by Birgir T. Runolfsson Solvason 


    The Theory of Rent-Seeking 
    The Wealth and Power Struggle
    Rent-Seeking in the Commonwealth 
    Concentration of Power 
    End of the Commonwealth 
    Economic Decline? 

      Bishop Gizur was loved more intensely by the whole population, than any other man, to our knowledge, has ever been in this country. As a result of his popularity, and his and Sæmundur's recommendations, and by the advice of Markús the lawspeaker, a law was passed that everyone should count and appraise his property; and swear that the evaluation was correct, whether land or chattels, and then pay tithes thereof. It shows the great power of the man that the people as a whole obeyed him; that he succeeded to complete the appraisal of all real and personal property in Iceland under oath, and collected tithes thereof. A law was also passed which made this compulsory as long as Iceland was inhabited.
                    The Book of the Icelanders1

    In the previous chapter I discussed the Goði-þingmann relationship and how this relationship changed during the course of the Commonwealth. An important aspect of this was rent-seeking. The term, "rent-seeking," denotes the monetary income the chieftains derive through their relations with farmers. Although the chieftains were simply trying to get income greater than their expenses, i.e. trying to profit from the situation, the term profit-seeking does not capture the essence of this behaviour.
    This chapter, therefore, describes the theory of rent-seeking and distinguishes rent-seeking from profit-seeking. This theory is then used to explain the decline and fall of the Commonwealth. Finally, I discuss the alternative views of historians on the end of the Commonwealth, and explain and distinguish my own view.
    The term rent-seeking is first used in publication in Anne O. Krueger's article "The Political Economy of the Rent-Seeking Society," (1974). Seven years earlier Gordon Tullock (1967) had offered the first systematic discussion of "rent-seeking" activities without using the term "rent-seeking." These articles analyzed situations where restrictions on trade, most notably government restrictions, predominate.2  Restricted markets offer different behaviourial incentives than unrestricted markets. It should be emphasized though that profit motives do not differ much from one situation to the other (Buchanan 1987a:17). Restricted market situations are not actually markets, since the market is by definition unhampered by imposed regulation. Rent-seeking is predominantly found in these non-market situations, although it can occasionally be found in some market situations (Tollison 1987:145).
    The term "rent" refers to "that part of the payment to an owner of resources over and above that which those resources could command in any alternative use. Rent is receipt in excess of opportunity cost" (Buchanan 1980a:3). "Rents" does not refer to the "rent" collected by landlords or paid by renters. Rent appears both in market and non-market situations, or in profit-seeking and rent-seeking situations. Profit-seeking is distinguished from rent-seeking by contrasting the consequences of rents-seeking with the consequences of profit-seeking. These consequences are, of course, unintended, since the individuals in both situations behaving alike and have the same motivations. 

    The institutional settings where rent-seeking occurs generally maximize social waste and minimize social benefits.3   The institutional settings where profit-seeking occurs, on the other hand, maximize social benefits and minimize social waste. Profit-seeking occurs in the unhampered market and rents "emerge from the increments to value that are created by entrepreneurs who put together new resource combinations, or who meet new demands" (Buchanan 1987a:17). Rent-seeking occurs in non-market settings in which "there are no increments to value created. Instead, the value that potential rent-seekers attempt to secure is artificially created through interferences with resource adjustments" (Buchanan 1987a:17-18). Rent-seeking, as distinguished from simple profit-seeking, can therefore be defined as "expenditure of scarce resources to capture a pure transfer," (Ekelund and Tollison 1981:19).  In a monopoly, for example, output is "fixed" or can be restricted and so would the rents at that monopoly price. Aside from the usual dead-weight loss associated with monopoly another "loss", rent-seeking, occurs where firms spend resources to acquire the rents. If competitive bidding is allowed then the resources spent on rent-seeking may equal the actual rents to be gained from the monopoly. In less competitive situations the rents may not be totally dissipated.
    Although rent-seeking is most likely to occur when states (governments or monarchs) grant monopolies or other privilege through licensing, it may also occur by private collusion (Tollison 1987:145). Oligopolies, for example, are engaged in rent-seeking when they use competitive advertising. Other examples of rent-seeking behaviour occur in the Mafia and when siblings compete for an inheritance. Rent-seeking is not limited to producers or firms. Rent-seeking by individuals or groups can occur wherever there are artificially contrived transfers or the output level is not competitive.5
    Rent-seeking can also been seen as a two-stage game or process (Tollison 1987:153). The first stage is the creation of artificial barriers in the market, i.e. the creation of a non-market out of a market. Individuals at this stage try to control the political apparatus that "creates, enforces, and assigns rent flows" (Tollison 1987:153). The second-stage of rent-seeking occurs with the competition for rents in particular instances.6  Here, in non-market situations with artificial barriers already in place, individuals compete to get rents or positions in the rent flow. The two stages of rent-seeking are equally important and are in a sense two sides of the same coin. To my story here they are also of equal importance. In the first stage, Icelandic institutions evolved or were created to ensure rent flows, while in the second stage the chieftains and others competed for these rents, undermining the Commonwealth.
    Now, I examine the historical details of the end of the Commonwealth in light of the above theory of rent-seeking.
      Although occasionally assuming pretensions of rulers, the stórgoðar were unable to establish effective regional states. Especially in the last decades of the Free State, their careers tended to be short and their hold on power became insecure as their feuds increased. Rather than setting up effective administrations dependent on sheriffs, bailiffs, and other functionaries of a central political hierarchy, individual leaders usually did not have the time or the authority to replace older forms of government. (Byock 1988:74)
    Most historians support the "political struggle" theory.7   The political struggle blamed for the end of the Commonwealth is said to start late in the 11th or early 12th century. At that time the Church had its first Icelandic bishop, Ísleifur, and succeeding him was his son Gizur. Bishop Gizur is not only credited with establishing the Church as an institution, i.e. providing it with a church building along with farm land to provide income, but with providing it with a secure means of future income, taxation. The Church's land and building was at Skálholt and later bishops lived there and participated in trade, farm production and teaching in a Church school. In 1096 the Alþing, through the advocacy of the bishop and the Lawsayer, accepted a form of taxation, the Tithe (Tíundargjald). The Tithe replaced the requirement for free-farmers to house and feed poor people, providing the Hreppur itself with income necessary to care for the poor. This tax also replaced voluntary contributions by parish members to local churches. The Tithe was a property tax, assessed 1% of the farmer's wealth. 

