Whether we're trying to save species or specie, decisions are based on information and incentives. Reform that generates poor incentives simply won't work. Good intentions are not enough.

Congress tried to protect endangered species via the Endangered Species Act (ESA) of 1973. Prior to 1973, landowners could operate even if their activities harmed the habitat of endangered species. This was a problem. Lawmakers saw prohibition of such activities as the answer. It wasn't.

While well intentioned, the ESA produces many unintended and adverse consequences. It tried to force landowners to maintain habitat. This made endangered species the enemy of landowners. It pits socially valuable activities such as forestry and farming against habitat protection.

The Act empowers the U.S. Fish and Wildlife Service to control private lands harboring endangered species. They can ignore the lost opportunities imposed. Social or landowner costs don't enter their calculations. The administrators have no incentive to economize when protecting habitat.

This command-and-control approach pits landowners against endangered species. Landowners fear the liability of owning endangered species habitat; its use may be restricted without any compensation. Today's ESA encourages people to modify habitat. Biologists consult with landowners to find ways to make their land inhospitable. Ironically, the ESA's mandate to protect habitat often encourages landowners to repel endangered species.

We have real and tragic examples across America. Cone's Folly is an illustrative case. In the 1930s Ben Cone, Sr. purchased 7,200 acres of land in North Carolina. His friends called it "Cone's Folly" for it was deforested. With careful sylvaculture by Ben Cone, Sr., and later Ben Cone, Jr., the "folly" became a well managed forest. Fish, game, and non-game critters became abundant.

They actively managed for wildlife with frequent controlled burns and carefully managed small timber sales. Their stands of rare long leaf pines were ideal for much wildlife. Cone's stewardship attracted many songbirds, deer, quail, wild turkey, and the endangered red-cockaded woodpecker.

In 1991, the ESA required the U.S. Fish and Wildlife Service to halt Cone's management of the 1560 acres of property inhabited by 29 of the rare woodpeckers. Cone lost rights to cut and sell the timber on nearly two-and-half square miles of his land, drastically reducing its value. He received no compensation and must still pays taxes for timberland unharvestable while woodpecker habitat. The woodpeckers he once liked became a multi-million dollar liability.

Cone now clearcuts around the woodpecker haven. This prevent them from infecting more of his property. And neighboring landowners have rushed to do likewise before their land also becomes suitable for woodpeckers.

The chart shows how the Act dramatically changed Cone's harvesting practices after 1991. Cone reduced the rotation of harvest from 80 years to 40 years, thereby eliminating the old stands that attract the woodpeckers. The ESA has given the woodpeckers a temporary safe haven. It will eventually rot or burn, the woodpeckers will move, and Cone will regain control.

Ironically, the ESA has given "Cone's Folly" a whole new meaning. Ben Cone's folly was to take such good care of the land that the ESA stripped much of the value from more than a fifth of his property.

"Cone's Folly" is one of the many cases demonstrating the importance of incentives to habitat protection. "Takings" produce predictable but unintended consequences. When landowners who harbor endangered species face stiff penalties for doing so, they minimize suitable habitat. Those of us who care about endangered species want landowners to favor the creatures and eagerly provide habitat. Can this be achieved by government coercion and "takings"? At what cost? Are there better ways?

Compensating landowners for the costs of maintaining suitable habitats for species like the red-cockaded woodpecker and spotted owl removes some costs of doing so. If regulations are stable and agencies forced to face the costs of their actions they will seek more efficient protection.

Tax breaks for habitat motivates landowners to provide it. And many species already have interest groups advocating their protection. The Rocky Mountain Elk Foundation, the North American Wild Sheep Foundation protect two formerly threatened species. Furthermore, information would improve as wildlife biologists would find entrepreneurial niches consulting landowners on how to create, rather than avoid, suitable habitat.

Landowners, like the habitat they own, are diverse. There are huge untapped opportunities for improving and protecting habitat. We might not expect ranchers to welcome wolves or timber companies to embrace beavers. But beavers don't eat livestock, and wolves don't eat trees. Plum Creek Timber Co., Inc. agreed and found dens for wolves. Defenders of Wildlife benefits when wolves find dens, the wolves most certainly benefit, and Plum Creek benefits from publicity and cash awards.

With positive incentives we can harmonize prosperity and environmental diversity. This must be the foundation of any successful reform of the ESA. Otherwise we risk more counterproductive policies which condemn both landowners and rare species.