In the course of my thesis and other research, I’ve been forced to think about why Canada and the United States took such different economic routes before the early 20th century. And the more and more I think about it, the more and more I think the argument cannot avoid the importance of public goods.
In 1763, when Quebec was conquered by the British, the population was concentrated along the St-Lawrence seaway. In this area, the population density stood at 8.91 inhabitants per square mile. This was well below the average figure for the New England colonies and even the more remote colonies of the American south. But land was as available in Quebec as it was in the American colony, so why do wee such important differences for density figures?
In an economy where land is cheap and labour is dear (i.e. few workers, lots of acres), population density would be a function of the production of “public goods”. By public goods, I mean grist mills, roads and other institutions needed to connect producers of final goods with consumers. In the United States (more precisely, in New England), the land ownership system was free and settlements would have been based on whether or not someone provided these goods. A landlord would have to attract farmers in his settlement area by producing public goods (grist mills, roads etc). If the public goods provided were of poor quality or too expensive, the peasants would have moved away to another settlement.
In Canada, the game was different. The French implanted a system of seignorial tenure which the British kept intact up to 1791 and kept partially in place up to 1854. The seigneurs controlled access to the land in the colony and to the industries settled on his land. However, they had to produce a minimum of public goods by law (they had obligations towards the censitaires – the renter). The censitaire could not go to other seigneurs to turn his wheat into flour, he could not sell his land either unless he paid a 12.5% tax of the sale value to the seigneur. In such a situation, seigneurs had no competition from other seigneurs since peasants could hardly move away. It meant that by controlling supply, a seigneur could enact a redistribution of income towards himself without necessarily producing public goods and services to match the size of the transfer. More importantly, it incentivized a thinner distribution of the population over the territory of the colony.
I say this because in such a situation, politically connected actors in quest of rent-seeking (read: obtain privileges) were incited to lobby for a seignorial title. Landlords obtained monopolies over land areas given by the crown and this resulted in dispersing population rather than concentrating it. But this meant that economies of scale could not be exploited, that regional markets were isolated (this prevented specialization and further economies of scale) and that landlors had no incentives to improve the price/quality ratio of the public goods they were producing. As soon as they did produce a grist mill (which was a condition of obtaining a seigneurie), they did not have to care about much.
Spreading the population more thinly meant a poorer quality of public goods, which hindered economic growth on top of the effect of isolating regional markets. This made it harder for the colony to develop economically and probably created a path dependency which affected the rest of Canada and set the colonies on a different path of economic change and performance than the United States.
 This estimate has been made possible by Jacques-Alexandre Fournier from the urbanist firm Indicia in Montreal using the map provided in Cole Harris. 2012. Le Pays Revêche: Société, espace et environnement au Canada avant la Confédération. Québec : Les Presses de l’Université Laval, p.112.