    After collection the tax was divided into four parts; one part was sent to the Church (the bishop), one to the Hreppur (for the poor), on to the local church (to reimburse building costs and maintenance), and one to the local priest (his salary). The two latter fourths actually went to the owner of the church-building, who then provided the church-building and paid the priest. The owners often became priests at their own local churches, until the Church (the Pope and the bishops) restricted this late in the 12th century.
      Thus the introduction of tithes paved the way for an increasing accumulation of wealth by a relatively small number of people, even if still in the name of the Church. This again laid the foundation for serious conflicts over church lands, which contributed to the general breakdown of Icelandic society. (Hastrup 1985:193)8
      [I]t was the system of funding the church that ultimately provided the apparatus for some men to skim the production of their neighbours. (Miller 1990:5)9
    It is my contention that the acceptance of the Tithe in Iceland is an example of rent-seeking. The Church by proposing the tax secures a steady and guaranteed income for itself, as Pope Gregory had demanded, and in doing so offers the "lawmakers", the chieftains, the same. The Chieftains had previously gotten income from various contributions, such as the church fee, the Alþing fee (þingfararkaup), legal fees, trade fees, etc., but the Tithe offered them a higher and steadier income. But even if the Church and the chieftains (along with church owning farmers) had a self-interest in accepting the tax, the tax paying public should not have. 

    Historical sources do not clearly describe the original Tithe, i.e. we do not know if the Tithe was originally only a tax on land or if it had a broader impact, as it had later (Stefánsson 1975:60-61). If the tax was limited in scope to begin with, then the free farmers may not have seen much to bother about. Actually, they may have preferred to pay one simple tax instead of various fees.10  The farmers may have accepted even a tax wider in scope for this reason, and because the tax provided a stable structure to provide tax-funded services. The only thing the Sagas make clear is that the farmers were anti-tax; this becomes clearer later in the Commonwealth. Previous chapters show that the most plausible explanation for the farmer's acceptance of the tax was the farmer's lack of choice. The chieftains had been gaining the upper hand in their relation with the farmers ever since the formation of the Commonwealth. By the end of the 11th century, the chieftain's position, taking into account their alliance with the Church and wealthy church owning farmers, had gotten so strong that they could interpret the law in any way they wanted, as long as all of them agreed. Eggertsson implies this, saying:
      "During the early Commonwealth, the law appears to have functioned well, but toward the end of the period the chieftains either ignored the law or manipulated it for their personal ends." (Eggertsson 1990:310)11
    The Church and the Chieftains were sure to exempt themselves from the taxation whenever possible. All properties given to God or intended for religion purposes were exempt from taxation and so was the institution of chieftainship. The Church and the chieftains were supposed to pay taxes on other properties, but to a large extent circumvented these rules. The tax-law, for example, exempted local churchplaces, the staðir, from taxation. Owners of local churches went on to declare most of their property as staðir and declared their families as guardians of the property.12  Even the institution of chieftainship was tax-exempt, although chieftainships were marketable commodities.13
    The description above corresponds to the first-stage of rent-seeking; the "competition to control the political apparatus that creates, enforces, and assigns rent flows," (Tollison 1987:153). Although the political structure was firmly in place in the Icelandic Commonwealth before the Tithe was introduced, the introduction of the tax itself restructured these institutions. Before imposition of the tax, the chieftains were the sole political authority in the country, but after the tax's introduction the Church and wealthier farmers contended with them for this power (Stefánsson 1975).14  If unanimity among the chieftains was required for the acceptance of the new tax-law, then the Tithe as it was actually accepted, was probably the only possible form of general taxation that could be agreed upon. Some of the Southern chieftains (Oddverjar and Haukdælir) controlled the institution of the Church. These chieftains, by getting the others to accept a portion for the Church, would therefore receive more revenue than the others. The other chieftains, in turn, had no way of getting a tax accepted without the approval of the Church. A stalemate would likely have resulted, if not for the exemption of all chieftain's from taxation. These exemptions as mentioned above included the local ecclesiastical institutions (staðir) and the chieftainship (goðorð) itself. Furthermore, in the 12th century Northern chieftains demanded, and got, another bishop for the Northern part of the country. The Northern bishops at Hólar, were independent of the ones at Skálholt. Since not all staðir were owned by chieftains, but, rather, many were owned by wealthy farmers they too could be relied on to support the new tax. It is therefore likely with this coalition of the Church, chieftains and the wealthier farmers was powerful enough that it did not really matter what the other free-farmers thought.
    The assignment of rents was therefore decided by the tax-law. Now a second-stage of rent-seeking occurred, with competition for rents in particular instances.15
      "The eventual breakdown of the system was preceded by (1) a strengthening of the relative position of the chieftains vis-a-vis their liegemen, and (2) the merger of the thirty-nine competitive firms (chieftains) into a few oligarchic firms." (Eggertsson 1990:308-9)
    The second-stage of the rent-seeking occurred when chieftains tried to acquire more sources of revenue within the structure created. In other words, they now spent real resources to capture pure transfers. This took the form of bringing under their control more followers (þingmenn), local churches (staðir), and chieftainships (goðorð). By getting more followers the chieftains made other chieftains comparatively weaker in strength and wealth. To get followers a chieftain had to offer some "services" in turn for the tax he got from the farmer. Aside from providing church services and aid to his followers, the chieftain distributed gifts. At given levels of revenue, at some margin, this would become uneconomical. The chieftains therefore began to acquire more staðir, and finally sought to control and acquire other chieftainships. By controlling more staðir and chieftainships, the competition for tax-payers was lessened and returns would potentially have been higher. By controlling more than one chiefdom, the chieftains established Greater Chiefdoms (Stór Goðorð).16 

    The first known Greater Chiefdom developed in Northern Iceland in the early 11th century. The chieftain there owned two chiefdoms, probably acquiring them through marriage or inheritance. In the 12th and 13th century Greater Chiefdoms became common, and, finally, all the chiefdoms became concentrated in five Greater Chiefdoms. Some of these could properly be called states (ríki) rather than chiefdoms, since their chieftains became rulers (or war lords), and the boundaries of most chiefdoms even became geographically fixed. Sigurðsson (1989:139-40) has summarized this concentration of power neatly:
      "The earliest phase in the process of power concentration probably started in the 11th century, and involved the first stage in the formation of lordships consisting of a territorial unit called a ríki. A ríki was a district with fairly fixed boundaries, comprising at least three to six goðorð, and one or two vorthing-parishes. During the 11th century, ríki were established by the Haukdælir in Árnesþing, the Ásbirningar in Hegranesþing, and the Svínfellingar and the Austfirðingar in Austfirðingarfjórðungur. Only the results of the first phase of power concentration are known; but the available information, sparse though it may be, indicates that it ran a slow, peaceful course.
