Romance versus Finance on Public Lands

Introduction by John Baden, PhD, Chm. FREE

Here are two important truths to consider when managing America’s “romance lands”:  First, the values that economists measure best are not those that matter most. 

It is relatively easy to measure or estimate the values of commodities extracted from these lands.  Their prices vary over time, usually trending downward, but are always posted.  Thus, when a project is proposed its advocates can claim that it will generate some dollar amount and produce some number of jobs.  Economists have a great deal of experience with such exercises.

Second, when property rights are secure and the market process free to function, we never run out of any commodity.  We can runout of lots of things, habitat for endangered species for example, but never commodities.   Hence, when advocates of development claim we “need” some resource, their position is strategic not economic.   Why is this true? 

When a commodity becomes scarce its price rises.  The price signals information and gives incentives to act in socially responsible ways.   These generate three types of actions; conservation, innovation, and substitution.  Aside perhaps, in time of war, no single commodity source is essential.  

Amenity resources and ecosystem services are far more difficult to measure.  One of America’s most productive economists, Harold Hotelling, (1895 to 1973) began working on these problems in the 1920s.  His 1947 article on estimating recreational value remains influential today.

In brief, many smart and well-trained individuals have worked on the problem of estimating scenic, amenity, and ecosystem values for three generations.  This is an inherently tough problem.  Still, it is sufficiently important to merit continued work.

MSU Professor Jerry Johnson, an internationally respected researcher on recreation, presents an approach in this FREE Insight:  He suggests creating “Amenity Accounting for Gallatin County”, and began to assemble the data.   “Much like the recent Montana Climate Assessment, we could turn to figures that help us assess the inevitable tradeoffs between development and preservation.”

Romance versus Finance on Public Lands,

Prof. Jerry Johnson, MSU

Bozeman boasts numerous high quality environmental organizations. Collectively, they have helped conserve important assets in Greater Yellowstone and beyond. Here is a sampling of their work.  

The American Prairie Reserve is a global leader in private conservation.  APR fosters constructive cooperation among several state, federal, and tribal agencies, and other owners and stakeholders. It excels at environmental entrepreneurship.

Headwaters Economics publishes reports cited by national conservation leaders. The Trust for Public Lands is a regional on-the-ground organization that fights the good fight for land, water, and wildlife. These and others merit our interest and on some issues our support. However, none have produced a missing piece of our conservation puzzle, the value of wildlands.

Within sight of most Bozeman citizens is historically rich Mt. Ellis.  Currently, it is the site of a proposed timber sale and predictable public opposition. Setting aside NIMBY issues involving the exclusive, attractive Triple Tree residential development, the public trails that run through its private and public land are enjoyed by many Bozeman residents.  Clearly the undisturbed area is a public asset. And its future after timber harvest is the issue.

Why, with so many good minds, creativity, and good intentions in nonprofit industry are we largely ignorant of the value of largely undisturbed open space?  We have a local system of trails, an excellent viewshed, clean water from Limestone Creek.  What is the amenity value of the Mt. Ellis complex?  Now we simply don’t have good estimates. 

We know the approximate value of our public buildings and estimate how much the University generates in local economic impact.   The taxable value of local real estate is published. Why don’t we estimate the value of neighboring nature and recreation? 

For Bozeman and much of the western economy amenities are real and tangible assets. It would make sense that, like other assets, decision makers at all levels should want to know their worth and value to the local economy.  Some act if they don't want to know.

Likewise, for conservationists, a powerful piece of data is missing in the constant political conflict over the role of public lands and preservation.  This is a failure of policy makers and environmental advocates alike.

Ryan Zinke, Trump’s Secretary of Interior, seems bent on reversing public lands preservation in favor of commodity development. He does this willfully ignorant of the economic context of national monuments and other public lands. He assumes development values outweigh preservation value; and he could be right - at least in the short run. The central issue though is that he neglects the other side of the equation – the value of these lands to the region.

Fortunately, both Headwaters Economics and Professor Paul Jakus, a Utah State University economics professor, have worked on this larger issue. Their conclusions have powerful implications; public lands can be of high sustainable value over the long term.

The Montana Department of Natural Resources and Conservation (DNRC) Trust Land Management Division (TLMD), Bozeman Unit, is proposing the Limestone/Nichols Creek Area timber sale of up to 2,725 acres. They calculate approximately $1.3 million in gross profit from the sale with $700,000 earmarked to go to Montana Tech in Butte. They are mandated to maximize revenue from state lands and a timber sale is an obvious if uncreative solution. Here is the problem: we don’t know the “gross value” of intact forests to the regional economy. No idea.

Fortunately, there is a relatively simple approach. What if a consortium of environmental nonprofits and local governments (and maybe even MSU) collaborated on a project, let’s call it Amenity Accounting for Gallatin County, and began to assemble the data? Much like the recent Montana Climate Assessment, we could turn to figures that help us assess the inevitable tradeoffs between development and preservation. Here are a few questions we could answer:

•      What is the economic value of the Bozeman viewshed to business and residents?
•      Map real estate values (and tax revenue) in proximity of trails.
•      What is the value of clean water flowing in the Gallatin River to the region?
•      Update the data on cost of residential services in sprawling rural subdivisions.
•      Do intact, undisturbed wildlands near places with Bozeman's attributes act as strong magnets for people with high human capital?
•      Do such individuals bring wealth with them or create it after settling in?   

If Bozeman is to sustain its character and remain an attractive and thriving community, decision makers should employ the most thorough analysis available. Amenity accounting is a key to good decisions.