Journals
Spring 2004, Vol. 44, No. 2
Legal and Economic Issues in Private Land Conservation
Roger E. Meiners & Dominic P. Parker
When a big-box store is built on a nice piece of land, those of us who live nearby feel like we have lost a little something. Formerly scenic space, such as farmland or a grove of trees, may be converted to the house we live in, stores where we shop, or restaurants where we eat. Increased concern about land development is resulting in more actions being discussed and implemented to encourage continued farming and preserve scenic views, wildlife habitat, and other amenities associated with agricultural land. The pressure to preserve land is not so much from farmers, who can choose to farm or not, but from urbanites who wish to observe farming and enjoy benefits provided by undeveloped lands. Much of the action taken in response to this pressure can be categorized as either political or market-driven.
Viewing Land Conservation through Coase-Colored Glasses
Terry L. Anderson
In his seminal article, “The Problem of Social Cost,” Ronald Coase emphasized that people have competing demands for resources and that clear assignment of property rights to those resources allows demanders to resolve their competing demands through bargaining and contracting. Of course, the bargaining will be constrained by transaction costs. This article examines how contracting is used to produce land conservation and how transaction costs such as agglomeration costs, joint production costs, unowned input costs, and non-profit agency costs constrain the potential for such contracting. It specifically considers how contracting can be used to produce recreational amenities, open space, and wildlife habitat.
When Are Environmental Amenities Policy-Relevant?
David D. Haddock
Due to the high transaction cost that would be necessary for large numbers of people to negotiate with each other, even those who are usually sanguine about private markets become reserved when externalities affect large populations. Among economists, at least, the distinction between private and societal interest is well understood for pecuniary externalities. But neglect of Buchanan and Stubblebine’s article “Externality” is as widespread among economists as among legal scholars, biologists, environmental scientists, or politicians and has left the same distinction widely unrecognized for non-pecuniary externalities. If only a few parties on either side of an interaction experience a relevant externality—given Buchanan and Stubblebine’s careful distinction between relevant and irrelevant externalities—private interactions can appropriately internalize costs and benefits across the entire population. Regardless of the perceptiveness of legal and cultural institutions in placing entitlements, and regardless of the level of transaction cost across the entire universe of the affected, a surprising number of externalities will readily fix themselves. The desirability of corrective intervention is much too easily conceded, at great cost to society.
Environmental Amenities, Private Property, and Public Policy
Steven J. Eagle
Environmental amenities, like beautiful vistas and famous natural landmarks, are highly valued by many people, but it is difficult to determine what would constitute an optimal supply of them. Since enjoyment of an amenity by one person does not preclude enjoyment by many others, and it is impractical to limit such enjoyment to those who pay, individuals have an incentive to understate their demand for environmental amenities, thus leading to their underproduction. On the other hand, interest groups might spur government to overestimate the unarticulated demand. Furthermore, much demand is not policy relevant, since individuals with a moderate taste for particular amenities might be more than surfeited by the supply that others voluntarily provide. Building upon this framework, the author contends that commonly employed methodologies for ascertaining the value of amenities are seriously flawed, and that attempts to provide very high levels of amenities without commensurate public expendi-tures may damage private property rights.
Presidio and Valles Caldera: A Preliminary Assessment of Their Meaning for Public Resource Management
Sally K. Fairfax, Lauren Gwin & Lynn Huntsinger
Enacted four years apart, the authorizing legislation for the Presidio and Valles Caldera Trusts emphasizes revenue generation, self-sufficiency, and minimizing taxpayer costs. Factors other than improved incentives better explain their development. First, both are experiments in community management of public land, though more “top down” than grassroots. Second, the cultures of agencies and environmental interests play a role in adapting to this new preserve concept. Discussed are what trusts and government corporations bring to public land management, the institutional fit in the National Park Service and the U.S. Forest Service, the likelihood of self-sufficiency, the eco-geographical fit of these models, and manage-ment innovations.
Limited Prospects for Privatization of Public Lands: Presidio and Valles Caldera May Be as Good as It Gets
James L. Huffman
Sally Fairfax, Lauren Gwin, and Lynn Huntsinger report interesting and revealing stories of the Presidio Trust and the Valles Caldera National Preserve. The stories are interesting as political theater and revealing of the likely roles for market approaches on the stage of public lands management. Although the market is the star in the Presidio Trust drama, its role is tightly constrained. Only time and perspective will tell whether it is hero or villain. In the Valles Caldera, the market has only a bit part.
Land Trusts and the Choice to Conserve Land with Full Ownership or Conservation Easements
Dominic P. Parker
Land trusts are nonprofit organizations that conserve environmental amenities on private land. Trusts can conserve land by owning it outright or holding conservation easements. This article describes the economic tradeoffs of these two conservation methods. Relative to full ownership by a land trust, conservation easements generate higher transaction costs. The trust and landowner will exert time and money to specify, monitor, and enforce the terms of the easement throughout its duration. Conservation easements, however, facilitate more economical production of commodities such as crops and beef because a separate landowner generally has a specialization advantage in managing agricultural land. Data from the Land Trust Alliance show that trusts tend to hold easements when transaction costs are low and gains from landowner specialization are high. For example, most trusts use easements to preserve scenic views over large parcels of agricultural land and use full ownership to enhance ecological functions on non-agricultural land. The desire to help donors of land and easements capitalize on tax benefits, however, sometimes outweighs transaction cost and specialization considerations and can militate against the use of cost-reducing conservation methods.