      The second phase of power concentration started in the early 12th century, and involved the establishment of a ríki by the Oddverjar in Rangárþing. This was shortly after the introduction of a tithe was approved at the Althing in 1096/97.
      The third phase in the concentration of power and the formation of ríki came in the last quarter of the 12th, and the first quarter of the 13th century. The development of ríki in Eyjafjörður and Þingeyjarþing started at the end of the 1180's, and was finalised in 1215 when Sighvatur Sturluson gained control of the district's six goðorð. At the beginning of the 13th century, Snorri Sturluson, Sighvatur's brother, established a ríki in Borgarfjörður, covering area on both sides of the boundary between the Sunnlendinga and Vestfirðinga quarters.
      To the best of our present knowledge, the concentration of power in Árnesþing, Rangárþing, Hegranesþing and Austfirðingafjórðungur involved a long, steady process. In other districts, such as Eyjafjörður together with Þingeyjarþing, and Borgarfjörður, the process started later and went at a faster rate, the latter being partly due to the use of pressure and coercion. The only exception was the unruly district of Vestfirðir, which for a long time exhibited no more than a tendency toward the formation of a ríki. It was not until the late 1240's that Þórður kakali, later succeeded by Hrafn Oddsson, managed to exert stable control over Vestfirðir.
      By 1220, most of the ríki had taken shape, and the fourth and final phase of the process was initiated. Five families - the Ásbirningar, the Sturlungar, the Haukdælir, the Oddverjar, and the Svínfellingar - controlled almost all of the 39 goðorð. Conflicts now involved ríki, not goðorð as before. The power struggles of this period resulted in the creation of the stórríki, which contained two or more ríki, or nine goðorð and three vorthing-parishes."
    Aside from controlling more staðir and chiefdoms through blood relations, chieftains also established small "armies" and fought for control of other chiefdoms. But one chieftain's killing of another chieftain was not enough to gain control of the latter's chiefdom. The triumphing chieftain had to offer "services" or gifts to the followers of the fallen chieftain so they would accept his leadership. The gain of another staður or chiefdom therefore not only resulted in a gain of revenue for the triumphant chieftain, but also increased his expenses.
    Despite the law stating that the farmers were free to choose a chieftain to follow and change their allegiance each year, it seems that with the advent of the political struggle this choice all but disappeared.17 A chieftain holding two out of three chieftainships in a local-þing really had an exclusive say on local matters. Thus, the farmers had little choice but to accept the chieftain's word as law. Of course, the farmers might have revolted so the chieftains made sure that at least a majority of the farmers were comparatively satisfied with his rule. This the chieftain would do by distributing gifts, upholding order, and representing his followers against other "states."18
    In some cases a chieftain controlled not only a few local-þings, but the majority of chieftainships in a Quarter-þing. In most cases the local or quarter-þings, were simply put off, and only the Alþing itself survived. At times even the Alþing was unworkable because some chieftains would not attend.19
    This concentration of power, wealth-seeking and the state of war (with relatively small casualties) was the major reason for the fall of the Commonwealth. The major contenders in this struggle were the chieftains, the Church, and the Norwegian kings. All wanted more power and wealth. The Church demanded control over its own affairs, both in judicial and financial matters. The Church demanded its own internal law and tried to gain control, sometimes successfully, of staðir. Some of the chieftains were allied or related to the bishops, and therefore took the Church's side. The other chieftains saw that a more independent and wealthy Church could only come at their expense. These chieftains resisted the expansion of the Church, and some made alliances with the Norwegian kings. The kings were ready, especially in the 13th century, to make temporary alliances to gain foothold in Iceland.20
    The free farmers, especially the wealthier ones, participated in the political struggle both by helping with other actors and acting independently to secure their own advantage. To participate in the struggle they needed revenue, initiating their own form of taxation and the offering of gifts to farmers.
    The supply of money from mints or other sources was always limited in Iceland, and as time went by money became even more scarce. To pay the tax the free farmers generally paid in commodity money, such as skins, wool, cows, pieces of metal, etc. This meant that the Church and other receivers of the tax engaged in trade to monetize these commodities. The chieftains had always been involved in trade-related activities and in assessing the value of goods ("price-controls"), and their involvement in trade was not new. The Church, on the other hand, had not existed as an institution before the tax; in becoming an independent institution, it needed for the first time to participate in trade. Since the Icelandic Church was part of the Norwegian archbishops area, it naturally traded with Norway. As the Norwegian kings controlled the Norwegian church, they also controlled trade with the Commonwealth. This, along with the fact that Norway was one of the bigger market for Icelandic goods, may explain why the Norwegians came to monopolize Icelandic trade.
    Despite this monopoly, trade continued between the two countries except during periods of hardship in Norway. But by 1200 some markets changed for Icelandic goods and inflation took off. This explains the trade hostilities in Iceland in the early 13th century. In 1215 the chieftains in Southern Iceland set prices (price controls) on various goods so that the Norwegian traders refused to sell. The Icelanders than raided the Norwegian ships, and so provided disincentives for other merchants to trade with Iceland and involved the Norwegian king directly in trade matters, as the merchant's protector. Earl Skúli, then ruler of Norway, is said to have proposed an invasion of Iceland. Through the persuasive efforts of some Icelandic chieftains he relented.
