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No. 363

November 9, 1999

How and Why to Privatize

Federal Lands

by Terry L. Anderson, Vernon L. Smith, and Emily Simmons

Executive Summary

tioning off all public lands over 20 to 40 years.

Fully a third of the land area of the United

Both environmental quality and economic effi-

States is owned by the federal government.

ciency would be enhanced by private rather

Although many Americans support the preserva-

than public ownership. Land would be auc-

tion of those lands, analysts on the left and the

tioned not for dollars but for public land share

right agree that the federal government has done

certificates (analogous to no par value stock

an exceedingly poor job of stewarding those

certificates)  distributed  equally  to  all

resources. Indeed, the failure of socialism is as

Americans. Those certificates could be freely

evident in the realm of resource economics as it

transferred at any time during the divestiture

is in other areas of the economy.

period and would not expire until after the

Four criteria should guide reform efforts:

final auction. Land would be partitioned into

land should be allocated to the highest-valued

tracts or primary units, and corresponding to

use; transaction costs should be kept to a mini-

each tract would be a set of distinct, separable,

mum; there must be broad participation in the

elemental deed rights. Any individual with a

divestiture process; and "squatters' rights"

documented claim to rights defined by those

should be protected. Unfortunately, the land

deeds, however, would be assigned the appro-

reform proposals on the table today fail to meet

priate deed or deeds. Once divested, tract deed

some or all of those criteria.

rights would be freely transferable.

Accordingly, we offer a blueprint for auc-

___________________________________________________________________________________

Terry L. Anderson is director of the Political Economy Research Center in Bozeman, Montana, and a senior fel-

low at the Hoover Institution. Vernon L. Smith is professor of economics at the University of Arizona. Emily

Simmons was a research fellow at PERC.