THE NEWFOUNDLAND FISHERY played a pivotal role in the early exploration and development of North America, and provides a compelling case study of institutional change. As in the California gold rush (Umbeck 1977), private interests established a system of property rights in the absence of governmental authority. Yet the evolution of property rights in the Newfoundland inshore fishery was unique.

The scarce resource in the inshore fishery was not fish — though the ease of catching them varied from year to year — but shoreline. The Newfoundland coast is characterized by limited amounts of flat and sheltered shoreline. There was a significant benefit to getting such ‘good' shoreline, and in the absence of an agreed allocation system, ship captains would have fought over desirable locations. The key institutional challenge for the fishery was to allocate scarce ‘good' shoreline in a manner that was both efficient and sufficiently equitable. This paper, then, does not analyze the allocation of fish stocks themselves — an issue that would become of great importance from the twentieth century — but of the shoreline used for processing fish.

The paper seeks to provide economic rationales for three interrelated issues that are puzzling, at least from the perspective of economic history. In all three cases, these rationales provide both a theoretical underpinning for the course of institutional change in the Newfoundland fishery, and add new insights to scholarly understanding of institutional change more generally. First, was the "admiral system," devised by the earliest migratory fishers to allocate shore space and governmental power in terms of order of arrival in the harbour, an efficient institutional structure? It is argued here that the main cost of the admiral system involved rent dissipation, as ships left Europe much earlier than necessary, and the main benefit accrued through efficiency gains — ensuring that the best shoreline was the most utilized every year. Such a benefit does not arise in situations of continuous, as opposed to intermittent, resource exploitation.

An understanding of the rationale for the admiral system is essential to the analysis of later developments. In the eighteenth century, three distinct organizational forms coexisted in the Newfoundland inshore fishery: migratory fishing ships, resident fishers, and bye-boat keepers. These were distributed somewhat differently geographically, but the three types were generally present in the same harbours. While different institutional forms in the same industry are often observed historically, it is less common for such an outcome to continue for over a century. In any case, all such historical episodes raise the question of why the most efficient institutional form did not quickly drive out alternatives. Why did these three institutional forms coexist for so long in the Newfoundland inshore fishery, and why did the resident fishery rise to dominance at the end of the eighteenth century? The answer to this question hinges on the answer to a third: how were property rights over shoreline transferred from admirals to residents, or, in other words, how was the fishing admiral system replaced by private property?

It was once commonly held that proponents of the fishing admiral system were for centuries intensely hostile to the idea of private property rights. It is now acknowledged by historians that migratory fishers came to appreciate in the seventeenth century, if not earlier, that there were advantages to some full-time residence in Newfoundland (Bannister 2003: 8). There are few examples where a group of agents with a set of property rights over a resource acquiesced in a process that would see their rights superseded by the rights of others. Why did migratory fishers come to accept year-round residence, and how did this acceptance lead to private property? This paper argues for the importance of what will be termed an "intermediate institutional form." While a direct transition from the admiral system to private property could not have occurred without conflict between competing interests, this intermediate form — in which men left behind over the winter could claim fishing space — was found to be in the interests of migratory fishers, yet paved the way for private property rights. While historians have appreciated that this change in institutions occurred, this paper will argue that this transformation was critical for the development of private property.

Analyses of complex institutional changes, such as the decline of feudalism, have often noted the existence of intermediate institutional forms, at least implicitly. Yet their role is rarely explicitly spelled out. Just as in the child's game where one word is transformed into another by changing one letter at a time, intermediate institutions allow transformations to occur over time. They have two important characteristics. Those in a position to drive institutional change see the intermediate form as advantageous; yet once in place the intermediate form encourages further changes which the original actors would not have perceived as beneficial. Intermediate institutional forms rely, then, on imperfect foresight.[1]

The existence of such intermediate institutions provides a further argument in favour of the path dependence of institutional change. The ability of any society to move toward more efficient institutional forms will depend on the availability and recognition of intermediate forms that allow the transformation to take place in small steps. Small differences in starting point may have a major impact on whether particular intermediate forms are viewed favourably.

While the intermediate form paves the way for further institutional change, it in turn may reflect either inherent conflicts within the original institutional form, and/or pressures emanating from elsewhere in the economy. It will be seen that a traditional Newfoundland historiography supports the first interpretation, but more recent research points to the second.

The intermediate institutional form sets the stage for the rise of both a resident and a bye-boat fishery alongside the migratory fishery. Why did they coexist for over a century? This paper argues that there was a symbiotic relationship between the bye-boat and migratory fisheries. The former relied on the latter for transport, and in turn solved two critical problems for the migratory fishery: fishing ship captains had difficulty monitoring the work effort of fishers in multiple fishing boats, and that of men left behind to perform various tasks during the winter. The size of the resident fishery was, of course, constrained by the size of the Newfoundland population. The resident fishery also proved able to solve the monitoring (agency) problems faced by the migratory fishery. As the resident population grew, it was able to outperform both bye-boat keepers and migratory fishing boats.

