The Federal Lands: An Economic Property Rights Perspective

The United States federal government possesses and manages a staggering 472,892,659 acres, constituting 21% of the land area within the contiguous states. This collective resource, referred to as Federal Lands, is governed through the administration of the Multiple Use principle, ultimately aiming for a maximum sustained yield. In contrast to the prevalent private property rights and markets governing most other US natural resources, access, exchange, and investment opportunities for Federal Lands remain limited.

While the sheer magnitude of this resource might suggest significant economic and welfare impacts, economists have largely overlooked the subject, warranting further economic analysis. This article aims to shed light on the potential economic implications and stimulate additional research into the matter.

The investigation delves into the history of federal lands privatization, tracing back to 1891, when the withholding of federal lands commenced. Surprisingly, there are no observable market failures or indications of resource scarcity resulting from private exploitation between 1870 and 1957, the period when most lands were withheld from the market.

With land being non-mobile and observable, private property rights could have been assigned, and any externalities addressed through Pigouvian restrictions or Coasean exchanges. Consequently, federal ownership might not have been unequivocally necessary.

In the Progressive Era, reformers, driven by concerns of potential resource depletion, advocated for scientifically managed, sustained-yield resources under government supervision. This institutional shift holds considerable economic importance, as highlighted by Dixit and others. Private rights holders exhibit strong incentives for efficient resource utilization, a facet lacking in agency officials who lack exchangeable property rights and do not directly bear the economic consequences of their decisions.

Through the lens of a rent-seeking framework, the analysis suggests that a) federal lands, under all other factors being equal, would yield lower production values; and b) federal lands management would be less sensitive to fluctuations in economic costs and benefits. While public goods, such as high amenity, recreation, and ecological areas, might be provided through federal land management, the dominant Multiple Use management principle lacks objective criteria for allocation or periodic outcome assessment and adjustment.

By examining contemporary federal forests, range, and oil and gas lands, this article offers a literature review and data to support its claims. This insight is drawn from the forthcoming paper by Gary D. Libecap.