Hawai''i

Why does land dominate every turn of Hawaiʻi’s story—from the first voyagers to modern sovereignty debates? Economist Sumner La Croix answers that in Rents, Rent-Seeking, and Hawaiian History (a composite theme of the work summarized here) by arguing that property rights, institutional change, and political coalitions in Hawaiʻi are all expressions of one enduring logic: who controls rents from land controls the social order. Across a thousand years, changes in technology, population, and external integration repeatedly reallocated those rents and forced elites to rewrite the rules.

From Limited to Open Access Orders

La Croix frames Hawaiʻi’s experience through North, Wallis, and Weingast’s model of “limited-access” and “open-access” societies. In limited-access orders, elites monopolize privileges and distribute rents to maintain peace. Over time, when secure property rights, rule of law for elites, and continuous organizations emerge, societies can transition toward open access—systems based on impersonal laws and broad participation. Hawaiʻi’s historical path shows this transition vividly: from tribal chiefdoms (fragile natural states) to unified monarchy (basic natural states), then to a globalized constitutional kingdom (mature natural state), and finally to democratic statehood under the U.S. open-access framework.

Land as the Source of Rents and Bargaining Power

Throughout, land has served as the fundamental rent-generating asset. Early chiefs, later kings, and ultimately governments organized power through land redistribution. In Kamehameha’s reign, land was parceled among loyalists to secure cohesion after conquest; in the 1848 Māhele, it was divided to formalize property rights under Western models and to attract sugar capital. Each reorganization of land rights reflected shifts in bargaining power and external dependencies—whether guns and trade in the 1790s, sugar tariffs and treaties in the 1800s, or American annexation in 1898. The pattern recurs: elites stabilize their rule by allocating rents from land and destabilize it when those rents shift or shrink.

From Surplus to Statehood

The story begins with Polynesian voyagers arriving in the early 13th century. Within centuries, massive population growth, taro cultivation, and the redistribution of irrigated valleys created the first political hierarchies. Surpluses justified tribute systems and monumental temples, institutionalizing stratified rule. When Western contact introduced guns, germs, and global markets, Hawaiʻi’s leaders adapted their rent structures—first unifying militarily (Kamehameha), then commercializing sandalwood and sugar, and finally adopting private property to secure capital inflows. Each adaptation—be it the Māhele, reciprocity treaty, or annexation—stitched Hawaiʻi more tightly into international markets but also exposed it to external power and internal inequality.

Colonial Legacies and Institutional Transformations

Annexation converted crown lands into U.S.-held public property, erasing royal claims and embedding colonial control. The 20th century saw attempts to redress this through the Hawaiian Homes Commission Act (1921) and later through statehood’s land reforms (1967 Land Reform Act). Yet even these were redistributions within existing institutional constraints—efforts by new democratic coalitions to capture rents for broader groups. Statehood in 1959 marked the shift to an open-access order: political rights widened, policy power localized, and old colonial elites lost their monopoly. The later leasehold reforms and sovereignty movements reveal how the same land-as-rent logic still defines struggles over ownership, inclusion, and justice.

Core Argument

Hawaiʻi’s history is best read as a continuous negotiation over rents. From ancient chiefdoms to modern statehood, elites and institutions evolved not in abstraction but as responses to who could credibly promise, distribute, and enforce claims on valuable land. When global shocks or demographic changes altered rent flows, Hawaiʻi’s institutions reorganized—revealing how economics, politics, and geography intertwine across centuries.

By following this framework, you can see continuity in what once seemed disjointed: voyaging, taro systems, the Māhele, the reciprocity treaty, annexation, leasehold reforms, and sovereignty all emerge as stages in one evolving rent-redistribution system. The book’s lesson is clear: institutions endure when they manage rents credibly, and collapse when they fail to adapt.

The first chapter of Hawaiʻi’s long institutional story begins with voyaging, rapid settlement, and the creation of agricultural surpluses. New archaeological chronologies compress settlement into a shorter pulse (ca. AD 1000–1260), showing fast population growth and equally fast institutional innovation. Imagine a few hundred settlers populating valleys across the islands, clearing forests, and establishing ponded taro systems—each valley a potential political microcosm.