The paper proceeds as follows. The next section provides a brief history of the Newfoundland inshore fishery through to the early nineteenth century. Section III examines the efficiency of the fishing admiral system. Section IV surveys the course of institutional change from admiral system to private property, and discusses why migratory fishers opted for the intermediate institutional form. Section V shows that the advantages of the intermediate institution were in turn driven by changes in the costs and benefits of wintering in Newfoundland. Section VI discusses how the intermediate institution set the stage for the bye-boat fishery, the bye-boat fishery's symbiotic relationship with the migratory fishery, and its eventual eclipse by the resident fishery. Section VII reviews the rise of the residential fishery and the resident population. Section VIII provides a brief reprise of the response of the migratory fishery to the rise in resident population. The final section offers concluding remarks.

Cabot's news of a sea "swarming with fish" in 1497 quickly attracted the attention of European governments and fishers. Soon, ships from France, the Basque country of France and Spain, and (to a much lesser extent) Britain were visiting on a regular basis. This was the first phase of the island's history, as host to an international fishery. The fish off Newfoundland can be caught in the spring and early summer on the Grand Banks or later in the summer as they move into the waters along Newfoundland's coast. The off-shore or bank fishery emerged in the mid-sixteenth century (Turgeon 1987: 138). The fish were preserved using the green (salt)-cure preservation method; little or no contact with land was required, though bait, water, and wood might occasionally be procured on shore.

The other possibility was to fish for cod in its summer habitat along the coast. This, the inshore fishery, was pursued soon after Cabot's news reached Europe, and is the focus of this paper. This activity began in March through May of each year when supplies and crews left Europe (earlier if they stopped for salt on the way in France or Spain). Once landed, the crew would set up stations on shore, and the fishing ship would be unrigged and moored for the season. Crews would then go out early each morning in small fishing boats, returning to shore in the evening. A dry-cure method came to dominate the inshore fishery. After being unloaded on wooden stages, the fish were gutted, headed, and split. Then they were lightly salted, and stacked in piles for up to ten days. In a few areas the fish would then be laid out directly on a gravel beach to dry in the sun. More often, however, the fish were dried on wooden platforms known as flakes. The crews fished as weather permitted through to September, when the fishing ships would be brought out of their summer moorings and readied for the return voyage to Europe, laden with the summer's catch (Handcock 1989, Matthews 1988).

The international fishery has received less attention than the later fishery, despite its institutional uniqueness. Fishing ships from France, Spain, Britain, and (to a lesser extent) Portugal participated, operating under the fishing admiral system, for most of a century. While this fishery was not always peaceful (see Quinn 1979), fishing captains generally accepted the rules of the game, at least in peacetime. The British were a minor presence in the international fishery until the mid-sixteenth century when they began to assert themselves (Kowaleski 2000).[2] The French would remain the largest fishing fleet in Newfoundland as a whole through the seventeenth century, and caught roughly twice as many fish as the British in 1700 (Pope 2004: 20). Still, by early in the seventeenth century the English had exclusive control of the Avalon Peninsula shoreline from Bonavista to Trepassey. West Country merchants were the dominant presence in the English migratory fishery.

Gradually, two other types of fishing arrangements emerged alongside the West Country fishing ships in the Avalon Peninsula. One was a resident fishery, consisting, as the name implies, of individuals who resided year-round in Newfoundland. They fished from shore in small boats, dried their catch onshore, and sold their finished product to the trading (sack) ships. The third group, known as bye-boat keepers, was a cross between the other two branches. Bye-boat keepers did not own ocean-going vessels; instead, they purchased passage to Newfoundland for themselves and their crews on the fishing ships. Once on the island, they operated much as the residents did, with the difference that they typically planned to return to England at the end of a season or two. They were styled bye-boat keepers because of the common practice of leaving fishing boats to "bide" in winter in Newfoundland. On the eve of the American Revolution, there were 500 bye-boat keepers employing 6,000 men (Mercer 2003: 212).

The relative contributions of these three groups to total output varied over the two centuries. In 1710 (notably during a period of war) bye-boat keepers contributed about 10 percent of total output, fishing ships some 35 percent, and residents the remainder (Handcock 1989: 76). The non-resident portion rose to nearly 80 percent of the catch in the 1730s, split evenly between bye-boat keepers and fishing ships, and was still above 50 percent in 1790.

This second period in Newfoundland's history came to an end after 1790, with the collapse of the migratory activities during the wars with France which lasted until 1815. Bye-boat keepers disappeared completely as the nineteenth century began, and fishing ships as well soon after (Handcock 1989: 76). By 1815, residents were responsible for virtually all cod production in Newfoundland, and the third phase of Newfoundland's history, that of a resident-based fishery, began.

The admiral system takes its name from the fact that the captain of the first ship into a harbour in the spring would not only be able to choose the best shoreline, but would serve as "admiral" of the harbour for the season, settling any disputes. The captains of the second and third ships into harbour received the next best pieces of shoreline and assisted the admiral in exercising these powers (see Bannister 2003). The admiral system was utilized by the international fishery and maintained by the British for well over a century after they had come to control the fishery on the Avalon Peninsula.

In studying the emergence of an institution other than private property, it is natural — at least to the modern economist — to begin by comparing the cost, in terms of reduced investment, against any benefit that might have existed in terms of decreased transaction costs. Since fishing ships could not be confident of gaining access to the same shoreline every season, crews did not build permanent structures, but annually rebuilt cabins, stages, and flakes. It will be seen below, however, that permanent facilities may not have been feasible unless someone wintered in Newfoundland to guard these. If so, then the negative effect of the admiral system on investment was negligible, since little investment would have occurred in any case (and we shall see that the eventual practice of wintering in Newfoundland triggered the move to private property).