    Others theorize the decline of the Commonwealth was caused by an overall decline of the island's economy. This theory was originally based on a clause in the agreement of 1262/64 between the Icelanders and the Norwegian kings. This agreement, referred to as the Old Covenant (Gamli Sáttmáli), guaranteed that the king of Norway, now king of Iceland, would have 6 ships sail for Iceland every year. Some historians have interpreted this as suggesting that Iceland's foreign trade had declined dramatically, to such an extent in fact that the islanders made the agreement solely to restore trade.21
    Historians have therefore looked at the records to determine whether there was such an economic decline. The two factors most often used to support the theory of an economic decline are: Firstly, that Icelanders owned almost no ships after the year 1100, and thereby had lost control of the island's trade relations. Secondly, certain export markets for Icelandic goods either declined or even disappeared. Historians, such as Gelsinger (1981), claim that the number of ships in the ownership of Icelanders declined steadily throughout the Commonwealth period.22  Some have claimed that Iceland's lack of forests and the great expense of ships abroad explains the dwindling of Iceland's fleet. But trees were imported for other purposes, and could also have been imported for shipbuilding. The claim that ships were expensive is not supported by the record. Shipbuilding was becoming more sophisticated and cheaper.23 Gelsinger claims "around the beginning of the eleventh century, land probably became a better investment because the shortage of free labour would have grown less extreme as the population expanded" (Gelsinger 1981:160). This may explain why Icelanders stopped investing in new vessels, but would not explain why this would have caused an economic decline. Gelsinger fails to explain why the lack of ship ownership in Iceland would have any effects on trade or the economy. The lack of shipownership in Iceland should not have had much or any effect on the level of trade. Norwegian and other merchants, an economic class Iceland never developed, owned ships and traded with the islanders. If there had been an unfulfilled need to trade, surely the islanders could have and would have bought their own ships.
    Gelsinger and others claim that the records confirm that fewer and fewer foreign ships, mostly Norwegian, arrived in Iceland each year. It is doubtful, as these historians suggest, that the Sagas would record every ship arrival, the records certainly confirm this contention. But, since the records seem to mention the number of ship arrivals mainly in years when a high number of them arrived and when only a few or none arrived, it might be just as plausible that when a proper number of arrivals did occur that was not noteworthy. In any case, it should be expected that fewer ships would arrive each year, unless one wants to claim that the foreign trade was actually increasing. The reason for expecting fewer arrivals is mainly that the ships were getting bigger, carrying as much as three times the load of earlier vessels.24   Sea voyages were not only becoming more profitable because of cheaper ships, cheaper both in building and operating costs, but voyages were also becoming safer, with the advance of the magnetic compass.25
    It is also doubtful, as Gelsinger and others claim, that the Icelanders were in any way dependent on trade or that they ever really traded that much. The island was in most ways a self-sufficient economy, although, of course, Icelanders would have and probably did gain from trade. The fact that grain, for example, could only be produced in very limited amounts in Iceland does not mean that the island was therefore dependent on trade. It is probably more accurate to say that Icelanders learned to get by without its use. As for other goods, Icelanders quickly learned to utilize all that nature would give them. As for meat, it is more likely that the island was an exporter of it than an importer.26
    The main production goods for trading purposes, whether within the country or abroad, were various wool products. Vaðmál and Varafeldir, for example, were the main export goods (as well as being units of account). Byock summarizes the mainstay of the economy well:
      "As the Icelanders, from early on, specialized in the exploitation of sheep by-products, exports were chiefly raw wool, different grades of homespun cloth, and a type of rough woollen cloak (varafeldir). Through this specialization they obtained, at least in one area of production, a comparative advantage that lowered their costs, making it feasible for them to participate in international trade. The goods were produced by a widespread cottage industry, and woollen products became a useful vehicle of exchange within the country. Along with merchandise derived from sheep raising, some trade was conducted in other farm products, for example, horses, hides, and sometimes cheese. Also there was a limited trade in sulphur and exotics such as white falcons." (1988:96-97)27
    Production of the main export goods increased during the Commonwealth, but of course production changes accompanied market changes. Around 1200 there were major market changes, the market for Varafeldir disappeared and the price of Vaðmál declined temporarily.28   Even if these market changes caused a depression in Iceland, it did not cause total economic ruin.29
    There may also have been some locally produced factors that could have interrupted trade temporarily. The chieftains attempts at price-controls, for example, have been suggested to have driven merchants away:
      "[T]he 13th century chieftains, by imposing severe price controls on the Norwegian traders who came to the country each summer, only managed to drive them away. It became uneconomical to trade with the Icelanders." (Gissurarson 1990:19)
    Other historians have disputed this, and claim that price-controls were exceptional.30
    Since no real economic statistics were recorded in the period it is hard to see that the economy did decline, in fact this lack of statistics make any claim less convincing. But even if we assume that an economic decline did occur, it seems that the reasons mentioned above could not have been the cause of that decline. Instead, a more plausible cause of an economic decline would have been found in the decline of Iceland's institutional structure. The continuous quest and struggle for staðir, for example, would be expected to not only interrupt trade and normal economic life, but further waste resources in the process.
    Another institutional feature, laws biased against the development of a fishing industry were in effect during this period, and would have prevented the development of an alternative means of income for the Icelanders. Iceland has always been, and still is, known as an obscure fishing station in the middle of the Atlantic. The settlers immediately used this resource for themselves, and later began exports of stockfish. Mainly, though, fishing was a side employment and farming continued to be the main one. But as other nations began increasing their demand for fish products, Icelanders, as well as the Norwegians, responded with increased exports. How much these fish exports accounted for in Iceland we do not know.31 But there must have some exports of fish, since at least two places in Iceland specialized in fish-processing before the end of the 12th century (Þorsteinsson 1980:211-212;Miller 1990:79). Sometime before the year 1200, though, the law was rectified such that individuals and their families were not allowed to have fishing and fish-processing as their sole occupation unless their local Hreppur allowed them and took responsibility for them (Þorsteinsson 1980:209). Whatever the reasons for this change in the law, the change probably did prevent further development of the industry.32 

    Among historians, Þorsteinsson (1953;1966;1980) has been in the forefront of denying any "economic decline" explanation as the cause of the end of the Commonwealth (See also Líndal 1964:33). He not only claims that economic conditions were better at the end of the Commonwealth, but that even if a decline did occur, it would only have been temporary and the Icelanders would have known from experience that it would be. As evidence of "progress" both the beginning of taxation, the tithe (Tíundargjald), in 1096 and the ever increasing "welfare system" support it.33   Further, the rise of the Church, educational institutions, and the productiveness in Saga and other writing also support a theory of increased well-being. The conclusion here will be that the "economic decline" theory fails to offer supportive evidence that withstands scrutinization and is therefore rejected. The historical record does, therefore, not allow us to conclude that there was a general economic decline in the Commonwealth. But, if there indeed was an economic decline, then it certainly was not the cause for the fall of the Commonwealth. 

