Spreading the Cost

Suppose a community needs a new park. Everyone pitches in a few hundred dollars, the land is bought, and the community benefits. Taxes for such things are not fun, but they do spread out the pain so no one hurts too much.

But suppose that instead of the entire community paying for the park, the city were to simply condemn and seize several homes in order to have land. Now we are talking real pain for the few who pay the price!

A $10,000 loss is more than ten times as painful as a $1000 loss unless the one is very rich. A $100,000 loss is far more than ten times as painful as a $10,000 loss. Spreading the cost reduces the total pain.

For this reason environmentalists should make peace with the property rights movement. As the population grows it is necessary to place some restrictions on certain landowners in order to preserve scarce habitats. But said landowners should be compensated. Society should foot the bill. It is only fair.

Compensating landowners is also good for the environment:

Focusing the burden creates concentrated opposition to environmental action. Spread the cost and getting those who pay the cost together to lobby and/or litigate is expensive. (It is for this reason that we have high general taxes with lots of loopholes and pork barrel programs.) Make a few people pay the cost and they are highly motivated to get together and fight back.

When landowners pay the entire price, there is a powerful incentive to “shoot, shovel and shut up.” Suppose you own land that is valuable to develop and you find a few endangered rats on your property. A discreet application of rat poison could protect you hundred thousand dollar investment. This is not good for the rats. Without landowner compensation the Endangered Species Act pays people to destroy endangered species! Sure, the government can levy heavy penalties for doing such things, but catching people in the act of doing things on their own property requires a great deal of surveillance. Mandating long jail terms might provide deterrence, but this becomes offensive to those who believe in justice. When such penalties become too severe, juries may balk

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Copyright 2004, Carl S. Milsted, Jr. All rights reserved.