Capturing Public Goods from Private Lands

Reed Watson, PERC December 7, 2011 Austin, Texas

Outline • The public goods problem • The property rights solution

–  Examples • Entiat River, Washington • Cheney Lake, Kansas • Devil’s Kitchen, Montana

– Takeaways • Opportunities in Texas • Questions

Public goods problem •  Common examples: national defense, radio

waves, open space, air quality, wildlife habitat, etc.

•  Defining characteristics: –  Non-rivalrous: one person’s consumption does

not reduce availability to others. –  Non-excludable: impossible to limit

consumption. –  Diffuse benefits, local costs.

•  Traditional thinking: –  Private parties will not produce public goods in

optimal quantities (if at all) because production doesn’t pay.

Public good or private bad?

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0-3 4 to 10 >10

Harvest Age = ƒ(RCW Density)

Property rights solution •  Private landowners will produce environmental

goods and services like open space, air quality, and wildlife habitat IF… 1.  property rights are clearly defined, secure, and

transferable; AND 2.  transaction costs are low.

•  English translation: 1.  No one washes a rental car. 2.  If it pays, it stays.

•  The additional revenues earned by private

landowners producing public goods can help protect rural landscapes and economies.

Example: Entiat River, Washington

Example: Cheney Lake, Kansas

Example: Devil’s Kitchen, Montana

Takeaways •  Creative cooperation

–  Organic ideas have the most success. –  Political entrepreneurs can grease the skids.

•  Objective measurement –  What does the buyer want? What can the seller influence? –  Can both agree to an objective measure?

•  Scope –  Large enough to have an impact and hedge risk. –  Small enough that coordination and monitoring costs stay

affordable. •  Timing

–  Both buyers and sellers want flexibility for themselves but certainty from the other group.

Opportunities in Texas •  Wildlife populations

–  Private landowners can enhance endangered species and other wildlife populations if they’re seen as assets, not liabilities.

–  Contract-based habitat conservation often produces immediate, amicable, and lasting results.

•  Water supply and water quality –  Contracts such as easements

might be a cost-effective way of securing water supply and quality for booming municipal populations.

–  Groundwater rights must be clearly defined, secure, and transferable.

“Conservation will ultimately boil down to rewarding the private landowner who conserves the public interest.” -Aldo Leopold

www.perc.org (406) 587-9591 reed@perc.org 2048 Analysis Drive, Suite A Bozeman, Montana 59718

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