The size of the inshore fishing fleet was constrained by the limited supply of flat shoreline suitable for drying fish (see Pope 2003a) . There was no governmental authority to allocate space, and the cost of negotiating a complex institutional arrangement, such as allocating particular spaces by country or captain in perpetuity, would have been prohibitive. The fishers came from several countries and could hardly gather to negotiate.[3] To negotiate in Newfoundland would require all fishing ships to spend much longer than the fishing season there. The admiral system had the advantage of simplicity. One simple rule could allocate shoreline without any need for annual renegotiation. Changing fortunes could be dealt with readily; those that did not show up would be ignored in the allocation.

Transaction costs fell significantly, but did not disappear, as English ships came to dominate the Avalon inshore fishery. Merchants and captains could not simply declare property rights to exist, however. They would have had to find a way to allocate the fishing rooms among themselves, a task which became more difficult when multiple ship captains could claim long usage of particular pieces of shoreline. They would then have to find a way of enforcing possession. The costs involved would have been very high in the international fishery, as noted already, but both sets should have diminished as the industry became dominated by West Country English interests. The group was relatively small, homogeneous, and potentially subject to British law. Still, one should not exaggerate the ease of contact among different towns across four different counties, nor underestimate the differences of opinion on many issues that characterized the West Country migratory fishery.

If migratory fishers could establish property rights, they could then overcome the most serious cost of the fishing admiral system: the "rent dissipation"[4] caused by ships leaving port earlier than necessary in order to obtain good shoreline. In the early seventeenth century the "official" date for departure to Newfoundland was 1 April. "As the century wore on, ships tended to leave earlier for Newfoundland, probably as a result of competition for shore space" (Pope 2004: 21). By 1670 the "official" departure date was 1 March and ships often left in February (earlier if stopping for salt on the way). James Yonge in 1671 complained that some ships left so early that they risked freezing their sailors to death, only to arrive in Newfoundland months before the fish (Mercer 2003: 215). Private property would simultaneously, however, eliminate one of the key advantages of the admiral system: as long as the vast majority of fishers traveled to Newfoundland seasonally, only the admiral system could ensure that the best shoreline was used each year. If a migratory fishing captain "owned" a good piece of shoreline, and failed to visit Newfoundland one year (whether due to illness, shipwreck, or other opportunities), the valuable resource (shoreline) might be wasted (or there would be conflict among others over the resource). This benefit of the admiral system is unique to systems of seasonal resource exploitation in which there is considerable risk that a given agent will not return the following year. The fact that the admiral system was maintained for decades after the British came to dominate the Avalon fishery suggests that either negotiation costs remained prohibitive[5] or — more likely — that the size of this benefit was large.

If so, then the admiral system would be retained until there was some shift in the relative benefits and costs of using it. Only once there was a resident population large enough to guarantee continued use of the best shoreline would the benefits of private property outweigh the costs. Given the limited economic opportunities outside the fishery in the seventeenth and eighteenth centuries, this large resident population could not emerge unless residents were able to participate in the fishery. This in turn would depend on the merchants who backed the migratory fishery seeing some advantage in year-round residency.

As noted above, early histories of Newfoundland assumed that the antipathy of the migratory fishery to private property rights, expressed vociferously through the sixteenth century, had continued unabated into the eighteenth. Pope (2004: 204) suggests, though, that migratory fishers in the seventeenth century were hostile to local government rather than settlement itself — though they likely did not want very much settlement. And Bannister (2003) has detailed how fishing admirals upheld the claims of residents in the (at least mid- and later) eighteenth century. How and why did migratory fishing captains become supportive of private property rights?

Did residents gradually usurp property rights against the wishes of the migratory fishery? It is hard to imagine such a process occurring without intense conflict. King William's Act of 1699 forbade residents from claiming any land used by the migratory fishery (though the Act recognized some property claims already in existence). Yet there is no evidence of migratory fishery interests (or the government) attempting to apply this law against residents. Nor did they object to the Act's recognition that land not being used by the migratory fishery could become private property. Likewise, when in the 1730s the British government began to appoint magistrates, the West Country merchants and admirals protested only incursions these might make into the admirals' rights to adjudicate disputes among migratory fishers (though Bannister [2003] surveys court records and finds that magistrates dealt almost exclusively with criminal cases while admirals dealt almost exclusively with property). This, arguably, is because the migratory fishery had already by that time made a small but very far-reaching change to the admiral system, the result being the intermediate institutional form referred to in the introduction. The admiral system allocated shore space by the order in which ships arrived in the harbour. This rule was changed sometime in the seventeenth century (Matthews 1988:21) so that shore space could be protected from year to year if a man was left behind over winter . In other words, the key to property rights was no longer the presence of ships but of men. Though the phrase was not used at the time, possession no longer followed a "first-ship" rule but rather a "first-man" rule.