Environmental Transformation

Pollen cores from Oʻahu (Haleiwa, Kawainui) record sharp drops in native palms and koa between AD 900 and 1300, replaced by charcoal deposits and rat remains—a fingerprint of active human transformation. The combination of fertile river valleys, freshwater flow, and irrigable slopes made Hawaiʻi unusually productive compared with other Polynesian islands. As population grew toward hundreds of thousands, ponded taro terraces sustained dense settlements and freed labor for specialization.

Surplus and Political Hierarchies

Large, dependable yields from irrigated taro created the foundation for structured society. Surplus was captured through rituals like makahiki tributes, which funneled goods to chiefs and priests, reinforcing hierarchies. Archaeologists like Earle and Kirch identify this as the moment Hawaiʻi crossed from autonomous communities to centralized island states. Control of irrigation systems became a mechanism of power: whoever regulated water distribution effectively controlled the valley economy.

State Formation and the Role of Warfare

Institutional consolidation went hand in hand with warfare. Competing chiefs sought land and allegiance across fragmented valleys. When leaders like Māʻilikūkahi reorganized Oʻahu into administrative moku and ahupuaʻa, they institutionalized the relationship between resource flow and political order. These early “basic natural states” standardized taxation, redistributed rents, and stabilized succession—essential features for later island-wide rule.

Key Lesson

When surplus production meets mechanisms of redistribution and taxation, you see the rise of durable institutions. In Hawaiʻi that combination birthed one of the most complex non-literate states in the Pacific.

This agricultural-to-political transformation set the template for every subsequent era: control the surplus, discipline the labor, and you control the coalition.

European arrival in 1778 disrupted the delicate equilibrium of Hawaiʻi’s natural state. Within decades, three intertwined shocks—guns, germs, and global trade—forced elites to rebuild coalitions around a radically new rent structure.

Kamehameha and the Unification by Firepower

Kamehameha the Great grasped first that firearms and European ship technology could rewrite Hawaiian warfare. With advisors Isaac Davis and John Young and imported muskets, he unified most islands by 1795. His victory was not only military but institutional: his post-conquest redistribution of land disarmed rival centers of power, binding chiefs through property allocations spread across islands—so no elite could revolt without losing rents everywhere.

Epidemic Collapse and Labor Reorganization

Yet firearms were only part of the upheaval. Epidemics decimated the population after contact, shrinking the labor force by more than half in some estimates. Kamehameha’s successors faced both land abundance and labor scarcity—a reversal of precontact conditions. Chiefs could command land but struggled to mobilize workers, prompting coercive labor extraction during the sandalwood boom (1804–1830s). The result was paradoxical: despite labor scarcity, wages fell, because coercion substituted for market bargaining.

Sandalwood and Short Time Horizons

The sandalwood export rush to China illustrated how insecure property rights and political turnover generate predatory resource use. With chiefs unsure of future allocations, many stripped forests bare, harvesting immature trees to capture rents before redistribution. The ecological ruin symbolized institutional fragility—rulers could not credibly commit to long-term property rights even for themselves.

Conceptual Pivot

Economic booms without secure institutions lead to destruction, not development. The sandalwood collapse taught elites that legal modernization was necessary to attract capital and sustain rents—laying groundwork for the Māhele.

In short, Western contact accelerated Hawaiʻi’s transformation from ritual redistribution to legally defined property—an adaptation that would peak in the 1840s sugar era.

By the mid-19th century Hawaiʻi stood at a crossroads. Missionaries had introduced literacy, legal thought, and a Western conception of property. Global sugar demand surged. Together they drove the radical land privatization known as the Māhele (1848)—the institutional hinge around which Hawaiʻi’s economy and sovereignty turned.

Ideas and Reformers

Missionary advisers such as William Richards tutored the aliʻi in constitutionalism and market law. Their influence crystallized in the 1839 Declaration of Rights and 1840 Constitution, establishing written governance and judiciary foundations. These innovations allowed contract enforcement and corporate formation, prerequisites for attracting foreign investment.

The Incentive Behind the Māhele

Although population was falling, the expected value of land soared with sugar. The reciprocity treaty with the United States was still decades away, but elites already anticipated profitable leaseholds. Dividing crown, government, and aliʻi lands into private titles gave the ruling class flexibility to mortgage, lease, and capture rents from sugar capital—transforming traditional stewardship into marketable property.