    The real cause for the ship-guarantee clause in the Old Covenant of 1262-64, driving all the economic decline explanations, is that during economic downturns in Norway no trade with Iceland took place. Therefore the guarantee that the Icelanders had put into the agreement was to secure supplies from Norway during such periods.34
      "The fall of the commonwealth in 1262-64, marked by the agreement to pay tax to the King of Norway, is the usual closing bracket for studies of early Iceland. The conventional practice is not without merit. The demise of the grand saga sensibility occurs soon enough after the political change to suggest some causal linkage. The change in governing institutions could not have had all that great an impact on day-to-day life for the greater part of the population, but the native conceptual universe seems to have soon been transformed significantly. By the early fourteenth century the creativity, the synergistic coupling of the heroic and pragmatic, that produced the sagas was gone." (Miller 1990:41)
    When Hákon becomes king, in 1217, a policy for "overtaking" Iceland seems to be initiated. Hákon offered new alliances with the chieftains, made them part of the Royal Circle, obligating the chieftains to adhere to his royal rules and wishes. A part of Hákon's deal was that his chieftain allies were to convince Icelanders to pay taxes to him and him alone and the king would guarantee the peace. The king was making an investment that could later bring ample returns. Chieftains in allying themselves voluntarily with the king had an obligation to obey the kings wishes and demands, and if they opposed him in any way surrendered their property to the king.35   The chieftains may not have seen any advantage in fulfilling the king's wishes, since their income might be lower under his rule, and therefore most did not obey him. The king declared these "traitors" and demanded possession of their property. To present cases and in general to achieve possession the king made alliances with other chieftains, who willingly fought for him and sometimes acquired control of more property.
    Throughout this struggle the structure of the Commonwealth went through radical changes. The chieftain, instead of being a representative of his fellowman, became a warlord. The chiefdom, instead of being a form of brotherhood, became an "armed tyranny."36   The chiefdoms had changed and became warring states, and finally they collapsed through infighting.
    In the end it was the farmers themselves, rich and poor, who chose the Norwegian king as their ruler. With the fall of a chieftain his chieftainship, or rather his followers, were up for grabs. A new chieftain could not simply overtake the chieftainship and expect the farmers to accept him. The new chieftain had to convince the farmers that he could fulfil their demands. In the 13th century, especially after 1240, the farmers turned down all new chieftains except those who were the representatives of the Norwegian king.37  The spirit in this choice is well stated in a supposed answer of a farmer to a potential chief-ruler. A story is told that this new warlord asked a leading farmer if he would be accepted in the area as ruler and the farmer replied that he could only speak for himself, and that he had no problem with his current ruler, although he would prefer if there were none. Later after consulting with the other farmers in the community he added that they had decided not to accept the new ruler, that he was too warlike, not very rich and yet had plenty of debt. He further added that the farmers wanted to wait and see what the king's men offered. 

    The farmer's response can be interpreted to imply that because of the ruler's wealth/debt ratio they could only expect to pay higher taxes to him. Further he implies that no ruler is preferred to some ruler, but that if they do have to have a ruler then better he live further away than nearer.38
    The fall of the Commonwealth can therefore be explained by the rent-seeking that took place there. As soon as structured taxation began, replacing the system of obligated contributions, rent-seeking took off. At first it took place peacefully, chieftains gaining more staðir and chiefdoms through family ties, gifts, power sharing, etc. But later it became an armed struggle. The chieftains gained followers and raised armies at great expense in the hope that newly acquired properties and larger tax areas would bring in even greater revenue. In the end it was political chaos resulting from this that made the farmer choose the king as their ruler.39
    Even though the king may not have been a better ruler than the warlords in actuality, he was supposed to have been. The Old Covenant of 1262-4 is an explicit and detailed agreement that has clauses guaranteeing a legislature for the commons and light taxation. The king, like the previous rulers, did not live up to the agreement. There was actually no need for him to do so, since all competition for the rents had been outlawed.

     bibliography        chapter 7 

    1 Quoted from Ruth (1965:31). 
    2 Tullock's article "The Cost of Transfers" (1971) deals, as the title suggests, with the costs to government transfers. This article was written before the term "rent-seeking" was coined, but would otherwise, in all likelihood, have been titled "Rent-Seeking and the Cost of Transfers." Tullock, in his article, was pointing to the additional costs involved in transfers; costs additional to the simple middle-man cost. The term "cost of transfers," as used by Tullock in 1971, is therefore as applicable to the case here, as is the term "rent-seeking." I have chosen to adopt the latter term, instead of the former, for two reasons: First, because it more properly emphasizes my point; the negative social impact of the transfers and the "hidden" costs to them. And, secondly, because I believe Tullock would insist on its use (see Tullock's chapter on "Rent Seeking and Transfers," in Tullock 1989:73-77). 
    3 See Buchanan (1980a:4-5). Also Tullock (1989:55) states "My suggestion is that we use the term 'rent seeking' (and I always have) solely for cases in which whatever is proposed has a negative social impact." 
    4 A similar definition is given by Tollison (1987:145): "Perhaps the most useful way to think about rent-seeking is in terms of using real resources to capture a pure transfer." 
    5 For a good introduction to rent-seeking see Mueller (1989) and Buchanan (1980a). Other works on rent-seeking to look at are Buchanan, Tollison and Tullock, eds., (1980), Rowley ed., (1987) and Rowley and Tollison eds., (1988). Some interesting applications of the rent-seeking model are: Ekelund and Tollison (1981), and in Buchanan and Tollison (1984).
    6  Tollison (1987:153) defines this second-stage as "rent-seeking behavior" in "the competition to capture the rents that inhere in particular instances of monopoly and regulation." 
    7 See for example Líndal (1964), Olgeirsson (1954), Sigurðsson (1989), Þorsteinsson (1953;1966;1980), and Karlsson (1972;1975;1980.) 
    8 For an excellent historical discussion on the details of this, see Karlsson (1975:31-49) and Stefánsson (1975:109-37). 
    9 For further discussion on the Tithe, its assessment, wealth accumilation, and the consequences, see Jóhannesson (1956:202:212). 
    10  It is actually not all that clear whether all the various fees (or contributions) were discontinued with the introduction of the Tenth. It is known that various fees were collected by chieftains and other leaders in the 12th and 13th century. See Sigurðsson (1989) and Ingvarsson (1986:172-191). 