Lueck (1995) has shown how groups with access to a "first-possession" resource often act to limit entry, and enforce various customs in the face of overexploitation of resources. While the overexploitation of Newfoundland resources is only one possible cause of the adoption of the first-man rule, Lueck's argument should hold for any problem that threatens the profits to be extracted from the resource in question. The seasonal aspect of the industry might have worked against developing a code of conduct that included sanctions, though the fishers' common culture and background would have facilitated its development. But their dispersion among numerous small ports (and a tendency to disagree on a wide range of issues, as both Matthews [1988] and Handcock [1989] emphasized) would have made the option of restricting entry untenable. They could not directly solve the annual problem of rent dissipation by agreeing not to fight over scarce resources; thus the "group" would focus on other "customs."

If a large number of migratory fishing ship captains and merchants came to see an advantage in over-wintering and the first-man rule, the rest would face a choice between accepting institutional change or entering a costly period of conflict.[6] The greater the proportion of the migratory fishery that came to favour wintering, the smoother would be the path to institutional change. The point to emphasize is that the choice is internal to the migratory fishery: it was not pressure from the small population of seventeenth-century residents but from within the migratory fishery itself which led to change.

It will be seen below that the advantages of wintering hinged on the degree of deforestation, which undoubtedly differed across harbours at any point in time. It is thus likely that the new rule was introduced in some harbours before others. Pope (2004: 146-7) shows how ships from different ports favoured different harbours, though these preferences shifted gradually over time. The fact that any one harbour was visited only by ships from a handful of West Country ports would further reduce the costs of negotiating a change in the rules.

Once migratory fishing captains accepted that a man wintering in Newfoundland had a claim on property, they inevitably opened the door to the resident fishery. If a man spending one winter could save a place, a man living continually in Newfoundland could also do so. At the time the change was made, the resident population was very small (1,500 in 1650).[7] As it grew, residents gradually laid claim to the entire shoreline. Once they did so the intermediate institution disappeared, for it had served its purpose: the point here is that the intermediate institution paved the way for resident ownership of the shoreline. If migratory fishers came to appreciate the role played by the growing resident population, they would acquiesce in the establishment of private property rights even before residents had come to occupy the entire shoreline: this would not detract from the importance of the intermediate institution.

Private property encompasses a diversity of rights: notably to use the property, to the income from the property, to bequeath the property to others, to lease the property to others, and to sell the property to others. The argument here is that the intermediate institution established de facto private property rights long before de jure property rights were established in law. It is clear that those wintering in Newfoundland could claim use of a piece of shoreline for the next fishing season (and thus perpetual use if they wintered continually), and had the right to any income they gained from such use. As permanent residents came to occupy shoreline, the right to bequeath followed naturally, for at least adult children who had lived on a piece of land could claim it upon parental demise. The fact that those left behind to winter were often acting (at least in part) as agents of fishing ships shows that some right to "lease" land to others was inherent in the intermediate institution. Given the importance attached to using the best shoreline each year, and the fact that some ships would not return as planned, it should hardly be surprising that those left behind would be able to lease land to ships other than those for which they were agents. It is only with respect to sale of land that the intermediate institution would provide a severe limitation: one could not transfer perpetual rights to a stranger, though one could conceivably pass the rights listed above to someone after a brief period of cohabitation. Possessors would have to wait for the legalization of private property before fully exercising the right to sell (and bequeath to non-cohabitants).

Fishing admirals adjudicated property disputes throughout the eighteenth century. Bannister (2003: 53) reports a case from 1752 in which an admiralty court upheld a lease to a fishing room when a deceased landlord's daughter wished to void it: this case indicates support from the migratory fishery for both rights of inheritance and leasing. More generally, Bannister (2003) and Johnson (1998) concur that the English common law principle that possession provided a presumption of ownership was applied in Newfoundland. Indeed, English common law was applied to the degree possible; this meant, though, that "local custom" was regularly cited in legal decisions. Johnson (1998) is confident that the right to inherit at least was recognized by mid-century. Bannister (2003: 123-4) concludes that all of the rights enumerated above were recognized by the late eighteenth century, with the single caveat that fishing rooms had to be employed in the fishery. He also notes that three-quarters of property rights recognized in 1792 were established by occupancy, with the remainder reflecting government grants or the property recognized by King William's Act of 1699.

Why, if those wintering were serving the interests of migratory fishing masters, did the rights to property not reside with migratory fishing interests (and thus prevent the rise of resident landowners)? The key point here is that those wintering must have operated as independent agents rather than employees: the migratory fishery might first have experimented with employees but found advantages to independence. Notably, an independent agent would be better able to ensure that the scarce fishing room was still employed if a particular captain or ship failed to return: he would not face the transaction costs inherent in acting as an agent for an employer who was not doing what he had been expected to do. But this was not the only advantage of independence. It will be important to show below, when bye-boat keepers are discussed, that fishing ship captains would have faced enormous difficulties in monitoring the performance of employees left behind for the winter. A man protecting a fishing room and supplies on his own account, with a promise to give a particular ship first claim next year, would be more diligent than an employee. Bye-boat keepers were admirably suited to the role of agent, though residents could also serve in this role.