Toward a Mature Natural State

The kingdom thus moved from the basic to “mature natural state.” Private corporations and legal organizations could persist beyond individual rulers. Institutions such as courts and bureaucratic ministries reduced uncertainty for investors. But these same reforms redistributed influence toward foreign planters and legal intermediaries—setting up the political vulnerabilities that would culminate in the 1893 overthrow.

Takeaway

Privatization was not inevitable—it was strategic. Hawaiian elites consciously restructured institutions to convert external opportunities (sugar rents) into domestic security, even as this tied national independence to foreign capital.

That decision reshaped the kingdom from within, evolving its institutions but eroding its sovereignty.

Economic globalization advanced rapidly after the 1876 U.S.–Hawaiʻi Reciprocity Treaty, which admitted Hawaiian sugar duty-free to U.S. markets. The treaty ignited explosive economic growth—but also planted the seeds of regime change. The resulting sugar rents empowered multinational firms and eroded native political autonomy.

Economic Boom, Political Trap

The reciprocity deal delivered U.S. prices (world price plus tariff) to Hawaiian producers, instantly enriching planters. Yet the gains came with dependence: having invested in mills and irrigation to serve one market, Hawaiʻi lost bargaining leverage. By the 1880s, U.S. negotiators demanded territorial concessions, including Pearl Harbor. Economic specialization had created political vulnerability—a classic “small-country trap.”

Coalition Realignment

The surge of sugar profits consolidated the Big Five companies (C. Brewer, Castle & Cooke, Amfac, Theo Davies, Alexander & Baldwin). Their capital networks controlled plantations, shipping, and finance. In 1887 they backed the Bayonet Constitution, which curtailed royal power and expanded foreign suffrage. The monarchy’s authority weakened further after the 1890 McKinley Tariff removed sugar advantages, collapsing planter profits and prompting direct U.S. annexation appeals.

Overthrow and Annexation

In 1893, the Committee of Safety—missionary descendents and planters—overthrew Queen Liliʻuokalani with U.S. diplomatic and military support. In 1898, Congress formalized annexation via the Newlands Resolution. Crown and government lands, nearly 1.8 million acres, were ceded to federal ownership—a massive rent reallocation from Hawaiian polity to U.S. control.

Historical Irony

The very institutional sophistication that made sugar profits possible—the rule of law, contracts, and property—also facilitated foreign political takeover. Integration delivered prosperity and dependency in the same stroke.

With annexation, a century-old cycle closed: rents once distributed by local monarchs now flowed outward through an imperial system.

Under U.S. rule, Hawaiʻi shifted from colonial territory to modern statehood. The path reveals how federal institutions, local activism, and global change interact to restructure power and property. The 1900 Organic Act, the 1921 Hawaiian Homes Commission Act, and the 1959 Admission Act mark sequential rent reallocations under successive coalitions.

Territorial Governance and Colonial Control

The Organic Act made Hawaiʻi an incorporated territory but centralized power in Washington. Governors and judges were presidential appointees; locals had limited say. Federal control ensured strategic interests prevailed over self-determination. Crown lands became public lands under U.S. ownership, prompting Queen Liliʻuokalani’s unsuccessful legal battles and setting precedents for enduring land disputes.

Hawaiian Homes and Structural Failures

The 1921 Hawaiian Homes Commission Act (championed by Prince Jonah Kūhiō) was an early reclamation attempt: 203,500 acres leased at nominal rates to Native Hawaiians of 50% blood quantum. Yet the policy failed to yield meaningful rehabilitation. Lands were marginal, leases inalienable, and financing blocked. Administrative mismanagement compounded problems. By 2012, fewer than 6,000 beneficiaries had received homesteads. The HHCA thus replicated colonial logics under a benevolent façade—land without capital or autonomy.

Statehood and Democratic Opening

Statehood in 1959 completed the institutional transition to open access. Locally accountable governors and legislatures replaced federal appointees, and voters could now control tax and spending decisions. Real GDP growth exceeded 5% annually in the next decade, fueled by jet tourism and federal infrastructure spending championed by Daniel Inouye. Open political access also triggered reforms: the 1961 Land Use Law, 1967 Land Reform Act, and antitrust measures against remnants of the Big Five.

