The setting of "Old Woman Magoun" is an isolated mountain settlement in the early 1900s. A description is given at the opening of the story:
The hamlet of Barry's Ford is situated in a sort of high valley among the mountains. Below it the hills lie in moveless curves like a petrified ocean; above it they rise in green-cresting waves which never break. It is Barry's Ford because at one time the Barry family was the most important in the place; and Ford because just at the beginning of the hamlet the little turbulent Barry River is fordable. There is, however, now a rude bridge across the river.
The description is of a village closed off by height, hills, and river. The water of the river is not fordable, or shallow enough to be crossed, and there is no bridge to Greenham until Mrs. Magoun insists that one be built. Once a bridge is built, it is "rude" or "roughly constructed." The bridge, which represents a desperate attempt of Mrs. Magoun to be able to escape the isolation of the town, is poorly built because the men who build it are resistant to the change. She and the other women must bribe the men to build the bridge, and even then, the men build it as if it is not meant to last. The whole situation shows the power the men have over the setting, as well as the limited powers of women in their society.
Why would Magoun want to be able to escape the isolation of her village? Barry's Ford is owned by a villain: Nelson Barry. While his family used to be respectable, Freeman makes it clear that he is now a known degenerate. His degeneration is so well known in the region that Mr. and Mrs. Mason will not adopt Lily because she is known to be Barry's daughter. While considering whether or not to adopt Lily, the Masons have the following discussion:
“What do you think, Maria?” he said. “That old woman came to me with the most pressing entreaty to adopt that little girl.”
“She is a beautiful little girl,” said Mrs. Mason, in a slightly husky voice.
“Yes, she is a pretty child,” assented the lawyer, looking pityingly at his wife; “but it is out of the question, my dear. Adopting a child is a serious measure, and in this case a child who comes from Barry's Ford.”
“But the grandmother seems a very good woman,” said Mrs. Mason.
“I rather think she is. I never heard a word against her. But the father! No, Maria, we cannot take a child with Barry blood in her veins. The stock has run out; it is vitiated physically and morally. It won't do, my dear.”
In the early 1900s, many people possessed a Naturalist worldview. Naturalism is a worldview that says a person's behavior is dictated either by their surroundings or their heredity. The Masons believe that even though Lily seems innocent, she is of "vitiated" blood; in other words, they believe she will not be able to escape being like her father, Nelson Barry.
The early 1900s setting also explains why Mrs. Magoun's rights were limited. In the early 1900s, women were still fighting for equal rights, and so owning land or claiming ownership of children put them at a disadvantage to men in general. Even though Nelson has a horrible reputation, and even though Mrs. Magoun has cared for Lily her whole life, the Justice System would side with Nelson in his claim over his daughter. After all, as Nelson points out, Mrs. Magoun did not hide the fact that Nelson Barry was Lily's father.
Mrs. Magoun had made a point to say that he had married and abandoned her daughter, because she wanted to protect her daughter's reputation as a single parent. At the time, women who had children outside of wedlock would have been considered promiscuous whores and shunned from good society. It would not matter much to society at that time if the single mother had been unfairly seduced or raped; either way, virginity lost outside of marriage devalued a woman to the degree that she would be ostracized from her community.
Barry's Ford is a setting that rests upon male domination, sexism, and the limited rights of women. It is no wonder Mrs. Magoun keeps Lily so sheltered and closed off from the world; she is trying to protect her from the isolation, oppression, and abuse of women cultivated by the environment of the village.