The concept of path dependence was discussed in the introduction: in a path-dependent process, the final outcome is dependent on the path taken. It might be objected that one should not speak of path dependence if the end result was inevitable. That is, if it is accepted that private property is the most efficient institutional structure, then this would most likely have been the result even in the absence of the intermediate institution. Note first that Libecap (1986), Alston (1996), and others have shown that institutional change need not lead to the most efficient institutional form, especially if this is not in the perceived interest of those in positions of power. In the case of Newfoundland, it must also be recognized that ( de facto or de jure ) private property was only the most efficient institutional form if people lived year-round in Newfoundland; otherwise it would be wasteful, as good shoreline went unused (recall that winterers could lease land to others if ‘their' ship failed to arrive). Since the intermediate institution allowed and encouraged the year-round residence that in turn made private property beneficial, it is reasonable to speak of path dependence.

Alternative explanations of this smooth institutional transition can be briefly disposed of. The first is that private property rights had long/always existed through custom. This might have been the case, for example, if captains visited the same harbours and occupied the same fishing rooms year after year, even before the practice of wintering began. Then the intermediate institutional form would not have been observed, nor would it have been necessary. Migratory fishers would have been able to move smoothly to private property rights if they had very nearly had these in practice. Yet this clearly was not the case. Fishing ship records (e.g., Yonge 1663) show captains arriving in Newfoundland and touring three or four harbours to find the best remaining fishing room. In a world of incessant competition for shoreline, direct institutional transition proved impossible.

Another possibility is that the costs of enforcing property rights would have been prohibitively expensive in the seventeenth century, but fell as the British government established a presence. Since fishermen relied on the British judicial system to resolve disputes involving murder and theft in the early inshore fishery (before magistrates were established), English courts might conceivably have been used to police property rights violations. But the precise surveying of boundaries in Newfoundland would have been problematic, travel between West Country towns could be difficult, and Bannister (2003: 31-3) maintains that it was always difficult to try criminal cases in Britain. One further problem with this explanation is that there was an obvious way to introduce property rights: through colonization companies. The West Country merchants could have bought into existing schemes, or they could have founded their own. The fact that they refused to do so, preferring the admiral system instead, suggests that there must have been some real or perceived benefit to racing.

A third explanation might run as follows. The ship fishery featured the separation of ownership and control. Ship owners and provisioners remained in England while captains and crews laboured in Newfoundland. The separation meant that fishing ships operated on a share system: typically one-third each to owner, provisioner, and captain/crew. This was the only way to align the interests of the three groups, since it was impossible for those in England to monitor the efforts of those in Newfoundland. Capital owners and provisioners could insure against risk by purchasing shares in many different fishing ships, and the evidence suggests that they indeed did so. Captain and crew could not insure against risk, however. Their income each year was totally dependent on the success of the fishing season. Thus they needed to be free to search for the best fishing rooms and the best fish stocks each season. Private property rights would have deprived them of this option. Merchants in England therefore had to respect these wishes, or they would not have found captains and crews for their vessels. In the eighteenth century, as wages came to replace shares in British shipping generally, the income of fishers no longer depended on how many fish they caught. They would thus cease to demand the right to race for the best harbour and shoreline. As above, this explanation suffers from being at odds with the facts. While aggregate fish stocks fluctuated due to climate, they tended not to change sharply from one year to the next, and were generally the same over a wide area; moreover, fishers searched for the best room and would not have ready access to information about fish stocks across distant harbours (Pope 2004: 34-5). Within harbours, too, the best fishing rooms did not change from year to year.

Why would migratory fishers change the institutional structure to recognize the claims of those who wintered in Newfoundland? If they were not reacting to external pressure, they must have come to see wintering as advantageous. This section will show that several forces combined to lower the costs and increase the benefits of wintering in the late seventeenth century. The analysis will be carried through to the eighteenth century, for it also informs our discussion of the rise of the resident fishery.

Why do three distinct institutional forms coexist through the eighteenth century? The intermediate institution had previously set the stage for the emergence of both bye-boat keeping and a resident fishery. Since neither residents nor bye-boat keepers had ships,[13] they would have been excluded from access to shoreline under the original admiral system. Once these new organizational forms emerged alongside the migratory fishery, however, one might anticipate that the most efficient form would quickly supplant the competition. It is perhaps only natural in treating "competing" institutional forms to focus on how they compete for fish and markets. When lengthy coexistence is observed, though, one should also ask whether and how these organizational forms may cooperate. In the case of bye-boat keepers, this paper will argue that they had a symbiotic relationship with the migratory fishery.

Bye-boat keepers shared characteristics with both migratory and resident fishers.[14] On the one hand, they could at times be indistinguishable from residents, bye-boat keepers being those who wintered for one or more years, and the earliest residents often planning on returning to England after making their fortune (Matthews 1988; Handcock 1989: 26). On the other hand, the bye-boat keepers performed two tasks otherwise performed by employees of the migratory fishery. They operated fishing boats populated by migratory fishers, and they guarded and gathered supplies over the winter. They were not employees, though, but rather contractors for particular tasks that could not be trusted to an employee.