Institutional Meaning

Statehood represented more than flag change—it was the point when rent allocation became subject to broad democratic bargaining rather than external dictates. It replaced colonial patronage with electoral accountability.

Nevertheless, unresolved land questions and structural inequality persisted, pushing later reforms of leasehold tenure and sparking new sovereignty claims.

By the late 20th century, Hawaiʻi’s politics revolved once again around land—this time urban leaseholds rather than royal estates. Leasehold tenure, born from tax advantages and trust restrictions on big estates (Bishop, Campbell), came to dominate postwar housing but ultimately collapsed under democratic pressure for ownership.

Tax Incentives and Estate Strategy

Leasing rather than selling allowed trusts to avoid capital gains realization and comply with charitable mandates. During the 1940s–1960s, residential leasehold soared—from 3% to over 25% of owner-occupied housing. Typical contracts ran 55 years with renegotiated rents pegged to appraised land value. Buyers traded long-term security for lower up-front cost; estates preserved tax advantages. The result was a dual ownership regime echoing past hierarchies.

Political Revolt and Legal Reform

The Democratic Revolution of 1954 made land access a populist issue. The 1967 Land Reform Act empowered the state to condemn leased tracts and resell lots to homeowners. Legal challenges culminated in Hawaii Housing Authority v. Midkiff (1984), where the U.S. Supreme Court unanimously upheld the act, equating it to land redistribution in public use. By 1991, over 23,000 homeowners had purchased their leased land.

Why Prices Stayed High

Breaking up estates did not make Honolulu housing affordable. Geographic scarcity (92% of land within 50 km undevelopable), high amenity demand, and restrictive zoning kept prices climbing. Regulatory delays—double permitting between state and county—became binding constraints, not land concentration. Economic research (Rose & La Croix, Saiz) shows Honolulu’s land share in housing value rose from 38% (1960) to 70% (2000s).

Modern Parallel

Redistribution can correct ownership inequalities but cannot repeal physical scarcity. In Hawaiʻi’s late-century reforms, justice was partly achieved—but affordability remained elusive.

Leasehold’s rise and fall shows the final arc of the land-rent cycle: from sacred stewardship to charitable trust, from tax-optimized control to redistributive reform—and finally to the inescapable limits of nature and regulation.

Despite multiple institutional revolutions, one issue never fades: who rightfully owns the crown lands and what justice do Native Hawaiians deserve? Modern sovereignty movements trace their legitimacy to the 1893 overthrow and 1898 annexation, arguing that confiscated lands remain unlawfully held.

Crown Lands as Continuing Dispute

The Admission Act (1959) transferred 1.4 million acres to the state public land trust, dedicating revenues to education, housing, public improvements, and “betterment of Native Hawaiians.” The 1978 constitutional convention created the Office of Hawaiian Affairs (OHA) to receive 20% of those revenues. Yet legal ambiguity over what counted as trust income sparked decades of court battles and legislative fixes, culminating in partial settlements such as the transfer of Kakaʻako lands to OHA in 2012.

Apology and Legal Boundaries

The 1993 U.S. Apology Resolution formally recognized the unjust overthrow and acknowledged Native Hawaiians never relinquished sovereignty claims. However, the 2009 Supreme Court ruling in Hawaii v. OHA limited its legal force, affirming state title over admission lands. Subsequent cases (Rice v. Cayetano 2000, Arakaki v. State 2002) restricted race-based voting and candidacy, constraining OHA’s political autonomy.

Recognition Efforts and Divided Futures

The Akaka bills (2000s) sought congressional recognition of a Native Hawaiian governing entity akin to tribal nations but repeatedly failed. The 2016 Department of Interior rule created an administrative path for recognition without Congress, contingent on Native Hawaiian self-organization. Yet debates over legitimacy—independence vs. recognition—keep the crown lands question alive. The enduring theme remains: institutional legitimacy and land rents are inseparable.

Contemporary Insight

Even in a modern democracy, unresolved distributions of historic rents sustain political contention. Hawaiʻi’s future sovereignty debates hinge not merely on cultural rights but on the material base of those rights—the land itself.

Thus the book closes where it began: with land, rents, and the institutions that mediate them. The past persists because its rent structures remain embedded in law, identity, and geography.