaction Costs and Property Rights Collide: The U.S. Land Ownership Recording in a Historical Perspective

Natalya Vinokurova

Abstract

This paper analyzes the fragility of the property rights regime in the United States, using a historical case study of the evolution of the land ownership recording practices in the U.S. My analysis considers the original legal framework undergirding land ownership recording system and four major subsequent developments. These developments include the introduction of 1) title abstracting in 1840s, 2) title insurance in the 1870s, 3) Torrens registration in the 1890s, and 4) the Mortgage Electronic Registration System (MERS) in the 1990s. My analysis suggests different antecedents behind the efforts’ inefficacy at improving the quality of the public recordkeeping. The proponents of both the public and the private attempts to change land ownership recording had to navigate the trade-offs between diffusion, legitimacy, and efficacy. I find that the public efforts to improve the quality of recordkeeping benefited from greater legitimacy, but failed to diffuse. By contrast, private efforts diffused more broadly, but had at best mixed effect on the quality of public record keeping. I argue that this effect on public record had to do with the private actors trading off impact for diffusion. To better understand the private actors’ options in navigating this trade-off, I compare the choices made by MERS to those of the Depository Trust Corporation (DTC), a private company that digitized the trade clearance on U.S. stock exchanges in the 1970s, and served as a model for MERS. I find that MERS decisions to deviate from the DTC model furthered its diffusion at the expense of impact and, in so doing, put into question MERS potential to serve as a basis of the most successful reform of the U.S. land ownership recording to date.