Bye-boat keepers could obviously not displace the migratory fishery, for they depended on the migratory fishing ships to transport both themselves and the fishers they employed between England or Ireland and Newfoundland. But why would the migratory fishing captains sacrifice precious space for their own fishers in order to transport bye-boat keepers and men who would only compete with them for fish? To be sure, no one fishing ship captain could exclude bye-boat keepers if other captains found it advantageous to transport them. At the urging of merchants and fishing ship captains, the Western Charter when reissued in 1661 contained a prohibition of bye-boat keepers; but James Yonge writing in 1671 noted that many merchants and fishing ship captains benefited too much from the practice to enforce this law. Yonge also appreciated that a law prohibiting the carrying of passengers would cripple the resident fishery; this may have been the law's real intent (see Mercer 2003: 210-5). And any one captain could (and often did) drop bye-boat keepers in a harbour different from their destination, and thus eliminate any possibility of direct competition. But why would any captain find this practice advantageous? More precisely, why would a fishing captain find it advantageous to carry a bye-boat keeper and the bye-boat keeper's fishers given the obvious opportunity cost: this would be one less of the ship's own fishermen that could be carried? The answer is that bye-boat keepers solved two critical agency problems for the migratory fishery. First, imagine the difficulties inherent in leaving one man behind over winter to guard one's boats and stages and fetch additional wood. While one could observe the number of boats guarded and built on arrival the next summer, these results must have depended on the vagaries of climate as well as the activities of thieves. The man wintering could all too easily engage in sloth or theft, and argue that some savage winter storm had destroyed the fruits of his efforts. If instead of an employee the fishing ship left a bye-boat keeper who guarded and carried wood on behalf of both himself and the fishing ship, it would be easy to monitor whether his efforts on the ship's behalf were comparable to his efforts on his own behalf.

Second, fishing ship captains must have always struggled to oversee a number of fishing boats. This problem was exacerbated as the Newfoundland fishery followed English merchant shipping more generally by shifting from paying sailors/fishers a share of the profits to paying them a wage (as workers agitated for thus shifting the risk onto merchants) in the first half of the eighteenth century.[15] As wages came to replace shares in the Newfoundland fishery, individual fishers must have become even harder to motivate. Nor could skippers be relied on to encourage maximum effort as these too became wage-earners. The independent bye-boat keeper, however, had a powerful incentive to encourage and monitor effort from those he employed in the fishery. Notably in this respect, bye-boat keepers always worked on their own fishing boats, and overwhelmingly managed only one, two, or three boats (Mercer 2003: 212-3). From the point of view of the merchants, they had the further advantage of absorbing much of the risk.

Bye-boat keepers were often said to have a further advantage of being able to attract better employees. Migratory fishing captains often complained that workers preferred to work for bye-boat keepers (Matthews 1988: 69). This might simply reflect the fact that bye-boat keepers were more productive for the reasons above, and could thus pay more. "The practice [bye-boat keeping] came to exert pressure on the migratory fishery by attracting more skilled workers and forcing up wages as bye-boat efforts were apparently more productive and returns to bye-boat servants were greater" (Antler 1982: 25).[16] Innis (1940: 152) concurs that bye-boat keepers were more productive. This was the view of James Yonge in 1671: he felt that bye-boat keepers used shares to a greater extent than the fishing ships (Mercer 2003: 213). The data on catch per boat and catch per man compiled by Ryan (1986) suggest that bye-boat keepers were less productive; unfortunately the data for the migratory fishery includes the bankers who caught large numbers of lower quality fish. As for wages, it is likely that the higher wages paid by bye-boat keepers merely compensated for the fact that they did not also pay the fishers passage to and from Newfoundland (Pope 2004: 178-80). The bye-boat keepers also (or alternatively) benefited from closer personal ties with the fishers (Innis 1940: 106). They could hire men they knew from their own village, while fishing ship captains inevitably hired large numbers of strangers. Moreover, just as small companies today can instil greater loyalty than large, the bye-boat keeper with a handful of boats at most must have appeared a less distant boss.

A further piece of the puzzle comes from considering the concept of vertical integration. When fishing ships controlled every stage of the fishery — supplying salt, catching fish, selling fish — it would have been virtually impossible for bye-boat keepers to operate. If residents needed to worry about the exercise of monopsony power by fishing boats, the concern of bye-boat keepers should have been even greater. They, after all, had to be confident of their ability to gain return passage for themselves and their fishers. They could often contract in advance, perhaps, though we have seen that fishing ship captains were accused of breaking such agreements with their own fishers. And a bye-boat keeper planning on wintering for a couple of years would likely be unable to contract in advance for the return voyage. The increase in the number of ships visiting harbours over the eighteenth century must have encouraged bye-boat keepers' confidence that they could obtain a fair return passage. Indeed, Pope (2004: 42-3) attributes the rise of bye-boat keepers entirely to the existence of sack ships and the fact that there was room on fishing boats going to Newfoundland; he thus discounts the fact that fishing captains must have seen some advantage to carrying bye-boat keepers in preference to more of their own fishers.