Comments on Land Trusts and the Choice to Conserve Land with Full Ownership or Conservation Easements
Bruce Yandle
Nick Parker’s examination of land trust decision making is of great interest to environmentalists, social scientists, and policy makers. His article is of particular interest to those who seek a better understanding of how private property rights affect and are affected by the growing land trust phenomenon. But rather than focus on their phenomenal growth and why there are land trusts, Parker seeks to get inside the box of the land trust, the not-for-profit firm itself, and explain the logic of choice that is applied when those organizations have the opportunity to receive ownership of particular land rights. Will the trust decide to hold conservation easements for the rights in question or will the trust seek the full bundle of land rights—fee simple? This is the motivating question for the article.
Securing Ecological Investments on Other People’s Land: A Transaction-Costs Perspective
Christopher S. Elmendorf
This exploratory article on contracting for habitat restoration considers landowner and land-trust strategies under the following conditions: (1) restoration entails initial specific investments by the land trust and adaptation over time, (2) landowners are uncertain about land-trust “type” (specifically, whether the land trust’s hidden agenda is to oust the landowner), (3) land trusts are uncertain about landowner type (specifically, the landowner’s private cost of complying with the contract), and (4) habitat restoration is characterized by increasing returns to scale (contiguous acreage). Several contracting strategies are compared. Two appear promising: “liability-rule conservation easements,” which would establish contracting frameworks with third-party determination of price; and “collective contracting” via supermajoritarian special districts authorized by law to bind the member landowners. It is suggested that contracts with special districts may prove valuable not only for overcoming holdouts, but also as a way of reducing the land trust’s vulnerability to opportunism that is premised on asymmetric information about landowner type.
What’s a Poor Land Trust to Do? Alternatives for Dealing with an Opportunistic World
Susan F. French
Christopher Elmendorf’s article, “Securing Ecological Investments on Other People’s Land,” raises the question whether a prudent land trust, or other conservation organization, can undertake a program of active ecological rehabilitation and management without acquiring fee simple title to the land.
To explore the problem, Elmendorf posits a scenic rural community that is beginning to experience some pressure to sell land for development of second homes. The primary land uses in the community are farming, ranching, and small-scale timber production. Most of the land in private hands is still owned by long-term residents. Much of that land has ecological value that could be considerably enhanced by rehabilitation efforts and considerably degraded by second-home and—presumably—other kinds of development.
In Elmendorf’s hypothetical community, a land trust wants to protect the ecological function now served by land in the community and “restore it to ecological glory.” I take it this means that the land trust wants to prevent any further development in the community, except perhaps for agricultural or recreational uses, and to restore streams and wetlands, native vegetation, and habitat for wildlife that may once have occupied the property. Once this has been done, the trust wants to ensure that its investment has enduring conservation value.
The Illusion of Perpetuity and the Preservation of Privately Owned Lands
Julia D. Mahoney
In recent years, a number of private landowners have taken steps to “preserve” their holdings. The preservation of these private lands is, as a rule, accomplished through the transfer of all or part of the owner’s property rights to a government or nonprofit entity. A key motivation for reconfiguring the ownership rights associated with these lands is to frustrate any future attempt to reverse the decision to preserve. Although the idea that perpetual land preservation is a worthy goal meets with widespread acceptance, there are compelling reasons to think that a number of today’s conservation measures will merit reconsideration. The costs of undoing or modifying preservation choices, policy makers should recognize, will in all likelihood vary significantly and will depend on the institutional structures set up to restrain development as well as on the anticipated changes in land use.
The Trouble with Time: Influencing the Conservation Choices of Future Generations
Barton H. Thompson, Jr.
Current generations dictate the conservation decisions of future generations in a variety of ways: they mandate land preservation in state constitutions, establish parks and other reserves, and create “perpetual” conservation easements. Because conditions, preferences, and knowledge change over time, such “intergenerational conservancies” may not always seem to be wise decisions 50 or a hundred years after they are made. But intergenerational conservancies do not inescapably bind future generations. The law provides various means, in particular, for future generations to escape conservation easements that have outlived their societal usefulness. There are various reasons, moreover, why society should allow the creation of intergenerational conservancies. These include the need to reduce the transaction costs of land conservation, to avoid future temptation, to ensure effective private and public ordering, and to solve a temporal tragedy of the commons. The law should be careful not to require or encourage “perpetual” conservation easements where shorter-term conservation easements would benefit society more, but intergenerational conservancies of all types often can be exceptionally valuable to both current and future generations.
Private Conservation Literature: A Survey
Amdrew P. Morriss
Private conservation has arrived, almost. Despite private ownership of the vast majority of land in the United States and extraordinary growth in the number of private land trusts, when we discuss land conservation, we still mostly talk about land owned or controlled by the federal, state, or local governments. One reason is the difficulty of writing about the diverse methods individual land owners use to protect the environment; another is the lack of comprehensive information about private land holdings. Also important is the statist orientation of many environmental writers, an orientation that is clear in many of the books reviewed here. Statism in environmental protection brings with it an unwillingness to see the impermanence of government solutions, an insistence on political control of resources over market control, and a distrust of market mechanisms. When the sorry record of governments in protecting the environment is taken into account, however, private measures that preserve resources for even a limited period become more attractive.
