The Wasted Potential Of Federal Lands

Wednesday, May 2, 2018
Image credit: 
Tony Kent, via flickr

Among Western, market-based democracies, can you guess which government owns the most land? The United Kingdom? No, the central government there owns about 5.3% of the land area. What about Germany? There the central government owns about 3% of its forests and agricultural land is private. The winner by far is America, where the federal government owns and manages 28% of the land across all fifty states. It is an immense holding of 610 million acres, four times the size of France. Most of it is managed by two agencies, the U.S. Forest Service in the Department of Agriculture (38,627 employees and a budget of over $7 billion) and the Bureau of Land Management in the Department of the Interior (10,196 employees and a budget of over $2 billion). The National Park Service administers a comparatively small, 27.4 million acres. What is the reason for this huge federal estate and what does it mean for today?

The founders of the republic would be astounded by these figures. Their objective was the rapid transfer of government land to private individuals as quickly as possible. They saw the widespread private ownership of land not only as good economics, but good politics. It would create a society of self-reliant individuals with a common interest in political stability and social cooperation. William Blackstone, the great English authority on the common law, commented in 1766: “There is nothing which so generally strikes the imagination, and engages the affections of mankind, as the right of property; or that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe...” And Thomas Jefferson famously stated: “The earth is given as a common stock for man to labor and live on… The small landholders are the most precious part of a state.”

With these ideas in mind, Congress enacted laws until the late nineteenth century to promote the private ownership of land. The most famous was the Homestead Act of 1862 that allowed family heads to claim 160 acres and, with occupancy and improvement, obtain title. Under the Homestead Act alone, nearly 130 million acres of land were transferred from the federal government to private individuals between 1863 and 1890. Farms were founded; agricultural production expanded; urban areas grew; and a prosperous middle class was achieved. The easy handover of federal government lands to private claimants was made possible by a stable political coalition representing settlers, developers, railroads, and an almost universal participation among U.S. citizens in land acquisition and sale.

Things began to change, however, around 1890. The political coalition that supported land transfer ended in the late nineteenth century, and federal land policy shifted from virtually free access to retention and permanent management by the administrative state. There are several reasons for this. Growing urbanization and industrialization meant that fewer citizens were directly tied to land ownership. While the urban share of the population had been about 26% in 1870, it grew to over half of the population by 1920. Second, the first major environmental crusade, which was part of the larger progressive movement, began to gain traction during this period. Early environmentalists were urban, higher income, and often had advanced degrees from European schools in biology, forestry, and engineering. They were trained to manage land, not operate farms, ranches, or timber operations. They were skeptical of the efficacy of private property rights, which would constrain their managerial latitude and administrative objectives. They saw private markets as inherently wasteful without the remedy of government regulation. They believed in an administrative state that they would help lead.

Bernhard Fernow, one of the major leaders in this movement who helped create the National Forests, said at the time: “the forest resource is one which, under the active competition of private enterprise, is apt to deteriorate… the maintenance of continued supplies as well as of favorable conditions is possible only under the supervision of permanent institutions with whom present profit is not the only motive. It [alleged forest destruction] calls preeminently of the state to counteract the destructive tendencies of private exploitation  [italics added].” The aim of environmentalists like Fernow was to repeal the land laws and to replace them with ones establishing permanent government ownership.

The environmentalists’ views reflected the opinions of others in the progressive movement. The hallmark of that movement was widespread government intervention in private enterprise, ranging from antitrust policies to food and drug regulation. This period is often referred to as the Gilded Age, a time when markets ran amuck—or so the argument goes. But despite the popularity of this theme among historians and modern day politicians, there is no compelling empirical evidence to support any of the claims of market failure that were used to justify broad federal intrusion. There were no significant monopolies, no significant food- or drug-related poisonings, and no major environmental disasters. Nevertheless, progressive era reformers believed in government intervention—and they were well organized. They assembled a coalition of professional groups in support of their plans, and they were supported by key politicians, such as Teddy Roosevelt.

The remaining federal lands, mostly in the West, became a chief target for the progressives because those areas were not yet privately owned and jurisdiction was with the federal government. The land west of the 98th meridian, running from North Dakota to Texas, was semi-arid, rugged, and not conducive to the small farm homesteads that worked so well to the east. It was better suited for livestock grazing and timber operations. Indeed, the geographer John Wesley Powell in his report to Congress in 1878 and in the 1880 Congressional Public Lands Commission called for much larger homesteads that could be used in ranching, lumbering, and bigger farms. No political coalition to modify the land laws, however, developed. The lands remained unclaimed not because of special amenity attributes, but because title could not be secured under the land laws. This is an important fact, missing in much of the debate today over the federal lands. As a result, much of the western United States remained federal land and could only be used informally by livestock herders, timber companies, and some homesteaders.