    11 Other historians support a similar view: "The law was not a set code that everyone was expected to obey, but a group of rules that individuals could use to their advantage or turn to the disadvantage of others. The sagas show characters routinely breaking the law when they thought they could get away with it, and it may well be that people acted in precisely this way" (Byock 1988:21). And Karlsson states: "The laws indicate that a man could plead his own case in court without the intervention of his goði. But in practice this led to difficulties, principally because a just cause and correct pleading in court were seldom sufficient to secure the execution of justice. In order to carry out a judgement a strong hand was required, and many had to turn to their goði for this. In addition, it seems to have been far more common in the twelfth century for quarrels to be settled by arbitration than by judgement. Arbitration was used to stabilize peace rather than to assure that justice be done; accordingly, the man who was more powerful came away with the better half of the bargain. There is clear evidence that it was considered better in dispute to have the support of powerful men than to have a just cause. It is therefore safe to say that in general justice and security were in the hands of the goðar." (1979:55-6) 
    12 Miller sums this point neatly: "Chieftaincies...were not titheble, nor was property donated to a church, even if that church was owned and under the sole control of the person making the contribution. This last exemption could be used by churchowners to insulate effectively all their property from tithes. From this exemption, coupled with the fact that one-half of the amount collected from others went to the churchowner for the maintenance of the church and of its indentured priest, we can begin to discern why there is no mention in the sources of resistance to the tithe by the rich and powerful, who in fact recognized and took advantage of the loopholes." (1990:36) 
    13 The commodity nature of the chieftainship is best illustrated in that it could be traded, given as a gift, inherited, etc. On the other hand though, just buying the chieftainship was no guarantee of power. Every chieftain had to be able to convince some free-farmers to follow him or accept his leadership. In failing to gain following the chieftainship was almost worthless.
    14 As other historians have stated: "Many studies have stressed the control of staðir as the principal source of wealth for the stórgoðar in twelfth- and thirteenth-century Iceland. This conclusion is sound in certain respects, but when accepted as a general rule it becomes misleading. The tithe did not establish the goðar as leaders. Traditions of leadership were firmly in place when in the late eleventh century the chieftains used their lawgiving power to reap benefit from a new form of revenue, one that also offered a nontaxable shelter for existing wealth. On the other hand, some families, particularly the Oddverjar and the Haukdælir in the south, profited to an inordinate degree from the management of staðir. The increased wealth such families derived from control of church property hastened the evolution toward increased social complexity" (Byock 1988:94). And, Byock continues in a footnote to this paragraph: "Björn [Þ]orsteinsson has been instrumental in drawing attention to the importance of staðir for these chieftains of the postconversion centuries who in modern studies are often called church goðar (kirkjugoðar). His emphasis on class structure, however, may be misleading... Gunnar Karlsson...notes that both stórbændr and stórhöfðingjar owned staðir and that possession of staðir alone did not assure the authority of a stórgoði" (1988:note 33 p. 94). And Miller (1990:26) also supports this: "During the turmoils of the last decade of the commonwealth, the big players in the power politics of the period resorted to raiding. The two most lucrative sources of wealth, in addition to the productive capabilities of their own lands and livestock, were the gains from controlling the access of little people to the law and their own access to tithes, which...was a function of being a churchowner rather than a chieftain."
    15 Tollison (1987:153) defines this second-stage as "rent-seeking behavior" in "the competition to capture the rents that inhere in particular instances of monopoly and regulation." 
    16 The historical facts in this paragraph and the next one are derived largely from Sigurðsson (1989) and Karlsson (1975). 
    17 "In treating the relations of farmers to goðar historians have on the whole stressed the farmer's legal freedom to choose his own goði.... In the twelfth-century Sturlunga sagas there is one example of a farmer who changed his goðorð of his own free will. This shows that it was possible to exercise this right; but it is no proof that the relationship between the goðar and thingmen was in general a matter of the farmers' free choice. It can be assumed that hereiditary custom often decided what goðorð a man was in. But it is also clear that the authority of a goði was to a certain extent territorially defined. There are, to be sure, clear examples that a goði's thingmen did not always form a consistent district in which no one else lived, but to a large extent the autority of the goði was restricted to one defined area. For defense against robbers men depended on the goði who lived in their district, whether they were his thingmen or not. There are also examples of goðar refusing to allow other men in their district than those they could depend on. Thus the goðar had their own areas of influence within which everyone - both their own thingmen and those of other goðar - had to respect their will. Under these circumstances the right to attach one's self to another goði meant little in practice. On the other hand, the goðar were dependent on neighbouring farmers in so far as they needed their support in defense and in fighting. When most of the goðorð in Iceland were assembled in the hands of a few powerful chieftains in the beginning of the thirteenth century, it is likely that this was due to some extent to the failure of farmers to support the less powerful goðar" (Karlsson 1979:56). 
    18 "The driving-force behind this process was the chieftains' desire for power and prestige, involving both economic and political motives. The chieftains' economic base was of great significance in determining subsequent developments; those who managed to control substantial resources of wealth were able to establish a ríki. It was mostly by means of gifts that each chieftain endeavoured to retain, and enlarge, his group of thingmen. A gift worked a strong spell; the recipient had either to give a gift in return, or else work for the donor. This practice gave a wealthy chieftain the means of enlarging his group of followers. Once the chieftain-vassal relationship had been established, the chieftain was obliged to maintain it, either by distributing new gifts, or by holding a feast for his followers. In the end, it was the chieftains' ability to mobilize the economic resources and manpower of their ríki that determined whether or not they survived the increasingly bitter and destructive power struggle during the final period of the Free State. The chieftains' economic power base was strenghtened by their control of the local ecclesiastical institutions, the staðir, and the churches of the wealthy farmers. Snorri Sturluson is a case in point: he managed to aquire several goðorð and vast economic resources, mainly through his control of the staðir and the churches of the wealthy farmers, and this enabled him to establish his ríki in Borgarfjörður. Riches begot riches. The goðar could then `buy' more farmers, which made it possible for them to expand their economic activities, and thereby establish their standing as stórgoðar. The concentration of power was parallelled by a corresponding concentration of economic resources. The difference in wealth between the 12th century goðar and the 13th century stórgoðar was huge. As an example, the sons of a leading 12th century goði called Hvamm-Sturla all became stórgoðar in the 13th century: Hvamm-Sturla's sons were at least ten times wealthier than their father, with power proportional to their wealth" (Sigurðsson 1989:141-2). 
