Low-Energy Fridays: Should we be selling public lands?
The budget reconciliation package proposed a (recently revised) provision to sell off up to 0.5 percent of the federal government’s large swaths of public lands. Much of this land is still what the government bought during big land purchases like the Louisiana Purchase, but was never homesteaded and transitioned to the private sector. Depending who you ask, finally privatizing this land could be either very good or very bad. Whether or not this is good policy, though, requires understanding its dual dynamics of environmentalism and economics. The issue is simple, but it’s hard to find policy agreement.
Economics of Public Lands
There are two major economic justifications for selling public lands: 1) as a solution to the nation’s debt woes and 2) because private firms tend to utilize land more productively than the public sector.
The first argument, that selling public land is a solution to the nation’s debt, is commonly raised but unfortunately dead wrong. If a homeowner is in debt because of their mortgage and sells their house to alleviate that debt, has their net worth changed? Not one iota. And so it is with the nation’s federal assets: We are in such a large amount of debt because we have exceptional borrowing power. This is not just because of federal revenues, but also because of federal assets. Selling public lands trades borrowing power for cash without altering our balance sheet, so the giant burden of public debt should warrant the same level of concern both before and after public land sales.
The second argument is more important, though. A well-understood economic theory is that private ownership of goods yields more productivity than public ownership. This is because under private ownership, the owner of a good also has the most incentive to innovate and maximize productivity. Conversely, under public ownership, the stewards of the good bear no consequence for failure.
Much of the federal government’s land is rich with mineral resources, and although the government makes this land available to private firms via leases, those mechanisms are inefficient and subject to political abuse. There is little doubt that the production of mineral resources (including fluid minerals like oil and gas) would increase if relevant lands were sold to the private sector, as they would have substantial incentive to extract the most economic value from the land.
Environmental Considerations
Where there is more complexity is in the environmental aspects of selling public lands. Public ownership can enable public access to environmental goods (e.g., National Parks), the intrinsic value of which can be difficult to quantify. A worthwhile question is, “What is the economic value of hiking on a mountain?” There is a willingness to pay, but if such mechanisms are not priced, their value is hard to determine. While the question of environmental stewardship of public lands is often framed on philosophical grounds, there is a difficult-to-quantify but still very real economic benefit to these lands. A reasonable concern is that selling land to the private sector would forgo a benefit by closing off public access to such resources.
Another concern is that private ownership of lands may result in harm to the environment; however, this risk isn’t so clear cut. It’s not immediately apparent that private ownership results in worse environmental outcomes than public ownership. Environmental protection laws also exist for the private sector, which means private-sector landowners don’t have free rein to be environmentally destructive.
The conventional school of thought on conservation assumes that because environmental quality is a public good, it’s best for the public to be responsible for that care. Basically, if I value the green space of a park, then I benefit from the government owning it since I have a say in how that space is managed.
But newer analysis of environmental outcomes is challenging that perception. It turns out that in many cases, private land ownership—especially land bought for the purpose of conservation—yields better outcomes than public ownership because a private landowner has a greater interest in maintaining their property than the public does. This is consistent with economic theories of productivity noted earlier, where private owners have greater incentives to maintain their property than the public does.
A reasonable and simple explanation for why private landowners would engage in conservation is that as individuals become wealthier, they have a greater willingness to pay for environmental quality (as covered in a previous Low-Energy Fridays). Additionally, privatized conservation often includes a profit motive to preserve environmental quality and biodiversity (e.g., private reserves). But the important bit here is that the assumption that public ownership of land yields better environmental outcomes is exactly that—an assumption. If selling public lands is opposed on environmental grounds, a stronger case ought to be made that the public is a more effective steward than a private owner.
In other words, the environmental concerns around private ownership of land are debatable and mitigatable, and some worthwhile theories call for environmentalists to encourage more rather than less private land ownership.
To sum it up, selling federal lands would likely be economically beneficial because buyers have greater incentives for productivity than the federal government does. Environmentally, there is less certainty as to the positive or negative impacts; however, it’s important to acknowledge that bad outcomes are not guaranteed and are likely to be mitigated by existing (or new) environmental protection laws. It’s also important to recognize the difficult-to-quantify economic benefits of public access to nature that are also worth preserving. From a policy perspective, such outcomes are not mutually exclusive—and the policy is worth further consideration.