Property Rights and the Arctic Contest

Regarding the Svalbard archipelago, located in northern Norway, Eivind Vad Petersson, Norwegian Deputy Foreign Minister, summed it up to The New York Times¹:

• “For too long Svalbard has been seen by other nations as a kind of Wild West, and anyone who wants can come and do pretty much whatever they want. That’s not the case. This is sovereign Norwegian territory. So, we are making it a little bit clearer.”

Recently, Norway has restricted land sales to foreigners and claimed hundreds of miles of sea around the archipelago, concrete signs of a will to clarify rights and boundaries.

These profound developments in the Arctic, evident in the renewed scramble for resources and strategic positioning, are naturally subject to a plurality of interpretations. Analysts might foreground military superpower competition, climate security, international legal disputes, or economic opportunity.

I propose applying a theoretical lens often overlooked in public debate: Harold Demsetz’s theory of property rights. According to Demsetz, property rights are not immutable elements, but institutions that emerge, become defined, and strengthen when the value of resources grows enough to make the benefits of exclusivity exceed the costs of definition and enforcement. Where a resource has little value or the costs of exclusion are prohibitive, an open-access regime may be more efficient. When, however, the expected value increases—for technological, market, or environmental reasons—the incentive arises to invest in rules, monitoring, and sanctions to manage the resource in an orderly way and capture its returns.

The historical case Demsetz uses to illustrate this dynamic is eloquent and convincing. Some Indigenous peoples in North America practiced beaver hunting under an open-access regime. With the arrival of external traders, the demand for furs increased and the price rose, spurring intensive hunting that threatened to deplete the species. To avoid the collapse of the resource, some communities introduced exclusive territorial rights: property became the tool to internalize the benefits of conservation. Those who could exclude others had the incentive to count and monitor the animals and to limit hunting when their numbers fell excessively. As further evidence in support of the theory, where the terrain made it difficult to demarcate and enforce rights or where the commercial value was low, private property did not take hold.

Clearly, Demsetz’s empirical case concerns societies with informal institutions, whereas the contemporary Arctic is not an undifferentiated “commons.” Sovereignty over land is largely defined, and the legal framework governing exclusive economic zones,² continental shelves, and maritime routes is well-articulated. However, Demsetz’s logic is not bound to the absence or weakness of formal institutions. It provides a logic of incentives—the trade-off between value and exclusion costs—that remains valid whenever benefits and costs change: states, companies, and communities react even in highly institutionalized contexts.

Demsetz’s central insight—that the emergence or strengthening of property rights responds to changes in the benefits and costs of exclusivity—is also applicable to international regimes, mineral rights, fishing rights, and territorial disputes. Concrete examples include the introduction of transferable quotas in fishing; the technological breakthrough of hydraulic fracturing (‘fracking’), unlocking new oil and gas reserves; the renegotiation of mining concessions; and the extension of continental shelves. These are all institutional responses to an increase in resource value and a greater technical capacity to exclude and monitor.

The point of contact with the historical case, to be taken cum grano salis,³ is that an external change (such as global warming or the arrival of new economic actors) increases the value of previously marginal resources, generating pressure on existing rights and incentivizing actors to strengthen, extend, or reinterpret their claims. In this sense, in the Arctic, we are not witnessing the birth of entirely new rights, but rather their reformulation accompanied by stricter enforcement.

This institutional intensification, however, raises issues of legitimacy, justice, and sustainability that cannot be ignored.

The first knot is political and distributive: who sets the rules and who benefits from the new opportunities? In the case of Greenland, rights derive from a complex interplay of international norms, Danish law, and protections for the Inuit. If decision-making processes marginalize local communities, the redefinition of rights risks translating into the expropriation of wealth and social conflicts.

The second risk, perhaps even more serious, is environmental: the Arctic is a fragile ecosystem crucial for global climate balance; the increase in extraction and maritime traffic entails concrete dangers of pollution, habitat loss, and overexploitation, with effects difficult or impossible to reverse. The bitter irony is hard to miss: the Arctic’s melting, driven by global warming, creates new opportunities for the very actors who dispute its causes.

Demsetz’s framework remains illuminating, as it sharpens our understanding of the circumstances under which property rights yield peaceful stewardship rather than conflict. The theory posits that well‑defined ownership can promote sustainable management, but only if two stringent conditions are met:

• Rights holders must operate with a long-term horizon, prioritizing preservation over short‑term gains; and
• Strong, transparent institutions must exist to enforce rules impartially and constrain predatory conduct.

In the Arctic context, this translates to a critical need for governance mechanisms that are legible, legitimate, and equipped with credible monitoring and response capabilities.

Without such a robust regulatory scaffold—one founded on scientific monitoring, clear lines of accountability, and equitable benefit-sharing with Indigenous and local communities—the surge in resource value may simply accelerate a race to claim and exploit. The result would be the externalization of massive costs onto the fragile Arctic environment and its inhabitants, through pollution, habitat destruction, and the erosion of traditional ways of life.

There is another irony at play: the very mechanisms designed to bring order (the establishment of exclusive rights) risk enabling a tragedy of the commons in reverse, where enclosure leads not to care, but to careless extraction.

Thus, while the old adage that “good fences make good neighbors” holds geopolitical truth—clear boundaries and rules can reduce interstate friction—the nature of these institutional ‘fences’ is paramount. To serve peace and sustainability, they must be constructed justly, through inclusive processes that prioritize environmental resilience and uphold the rights of those most directly affected. Otherwise, they risk becoming instruments of exclusion and geopolitical predation, cementing inequalities and securitizing disputes. In the worst-case scenario, they become the legal and territorial fault lines along which conflicts ignite.

Viewed through this lens, the heightened rhetoric and hegemonic posturing of major powers in the Arctic are not harmless theatrics but portents of a system drifting toward instability or bad equilibria. They expose a geopolitical landscape in which the soaring valuations of once‑inaccessible resources have outstripped the development of trustworthy, shared institutions. Plans to address these challenges not through existing institutions and negotiations, but through a transfer of cash for territorial sovereignty to a single decision maker, represent the expression of a worldview that treats territory, alliances, and even security as commercial commodities. In Demsetzian terms, such plans to address the challenge by treating the right to make such decisions as available for sale reflect an attempt to redefine rights unilaterally—through valuation and power rather than through the social coordination that makes property regimes legitimate.

This mentality extends into a broader system of geopolitical patronage, where the message to allies becomes: security must be bought, whether through political loyalty, tariffs, basing rights, or strategic concessions. Such behavior collapses the cooperative conditions that Demsetz saw as essential for rights to evolve efficiently, replacing them with coercive reallocations that raise transaction costs and erode trust. This approach subverts multilateral frameworks, reducing them to bargaining chips in zero‑sum negotiations and accelerating the erosion of shared governance. It incentivizes a scramble in which power—not law, not ecology—becomes the decisive currency.

The rising nationalism around Arctic claims is therefore not just a symptom of instability but the product of a great‑power ethos that treats rules as disposable. Without a collective recommitment to equitable, ecologically grounded governance, the logic of property rights—distorted by a transactional, might‑makes‑right philosophy—will not merely risk conflict but steer the region toward sustained confrontation.

Footnotes

[1] Jeffrey Gettleman, Sarah Hurtes, and Louise Krüger (January 11, 2026). “The Tug of War at the Top of the World.” The New York Times.
[2] Exclusive Economic Zones, or EEZs, are defined in the United Nations Convention on the Law of the Sea (pdf).
[3] Cum grano salis: with a grain of salt.