The advantages of the bye-boat keeper would all dissipate over the eighteenth century as the residential fishery expanded. Residents could always guard shoreline and supplies at least as well as bye-boat keepers. Once Newfoundland had a cheap but just as productive labour supply, the bye-boat keeper's ties to English fishers would no longer provide an edge. One caveat should be mentioned in this regard: while the challenge in the early days of residency was for Irish immigrants to master the skills of the fishery, the greater challenge later may have been matching the ability of the migratory fishery to hire unskilled labour at very low wages. The small-scale resident fishery would have the informational advantage with the residential labour force, and could supply an equally inviting work environment. Historians have missed this logical explanation of the decline of the bye-boat fishery. Handcock (1989: 83-4) blames a collapse in fish prices after the onset of the French Revolution, but does not discuss why this would have hurt one organizational form more than others. The residents, of course, were less able to change occupation in bad times. And cross-ocean travel was naturally disrupted by the quarter century of war after 1793. Matthews (1988: 134) blames the rise in wages and price of provisions during the war. But by this time the Newfoundland labour force was already dominant, and increased provisioning cost would hurt all types of fishery. As with the migratory fishery itself, the war accelerated the collapse of the bye-boat fishery, but since it had been in severe decline before the war we need to look further for a complete understanding of its disappearance.

The resident fishery could and did at times cooperate with the migratory fishery by reserving shore space for migratory fishers. The resident fishers could thus compete with bye-boat keepers in solving the agency problems of migratory ship captains. Residents would at first have a disadvantage in supervising fishers,[17] but this would dissipate as the resident population increased. Migratory fishing captains could thus see advantages of a resident population. A small population of residents might have continued to rent the shoreline to migratory fishers; it was only because further increases in population allowed residents to prosecute the fishery at lower cost than the migratory fishery that the resident fishery displaced the migratory fishery. Once the fishers were located permanently in Newfoundland, and the fishing boats built there, and the fish were taken to market by sack ships, the fishing boat captains lost their previous role in the fishery. Through the eighteenth century, population growth caused residents to replace migratory fishers, first in Conception Bay, then elsewhere (Cadigan 1995: 20-4). Instead fishing ships came to focus on carrying supplies to the resident fishery. This need not have been a misfortune for them: if residents could catch fish with lower costs than migrant fishers, while absorbing much of the risk, merchants may have been able to earn higher profits by supplying the resident fishery than by prosecuting the migratory fishery. The point to emphasize is that the first step in the chain of causation which led to a resident fishery — the first-man rule — was taken long before the benefits of an entirely residential fishery could have been obvious to migratory fishers.

A full survey of the determinants of Newfoundland population growth would require another paper. One key part of the puzzle was explored above: the cost of wintering fell and the benefit of wintering rose through the eighteenth century. It thus became increasingly advantageous to locate fishers in Newfoundland year-round. There were, though, several other factors that would encourage migration. Five such factors can briefly be listed:[18]

1. A new source of immigration. As noted above, fishing ships stopped in Ireland for inexpensive provisions and labour.[19] Mannion (2003) describes how these ships soon began to take workers as well. Matthews (1988: 53) speaks of a surge of Irish migrants after 1711. The southern Irish labour force was not as skilled in the fishery as the West Country fishers, but could be profitably employed in certain unskilled tasks (as had agricultural labourers from the West Country before them). Facing a lower opportunity cost at home, the Irish proved more likely to migrate than the English (especially during the famines of the 1720s and 1739 [Rowe 1980: 212-3]). They were also, crucially, more likely to bring their wives.[20] This reflected both the lower opportunity cost at home, and the fact that the Irish successfully transplanted the potato to Newfoundland: women thus had productive employment outside the fishery. The second generation grew up in the fishery, and matched the English in fishing skill.

2. The cost of leaving. As with Canada more generally, the question must be asked of why migrants did not carry on to the mainland. Some did: 1,300 in 1717 alone. Indeed, American traders were required to post bonds with the government as it attempted to limit on-migration. Though ships travelling to Newfoundland aspired to leave laden with fish, they could and did carry workers, perhaps as indentured servants. Newfoundland may well have been a cheaper source of labour for the United States than Europe. Nevertheless, Matthews (1988) suggests that the Newfoundland population barely declined in bad times, as residents could not afford transit off the island.[21] Much research needs to be performed on outmigration; it is possible, though, that this opportunity decreased after the American Revolution, and thus encouraged population increase.

3. Involuntary migration. Not all who settled in Newfoundland did so by choice. Fishing ship captains were often accused of leaving fishers in Newfoundland, rather than taking them home as promised. Or, if the fishers earned too little (as those paid on shares could easily do if the fishing was bad) or spent too much (perhaps on gambling or alcohol, though Pope [2004] doubts claims by previous historians that fishers were regularly exploited in this manner) to pay their way back, they were left behind (Handcock 1989: 27; Rowe 1980: 213-4). With no ability to get off the island, and starvation far from unheard of, the reservation wage of these unfortunates would be low. Matthews (1988) suggests that some of the earliest Irish fishers were abandoned due to low productivity.

4. Non-pecuniary advantages. Residence in Newfoundland had one huge advantage: it provided the protection of distance from British naval press gangs. There was increased migration to Newfoundland in times of war (perhaps in part as fishing ships too were pressed into naval service, stranding some fishers).[22] Britain was at war for half of the two centuries before 1815. Newfoundland may also have appealed to those in trouble with the law at home.[23] Pope (2004: 55) suggests that residence in Newfoundland may have been attractive to those who could not aspire to own property in England, even if the move did not make strict economic sense. There were certainly non-pecuniary disadvantages. The lack of a governmental presence forced communities to protect themselves, though it appears that as population grew settlers were better able to provide mutual protection. In this respect, the appointment of magistrates to handle criminal cases in the eighteenth century (see Bannister 2003) should have encouraged settlement. And while we now know that there was only one significant French military attack after 1713, residents of the island could hardly have assumed this result.