    19 "The development of ríki led to the use of new methods of government by the stórgoðar in the 13th century (the greater chieftains), who usually took Norwegian practices as their model. Trusted men served as their advisors, and probably also as their representatives in the local government, while other followers acted as bodyguards and police, capable of exerting coercion where necessary. Both groups functioned as the extended arm of the stórgoðar. The power base of the stórgoðar also changed when the ríki evolved. In former times, the farmers had been relatively free to elect a goði. Now, however, all the farmers within a ríki were, in reality, subjected to one stórgoði as his thingmenn. That which at an earlier stage had been essentially a leadership based upon family and friendship, now became a territorial, political domination. At the same time, the stórgoðar gained control over the judicial activities in their district, and decided all the cases arising between their thingmenn. The local and regional things declined. The stórgoðar aimed at ever-increasing power and influence" (Sigurðsson 1989:141). 
    20 There is some disagreement as to how important the institution of the Church itself was in this struggle. All the historians admit that it did play a role, but the question is how much this role was. Stefánsson (1975) has given it the most important status. A more fair summary of what the facts do allow us to conclude is found in Miller: "The history of the Icelandic church and the story of the fall of the commonwealth are undoubtedly connected but in no certain way. Our evidence allows us to identify other factors that contributed to the advent of Norwegian rule, but it does not allow us to privledge any one explanation. A confluence of factors was at work. One of the key changes in the social order during the course of the last half of the twelfth and into the thirteenth century was the consolidation of much official and unofficial power into fewer and fewer hands. By the 1220s most of the goðorðs had come into the possession of five or six families. They were able to rule territories, effectively depriving the bændr of any legal right to choose their Thing attachment. The process by which these families ascended and others declined is obscure. The usual explanations link the process to the greater accumulations of wealth made possible by access to tithes and donations to the church." (Miller 1990:39) 
    21 A somewhat typical statement of this argument is made by Gissurarson: "[T]he Icelanders were not primarily making the pact with the Norwegian king in order to achieve domestic peace: they were trying to avoid economic isolation. After all, this later became the fate of the Icelandic colony in Greenland with which all contact was lost in the early 15th century," (1990:18). See also Líndal (1964). 
    22 Þorsteinsson (1953), although claiming this is a non-issue, confirms that Icelandic ownership declined throughout the period. He goes a little further, though, and claims that the Icelandic shipping fleet did not recover until the 19th century (1953:132). See also Líndal (1964). 
    23 The advance in ship-building is mainly due to a changed method of building them: "Clearly, the date and location of the change from skin-first to skeleton-first ship construction is a major problem in economic history. The new method would build an adequate ship at much less expense. Wreck or destruction of a ship by pirates or in a war would mean less loss af capital than formerly and the returns on successful trade would be proportionally increased on the lower investment.... in the delta of the Po a boat 10.5 meters long, built skeleton-first, has been found and dated by pottery to the eleventh century.... at present it appears that in the century or so before the first crusade a simplification of the shipwright's art provided ships which were far cheaper, and therefore presumably more numerous, than had been earlier. The ability of the crusaders to maintain themselves for nearly two hundred years in a hostile context so far from their home bases may partly be explained in this way." (White 1986:288-9) See also White (1976:167) and Jones (1987). 
    24 That the ships were getting bigger is now well established by archaelogical finds. In discussing the ship find at Roskilde, Hodges says: "Wreck 1 from Roskilde was the ship of the future. This was a heavy boat about 16.5 m long and 4.6 m in the beam, and was probably a knarr, the kind of vessel used on the voyages to Iceland and Greenland. It too had fore and aft half decks with a central hold that could have accommodated nearly 30 tons, causing the ship to draw 1.5 m of water, compared with the metre that wreck 3 would have drawn fully loaded. This load-draughted boat required two pairs of oarsmen fore and aft, but it was primarily a sailing boat that docked and was, we assume, seldom man-handled, unlike those that preceded it." (1982:99) And he continues, a few paragraphs later: "The implications of this are twofold. First, one merchant meant as many as twenty crew members before the tenth century. Secondly, bearing the crew in mind, cargoes must have been very limited; on the basis of Ellmer's calculations, in the order of 8 tons or less before about A.D. 1000. Quite clearly bulky goods were out of the question." (Hodges, 1982, 100) The historian Peter Sawyer also confirms this for Scandinavia in particular: "These heavier vessels reflect a change that apparently occurred in Scandinavian ship design towards the end of the Viking period when heavier, more rigid craft replaced the light, flexible boats of earlier times. This was partly a response to changing needs, for in the eleventh century there was a growing demand for deeper ships capable of carrying relatively heavy loads." (1971:80) It is also possible that Iceland enjoyed a similar experience of the Shetlanders: Boatbuilding in Shetland seem to have started as a kind of assembly line. Norwegian boats for the Shetland market were built with minimum of fastenings, marked, dismantled and shipped as kits to be put together and fastened in Shetland." (Christensen 1984:86) 
    25 As White claims: "Another great advance both in safety and in profit was caused by the arrival of the magnetic compass in Europe from China in the last decade of the twelfth century; within a few years it was widely employed" (1976:167). And, further: "In Europe the mariner's compass appears in Alexander Neckham's De naturis rerum, which was in wide circulation by the end of the twelfth century, and in Guiot de Provin's Bible composed between 1203 and 1208. By c. 1218 Jacques de Vitry considered the compass `valde necessarius...navigantibus in mari'. By 1225 it was in common use even in Iceland." (White 1964:132) 
    26 Some historians use the grain example as support for the argument that Iceland was dependent on foreign trade. They, seemingly, do not know that what grain the Icelanders were able to produce on the island went mostly into brewing ale, rather than for baking bread. On this and on local production in general, see Þorsteinsson (1953;1966;1980). On the Icelander's dietary needs in the period, see Björnsson (1975). 
