Psychological Entitlement, Reference Levels, and Valuation Disparities

In this paper, C. Leigh Anderson and Richard O. Zerbe examine psychological aspects of property rights in the context of Native American land ownership. Specifically, they posit that a relevant concept of ownership derives from a sense of psychological entitlement, which depends not only on legal rights, but also on cultural and historical norms and expectations that give rise to a moral claim. Thus, moral claims underlie psychological entitlements. Those psychological entitlements, in turn, affect reference levels (the set of perceived rights from which one measures gains and losses) and potentially create valuation disparities (differences between willingness to pay and willingness to accept) across individuals with different moral claims over resources. In the absence of differing moral claims, those individuals could well value the resource identically.

Applying their hypothesis to historical valuations of real property among Native American tribes, Anderson and Zerbe find that treaties, which focused on operational-level rights and economic valuation, presupposed reference points that failed to recognize the psychological entitlements many Native Americans held over the lands that were the subject of those treaties. The Native Americans’ psychological entitlement arose from complex entitlement structures with roots in spiritual and religious traditions that supported cooperative behavior on tribal lands, which were held as common property. The treaties imposed untimely transitions from common to private property that eroded psychological, and possibly economic, value through changes in the complexity of the structures that promoted cooperative behavior.

This paper was presented at the Lincoln Institute’s conference entitled “Evolution of Property Rights Related to Land and Natural Resources” in 2010 and is Chapter 10 of the book Property in Land and Other Resources, edited by Daniel H. Cole and Elinor Ostrom.