Freeman

ARTICLE

Owls, Ferrets, And Free Markets

The Endangered Species Act Creates Perverse Incentives

MAY 01, 1994 by K. L. BILLINGSLEY

K. L. Billingsley is a media fellow of the Pacific Research Institute in San Francisco.

Ranchers in the western states like black-footed ferrets because they wreak havoc on the prairie-dog towns that cause ranchers much grief. But when ranchers see a black-footed ferret, they are likely to shoot, shovel, and shut up about it. What would lead ranchers to act against their interests?

Federal regulation. The black-footed ferret has been declared an endangered species, like spotted owls and various brands of woodpeckers and snails. If an endangered species is discovered on your property and federal regulators find out about it, they will make life very difficult for you. In fact, you may not be able to use your property.

The Constitution of the United States stipulates that you may not be forced to quarter soldiers on your property without compensation. As Montana State economics professor and former Interior Department official Richard Stroup points out, “the military pays for what it takes,” but environmental bureaucrats do not. Stroup notes that current regulations require landowners to quarter all manner of species, or even a wetland, with no compensation.

To many observers, this constitutes a “taking” and should be compensated. John Echeverria, chief legal counsel of the Audubon Society, disagrees, seeing the call for compensation as a money-making scam and radical reinterpretation of the Constitution. Echeverria favors stepping up the regulatory enforcement that has become quite draconian.

According to Nancie Marzulla, formerly of the Justice Department and now chief legal counsel for Defenders of Property Rights, some 800 people have been jailed for environmental infractions since 1982. That figure includes seven for violating wetlands policy.

According to Vice President Al Gore, the world and nation stand at the brink of an environmental apocalypse. By Gore’s standards, then, the regulatory approach is protecting neither the environment nor the individual rights that constitute the bedrock of American government and society. Some people see a better way: free-market environmentalism, which is more than a theory.

The government of Zimbabwe has come to the rescue of dwindling elephant herds by privatizing hunting rights. Poaching has virtually disappeared, the elephants are thriving, and the income of the villagers has doubled.

In the United States, the group Ducks Unlimited has preserved more wetlands than government departments boasting much larger budgets, resources, and legal clout.

Hank Fischer, the Northern Rockies representative of Defenders of Wildlife says that the Endangered Species Act (ESA) has been ineffective on private lands, which harbor fifty percent of endangered species. Fischer’s group compensates ranchers when wolves kill livestock. The group also pays ranchers to let wolves develop on their land.

R.J. Smith of the Competitive Enterprise Institute is an avid bird-watcher and former president of the Monmouth (N.J.) Audubon Society. Smith notes that around the turn of the century the wood duck became an endangered species. The ducks now thrive, not due to government regulation but to private landowners who built boxes for the ducks to use in nesting. Something similar happened with the osprey. But things have changed since the ESA.

At present, Smith notes, “there is no incentive to help the spotted owl,” since building boxes for the birds will only attract predatory regulators. In this way the ESA, Smith adds, provides “perverse incentives” and creates a “lose-lose” situation.

The largest landowner in the United States is not some tycoon or corporation but the U.S. government, which still controls about one-third of the nation’s land. Economist Terry Anderson, Senior Research Associate at the Montana-based Political Economy Research Center (PERC) and co-author of Free Market Environmentalism, advocates a plan in which the federal government could sell some of this land to private groups such as the Sierra Club, which are interested in preserving old-growth forest. This type of privatization would force people to face both costs and benefits. According to Anderson, the federal government lost $23 million on recreation last year.

Parks could be privatized and companies could lease their land to hikers, hunters, and fishermen. Another market measure would be the trading of permits. For example if a logging company owned some old-growth forest, it could trade that area for a timber region that they could harvest.

“When you own assets you take better care of them,” says Richard Stroup, who adds that the market “forces even shortsighted people to account for the future.” Stroup argues that, contrary to what many believe, the government is more shortsighted than the market. He cites the case of a government official he worked with who agreed that a certain inexpensive research project had merit but who failed to fund it because it outlasted his tenure in the Interior Department.

While those on opposite sides of the environmental debate disagree with each other’s beliefs, observes Stroup, a market system based on common law will force them to respect each other’s rights. And since there is no perfection in human affairs, Stroup urges all sides to ask the “compared to what?” question.

In the end, there are only two ways to solve the environmental question: by regulation or by property rights. According to the best evidence to date, the property rights approach comes closest to a win-win situation.

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May 1994

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