    27 For a more thorough description of the Icelandic economy, see Jóhannesson (1956:341-410) and Þorsteinsson (1966). 
    28 Quoting Gissurarson again: "[T]he Icelandic economy could simply not withstand a great fall in the value of its exports, mainly wool, in the 13th century.... It was only later when the Icelanders started exporting fish that the economy became feasible." (1990:18-19) 
    29 It should be mentioned here that some historians have claimed that weather conditions became unfavorable in the 12th and 14th century and this in turn caused a downturn in the economy. Modern studies, though, indicate that this is not correct and that the beginning of the "little ice age" only came about later. As Stoklund says: "A fall in the average temperature can be traced from about 1300." (1984:97) The following table from Hastrup (1985:161) comes to the same conclusion: Climatological Periods: 1. 800-900 Generally dry and warm summers. Eastern winds dominated over the North Atlantic. 2. 900-1050 Relatively wet and cold summers. 3. 1050-1130 This period was much like the first. 4. 1130-1160 Like the second period, only worse. 5. 1160-1230 Of the same kind as the first period, but not quite so advantageous. 6. 1230-1270 Like the second period, only considerably worse. 7. 1270-1330 Slight improvement in climate, but increasing frequency of north-westerly winds. A period of general instability. 8. 1330- Gradual worsening of conditions, leading to the `Little Ice Age' (1600-1800). 
    30 Both the Alþing and some local þings occasionally did announce price lists of some goods, but whether they were ever abided by is not known. Chieftains seemingly had the authority to set prices also, i.e. price-controls, but Karlsson, at least has disputed that they ever used those powers to any degree: "Ekki verður heldur mikið vart við afskipti goða af verslun og kaupmönnum í frásögnum frá 12. öld." (Karlsson 1979:10-11). And he continues: "Árið 1215 lögðu" þrír goðar "lag á varning norskra kaupmanna, og virðist þá hafa verið óvenjulegt, að íslenskir höfðingjar gerðu það." (Karlsson 1979:11) 
    31 We do know that Norway invaded the English market with great success, as Gelsinger says: "Because of its urban development during the eleventh century and later, England had a large market for dried fish that Norway could offer in return for grain and other supplies it needed" (1981:166). At another place he says: "After the beginning of the eleventh century England provided a substansial market for Norway's dried fish and other products in return for grain, fine cloth, and other goods." (1981:157) See also Þorsteinsson (1953:136). 
    32 The law was changed again in the late 13th century, after the fall of the Commonwealth, and the fishing industry "took-off" from that point on. On the development of the fishing industry in general see Þorsteinsson (1953;1966:1980). 
    33 Þorsteinsson argues that the fact of organized taxation and its expenditure are supportive of his contention that economic conditions had become better. Even so it would seem that continued taxation need not be supportive of continued "prosperity", in fact taxation might have continued in spite of an economic decline. But economic decline by itself is a doubtful cause for the fall of the commonwealth. 
    34 There is seemingly no evidence of "better times" in Iceland's economy after the agreement with Norway. Only in the 14th century do we (think we) know of better times, after the exporting of fish products increased drastically. The 1301 count of tax-farmers shows lower numbers than in 1097, and it seems therefore that there were fewer people in Iceland in 1300 than in 1100. The question is whether there was a linear decline in population in those 200 years, whether population had increased again by 1300, or whether the population had actually stayed the same but that the number of tax-paying farmer had declined? 
    35 See Jóhannesson 1958:205-225. 
    36 Or as Miller says: "Feud between big families started to take on the characteristics of war, the chief costs of which were not born by the principals but by the people who lived in the territories they controlled. We see the powerful and pretenders to power provisioning themselves by plundering the people they sought to rule." (1990:40) 
    37 "Thus, by about 1250, the king had managed to aquire control over almost all of the goðorð in Vestfirðingafjórðungur, Sunnlendingafjórðungur and Norðlendingafjórðungur; the goðorð in Austfirðingafjórðungur were aquired in 1264. With establishment of control over the goðorð, the king could appoint their governors, and in fact became the farmers's overlord" (Sigurðsson 1989:140-1). 
    38 Karlsson claims that the wealthier farmers in effect replaced the chieftains and took over their functions: "Á síðasta skeiði þjóðveldisins verður gagnger breyting.... Goðorðsmönnum fækkar, og þeir verða víða óstöðugir í sessi vegna innbyrðis átaka og áhrifa norska konungsvaldsins. Um leið eflist sá hluti bændastéttarinnarm, sem getur aflað sér tekna af umráðum kirkjueigna. Þessi hópur bænda, sem líklega hefur tekið við hlutverki goða í heimabyggðum og staðið í svipuðum tengslum við bændur og goðarnir höfðu áður gert. Það er þessi hópur forystumanna bænda, sem kemur fram fyrir þeirra hönd gagnvart stórhöfðingjum Sturlungaaldar og heldur því stundum fram, að best sé að hafa enga höfðingja." (1979:49) A more detailed statement by Karlsson goes: "In the thirteenth century there are a few examples of farmers being strongly independent of goðar. In general the goðar did not take power without first assuring themselves of the approval of the farmers in the district, and at times the farmers hint that it is best to have no goði. This has been interpreted as remnant of the old freedom of farmers, and it has been concluded that this freedom was greater before the great chieftains and large-scale wars of the thirteenth century. But closer consideration reveals that it was especially the so-called big farmers or, `best men' whom the chieftains turned to for support, and that the smaller farmers followed the bigger ones. It is likely that these big farmers assumed the leadership over other farmers when the goðar became fewer in the thirteenth century and their personal contact with the individual farmers diminished. The big farmers then took the place of the goðar to some extent. The goðar could be more harmful than useful, for they were often at war and the farmers often had to support them with certain expenditures. The big farmers, on the other hand, seem to have been wealthy men who lived on prosperous church farms and made a profit by managing the church's property. Some of these men figured in the struggle for power between the goðar families, and one of the Sturlunga sagas, Svínfellinga saga, tells of a prosperous church farmer who killed his goði" (1979:57). 
    39 It has often been suggested by some historians that the various kings in Norway always wanted to gain hold of Iceland, but that for some reason never managed to achieve their goal. Icelandic historians, earlier ones especially, tended to claim that it was patriotism on the part of the Icelanders that prevented the kings from this. But then in the 13th century the chieftains committed treason and abandoned patriotism in favor of Royal privlidges. Their explanation is, of course, not convincing and has therefore been rejected by modern historians (See Líndal 1964). But the claim concerning the kings' goal may still be salvaged though. If, as claimed, the kings wanted to gain Iceland as part of their kingdom, then the progress in technology was surely on their side in the longer-run. The kings may simply not have been able to achieve their goal in the 11th and 12th centuries because of transportation and communication difficulties. By the 13th century, however, technology, especially in shipping, had advanced so much that the goal became achievable. This advance in technology gives the kings' intentions, at least, some plausibility.

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