The federal lands provided an opportunity for environmentalists to practice sustained-yield management. This form of management requires harvest or extraction to be tied to the rate of growth of the stock for renewable resources like timber or grass stands. It is a biological/engineering concept, not an economic one. There are many cases where it is economically justified to draw down the resource stock, at least temporarily. For example, if growth of the resource stock is very slow, such as with old-growth timber or rangelands, adhering to sustained yield, as called for by environmentalists, virtually blocks harvest of any type, regardless of the impact on people and the economy. Because private owners with complete property rights consider tradeoffs in resource harvest decisions, adherence to strict sustained-yield management that does not weigh tradeoffs requires either government ownership of the land or strict regulation of private property.  

Sustained yield appealed and continues to appeal to engineers, scientists, government regulatory officials, and non-government advocacy groups. It is preservation by another name. Some preservation can be in the public interest, but federal lands management decisions are not constrained by compelling cost/benefit analysis. None of the federal lands managers nor environmental advocates bear the opportunity costs imposed by sustained yield, while property owners and consumers do. When it is economically justified, deviation from sustained yield results in economic losses internalized by owners. When it is not economically justified, but imposed by regulation or government ownership, sustained yield again results in economic losses, these ones borne by society. Sustained yield was and remains a driving factor in government resource management and it underlies the current popular concept of sustainability.

To justify withholding federal lands, private property rights and exploitation were discredited by progressive environmentalists as being driven by short-run profits, leading to rapid depletion and waste. Retention of remaining federal lands and their permanent supervision under sustained-yield, scientific management was presented as the only remedy. The state was elevated over the market. But there is no persuasive evidence of depletion and waste by private property owners as asserted by environmentalists and agency officials. There was some loss due to overgrazing and rapid timber harvest, but this was the result of the tragedy of the commons: individuals could not get property rights under the federal land laws.   

The land laws that had existed from the early nineteenth century gradually were repealed under the General Revision Act of 1891, the Taylor Grazing Act of 1934, and other laws for which environmentalists, bureaucratic agency heads, and politicians lobbied, leaving the government with the enormous estate that remains today. Environmental advocates were able to co-opt potential claimants such as homesteaders, livestock owners, and timber companies by offering them privileged access to the land (but not title for timber and range land). Homesteaders received federally-subsidized irrigation water, dams, and ditches through Bureau of Reclamation Projects after 1902. Herders were offered renewable grazing permits within newly created grazing districts. And timber companies were offered timber leases and, later, subsidized access to forest lands.

These offers turned out to be part of a Faustian Bargain with the agencies. By the 1960s, political coalitions shifted and regulatory agency interests changed. These promises of access were broken as new parties—recreationalists, environmentalists, and preservationists—were granted access under the notion of multiple use. Multiple use grants discretion to the bureaucracy in allocation and regulatory decisions in a manner that promotes the agency and its favored lobby groups, but does not necessarily advance broad public welfare. New laws were passed and federal lands were at their center: the Multiple Use and Sustained Yield Act of 1960, the National Environmental Policy Act of 1970, and the Federal Land Policy and Management Act of 1976.

How do bureaucratic officials make allocation decisions for federal lands? Where do they assemble the necessary information on new uses and their value to society? How do they know what is in the interest of present and future generations? Because the stock of land is constant, these decisions necessarily involve reallocation and greater administrative monitoring with active input from lobbying groups. Decisions are made via administrative discretion; elected politicians and citizens often have little chance to critically respond. By contrast, in an open market, traders review the value of new alternatives incrementally and transparently, allowing for continued reassignment and fresh uses.

What are some of the costs of the administrative state and federal lands? It is very likely that the 610 million acres of federal lands are not efficiently contributing to their share of national welfare. Because users—whether traditional cattle grazers, timber companies, recreationalists, or preservationists—have no property rights, reallocation to meet new demands requires redistribution without compensation. This process inherently is adversarial, undermining the social fabric of the country. Greater preservation of land and resources could be warranted in certain cases, but how much and where? Current administrative management cannot address these questions effectively. The public interest is asserted, but no tradeoffs are weighed.

Preservation of so large a land area is costly. Ranchers who initially received access to range lands have had their grazing privileges reduced and valuable livestock levels have fallen. With uncertain land use, ranch values have fallen, families migrate away, and local, rural communities decline.  Other costs of bureaucratic management of lands include underproduction of minerals. Even though federal lands have large estimated minerals and oil and gas deposits, most production takes place on private lands due to the high costs and uncertainties associated with obtaining search and production permits on federal lands. Further, federal timber lands contribute less to lumber production than their potential. As lumber prices rise, making home ownership costlier, the policy of federal lands seems to be undermining a long-held objective of widespread private home ownership. Finally, the danger of wildfires is rising, along with the costs of fighting them, not to mention the costs in lost homes, businesses, and human lives. Increased logging and the thinning of timber stands on federal lands is a known remedy to preemptively reduce fire risk and to improve watersheds, but this, too, is challenged by interest groups opposed to such activities.

The conflicts over access to and use of the federal lands and their associated mismanagement are inherent in administrative management, where the objectives of bureaucratic agencies and lobbyists are paramount. Their objectives are not the same as the public interest, despite agency and lobbyist assertions to the contrary and the advertising of federal lands as the “public.” Given the size of the lands and their potential national contribution, locking them up administratively does not advance public welfare.