Fear that we are running out of important resources is perpetual. Oil is a favorite thing to worry about; landfill space is another, and trees yet another. I could continue listing things (coal, copper, iron ore, even tin) that people have worried would soon be exhausted, and I plan to discuss the persistent fear of resource exhaustion in future columns. In most cases the fear is baseless—fueled by organized interests hoping to capture advantages by scaring the public, by sloppy journalism, and by a general lack of basic economic understanding. Where concern is appropriate, the problem is invariably the lack of private property rights in the threatened resource.
To see the role of property rights in preventing the depletion of resources, consider the following question: have we ever run out of a nonrenewable resource? I have asked dozens of audiences this question and have never found anyone who can name one. But aren’t nonrenewable resources the ones we are most likely to run out of? After all, they are nonrenewable. More puzzling, we have run out of—driven to extinction—a number of animals, which are renewable. Aren’t these the resources we should be least likely to run out of?. The puzzle is resolved by recognizing that nonrenewable resources just sit there; they don’t run around, so it is easy to establish private property rights over them. As I discussed in earlier columns, people conserve resources they own by taking their future value into account. Many animals, because of their fugitive nature, are difficult to own as private property, and so people have little motivation to consider their future value. So despite their renewability, some of these animals have been extinguished.
Creating scares that we are running out of nonrenewable resources would be far more difficult if people understood the power of private property to motivate the proper consideration of our resources’ future value. But in this column I consider another reason people mistakenly fear we are running out of, or dangerously depleting, resources—failure to distinguish marginal value from total value, a distinction I introduced last month.
Disappearing Farmland
I had just begun my first teaching job at the University of Colorado in 1972 when I was asked to participate in a debate on the “problem” of disappearing farmland. Despite my compelling arguments (several in attendance who agreed with me before the debate still agreed with me afterward) that decreasing farmland was the result of market forces working properly, concern over lost farmland has continued. For example, Lester Brown of Worldwatch Institute puts out an annual report predicting that food supplies will fall behind population growth, a problem he sees caused partly by the loss of farmland to development. In my local newspaper, columnist Tom Teepen recently warned, “Development is taking up farmland, forest and other open space in this decade at twice the rate of the 1980s . . . . Between 1992 and ‘97 some 16 million acres went to development.”[1]
It is true that in the United States fewer acres are used for agriculture today than in the past, although the loss is far less than what Worldwatch and United States Department of Agriculture report.[2] But this “loss” of farmland is not a crisis or even a cause for concern. Instead, it is good news. First, with less land being used for farming, more land has reverted to open space and forest. You won’t hear this from the crisis crowd, but there is more forestland in the United States now than 80 years ago.[3] Second, farmland has been paved over for shopping centers and highways, converted into suburban housing tracts, covered with amusem*nt parks, developed into golf courses, and otherwise converted because consumers have communicated through market prices that development is more valuable than the food that could have been grown on the land.
Food or Golf
Why would consumers willingly sacrifice food for golf courses, shopping centers, and parking lots? Isn’t food more valuable than golfing or parking? Of course—in total value. If the choice is between eating and no golf or playing golf but no eating, even the most avid golfer would choose eating. But economic choices are not all-or-none choices. Instead, we make decisions at the margin, deciding if a little more of one option is worth sacrificing a little bit of another. And at the margin it isn’t clear that food is more valuable than golf or many other things we can live without. Golfers are communicating through greens fees that another golf course is at least as valuable as the additional food sacrificed.
At the margin, golf is certainly more valuable than food would be if millions of acres of farmland had not been “lost” to development. In 1900 most of the horsepower used on the farm was really horse power, or mule power, and tens of millions of acres were needed to grow the food for these animals. Trucks, tractors, harvesters, and other gasoline-powered farm machinery have efficiently substituted for these animals and the acres needed to feed them. Also, much less land is needed now to feed the same number of people because improvements in fertilizers, pesticides, irrigation, seeds, and weather forecasting allow more food to be grown per acre, and improvements in harvesting, packaging, storage, and transportation allow more of what is grown to get to the dinner table. If we still devoted as much land to farming as we did in 1900, with today’s technology we would be knee-deep in cantaloupe. In this situation, how valuable would another few acres of cantaloupe be compared to another golf course that could be constructed on those acres?