5. Historical events. The victory of the British over the French in 1763 must have encouraged settlement by giving English fishers access to more shoreline. Likewise, the American Revolution caused New England merchants to be squeezed out of the Newfoundland trade, albeit temporarily, and encouraged the rise of a Newfoundland-based merchant class. The rise in the price of fish during the Napoleonic Wars encouraged further migration. Notably, these later migrants were encouraged to stay permanently by the opening of the winter seal harvest (see Ryan 1994).

How did the migratory fishery respond to the rise of the resident population? Residents were able to use the first-man rule to claim the best shoreline. Yet we have seen that conflict was avoided. There were rare instances in which migratory fishers leased shoreline from residents, but opportunities for this sort of transaction disappeared as the resident population grew. Migratory fishing merchants and captains responded in two main ways. They moved geographically to areas of limited settlement, and thus paved the way through the late eighteenth and early nineteenth century for resident expansion along Newfoundland's south and north coasts. While thus moving to less bountiful fishing grounds should have lowered the profitability of the migratory fishery, the second response likely increased profits. Some merchants came to supply resident fishers with agricultural and (especially) industrial goods from England. The period between the American Revolution and the repeal of the Navigation Acts in 1828 is of special importance here, for during this time the English government struggled to keep American ships away. Matthews (1988: 142) speaks of merchants building large establishments on the island before the Napoleonic Wars. Innis (1940: 290-1) cites the late eighteenth-century observer Reeves, who speaks of the twin "facts" that residents provided the cheapest way to fish, and that there had been a surge in provisions from the United Kingdom after the American Revolution; Reeves felt that it was only natural that merchants would essay to supply these residents. Note that if the resident fishery had lower costs than the migratory fishery, but residents were dependent on English merchants for provisions, merchants (assuming no change in the degree of competitiveness among them) would be able to make more money servicing the residents than prosecuting the fishery.

The English merchants were able to further enhance their profits by a change in ship type. The "migratory fishing ship" had always been a misnomer: the actual fishing was done from small boats. The ship itself served only as transport, and was generally moored over the summer. Merchants no longer temporally tied to the in-shore fishery switched to ships that could pursue the bank fishery ("bankers") during the summer. Matthews (1988: 109) dates this innovation to the first half of the eighteenth century.[24] Between 1769 and 1776 bankers comprised 55 percent of the migratory fishing ships; as our analysis would predict these were heavily concentrated in the Avalon Peninsula while the traditional ships tended to be farther afield (Ryan 1986; Head 1976: 155). As noted above, green (salt)-cured bank fish were a lower quality output than dry-cured inshore fish. The bankers generally practised an intermediate technique where lightly (compared to Spanish and Portuguese bank fisheries) salted fish were dried on shore every few weeks, but the result was still inferior to that of the inshore fishery. The bankers thus made the bulk of their income in transporting supplies, with the bank fishery adding marginally to this income (Matthews 1988: 131).

The adherence of migratory fishers for centuries to the admiral system reflected primarily the fact that the admiral system ensured that superior fishing rooms would not be wasted due to illness of a particular captain, accident at sea, or diversion of a particular ship elsewhere. Thus, an institution likely to strike economists at first glance as inefficient can be seen as an efficient response to peculiar circumstances. As the costs of wintering fell and the benefits rose, the migratory fishery introduced an institutional innovation whereby those wintering could claim shoreline for the next season. This innovation has been recognized by previous historians, but its importance in encouraging further institutional change has not been fully appreciated. This intermediate institutional form provided de facto private property rights. It thus enabled and encouraged the entry of both bye-boat keepers and residents into the fishery. Why do the three forms coexist for so long? The size of the resident fishery was obviously constrained by the size of the Newfoundland population, since it relied on local fishers. As population expanded in some harbours, the migratory fishers and bye-boat keepers moved elsewhere, and some merchants turned to provisioning the merchants. Bye-boat keepers could not replace the migratory ship fishery, or vice versa, because these had a symbiotic relationship; bye-boat keepers depended on migratory fishers for transport, and migratory fishers valued bye-boat keepers for solving agency problems. While they both would prosper for well over a century, as the Newfoundland population grew the advantage tipped decisively toward residents. Residents took over from bye-boat keepers the solution to fishing ship agency problems, and then outperformed fishing ships themselves. Rapid rates of both natural increase and immigration characterize the last decades of the eighteenth century (driven in part by forces similar to those that had previously encouraged wintering). Economists tend to view economic activity in a competitive framework; the key to understanding the inshore fishery in the eighteenth century is to appreciate how different institutional forms cooperated.

It was suggested in the introduction that answers to each of the three main questions addressed in the paper would add new insights to scholarly understanding of institutional change in general. With respect to resources used intermittently, scholars are guided to appreciate the benefit of ensuring that the best resources are utilized first. When faced with an institutional change that appears to go against the stated wishes of those with political power, scholars are guided to look for intermediate institutions by which the powerful may set in motion an unforeseen chain of institutional change. And when confronted by the coexistence of "competing" institutional forms, scholars are guided to look for symbiotic relationships among these (as well as constraints on the growth of particular forms). More generally, this paper has provided yet another example of path dependence in institutional change.