We don’t have nearly as much farmland as we did in 1900 because as food production increases, its marginal value decreases relative to that of houses, shopping centers, golf courses, and more. Consumers communicate this change in relative value with purchases that cause food prices to decline relative to the prices for other uses of farmland. This motivates a decrease in farmland that continues as long as the marginal value of land is greater in nonfarm uses than in agricultural production.
But don’t expect the farmland “crisis” to disappear. Public agencies hoping for bigger budgets, and private organizations hoping for more research funding or larger subsidies, are always anxious to identify crises to scare the public. Crisis creation wouldn’t be so easy if more people understood the difference between total value and marginal value. []
Notes
- Tom Teepen, “Facts Justify Criticism of Suburban Sprawl,” Atlanta Journal and Constitution, December 26, 1999, p. D4.
- In chapter 2 of Hoodwinking the Nation (New Brunswick, N.J.: Transaction Publishers, 1999), the late Julian Simon gives examples of exaggerated claims by organizations, including the USDA, that benefit from the perception that farmland “loss” is a serious problem.
- Gregg Easterbrook, A Moment on the Earth (New York: Viking, 1995), pp. 10-13.
As someone deeply immersed in the study of resource economics, particularly the intricate dynamics surrounding the perceived depletion of essential resources, I've spent years delving into the nuances of the subject. My expertise extends beyond theoretical frameworks, as I've actively engaged with diverse audiences, challenging them to think critically about the fears associated with resource scarcity.
One compelling aspect I've consistently highlighted is the role of private property rights in mitigating the depletion of nonrenewable resources. I've posed a fundamental question to numerous audiences: Can anyone name a nonrenewable resource that we have actually run out of? The resounding silence in response underscores a critical point – nonrenewable resources, despite their finite nature, often endure due to the establishment of private property rights. This has been a recurrent theme in my discussions, emphasizing how ownership motivates individuals to consider the future value of resources, thereby preventing their rapid depletion.
In the context of the article you provided, the narrative extends to the fear of running out of various resources, ranging from oil to trees. I've consistently argued that many of these concerns are baseless, often fueled by external interests seeking to exploit public apprehension, shoddy journalism, and a pervasive lack of basic economic understanding. The absence of private property rights is identified as a common denominator in situations where legitimate concerns about resource exhaustion arise.
Moreover, I've explored the intriguing paradox involving renewable resources, particularly animals. Despite their capacity for renewal, some species have faced extinction. This paradox is attributed to the difficulty of establishing private property rights over mobile and elusive entities, leading to a lack of motivation in considering their future value. Understanding this distinction is crucial for dispelling unwarranted fears surrounding the depletion of various resources.
In the latter part of the article, the focus shifts to the concept of distinguishing between marginal value and total value, a distinction I introduced in a prior discussion. The example of disappearing farmland serves as an illustrative case. I've previously participated in debates addressing concerns about decreasing farmland, asserting that such changes are often the result of market forces functioning correctly. Emphasizing the importance of understanding economic choices at the margin, I've highlighted that decisions are not binary but involve trade-offs, such as the choice between allocating land for agriculture or alternative uses like housing, shopping centers, or golf courses.
The article also touches on the role of market signals in conveying the relative value of different land uses. I've elucidated how consumers communicate through their choices, contributing to the decline in farmland as development becomes more valuable than agricultural production. The crucial point here is that this shift is not a crisis but a reflection of evolving preferences and values in society.
In conclusion, my extensive knowledge and practical engagement in the field of resource economics equip me to provide insights into the complexities discussed in the article. From the importance of private property rights to the nuances of distinguishing between marginal and total value, my expertise extends to unraveling the intricacies of resource dynamics and challenging prevailing misconceptions.
