A Comedy of Errors: How the US Government Bungled Helium Production Over and Over

Spectrum Tubes Helium ++

What do balloons, MRI machines, and the Large Hadron Collider have in common? Helium!

These items and a multitude of others require the second-most common element in the universe to function. Although it is generally abundant throughout the cosmos, helium is relatively hard to find on Earth, as its low mass allows it to easily escape the atmosphere.

Helium can be found in a few separate deposits under ground as well as in trace amounts in the atmosphere (5 parts per million) and in underground natural gas deposits (up to 7% of total NG volume). It is also a common byproduct of radioactive decay, as alpha particles.

Since the 1920s, the United States government has held a monopoly on helium production. Helium is crucial for national defense applications such as rocket engine testing and air-to-air missile guidance systems. Thus, the government, through the Bureau of Land Management, began to produce and store it in large quantities at the National Helium Reserve in Texas, at one point amassing over one billion cubic feet of helium.

CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=646716
CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=646716

In the 1990s, the National Helium Reserve fell into debt to the tune of $1.4 billion due to poor management and increasing costs of helium extraction. Concerned about bloated government, the 1996 Congress passed the Helium Privatization Act, which initiated the shutdown of the National Helium Reserve. The Reserve was required to sell its entire stockpile at below-market rates, finally shutting down operations entirely in 2015. The intention of the Act was to jumpstart the privatization of the helium industry, but things did not play out as hoped.

The National Helium Reserve flooded the market with helium, which drove worldwide helium prices to record lows. Low prices made helium recycling economically disadvantageous, which increased consumption. Most strikingly, private industry failed to step in because low prices made helium extraction and sales unprofitable.

As the National Helium Reserve continued to sell off its reserves and slouch toward its mandated end, an heir apparent in the private sector failed to appear, and scientists began to worry. A panel convened by the US National Resource Council, a branch of the US National Academy of Sciences, recommended that the US Government increase the cost of helium and slow the depletion of the National Helium Reserve. They warned that if the US failed to take action, the closing of the reserve in 2015 could trigger a global helium crisis, and that consequences of such would be dire due to the ubiquity of the need for helium in scientific and and technological research.

Exell Helium Plant, circa 1980. By Federal Helium Program (Bureau of Land Management) [Public domain], via Wikimedia Commons
Exell Helium Plant, circa 1980. By Federal Helium Program (Bureau of Land Management) [Public domain], via Wikimedia Commons
The US Government took action in 2013 by extending the lifespan of the National Helium Reserve and selling existing helium reserves at market prices. But with private industry failing to identify and extract new helium reserves, helium prices soared and US reserves continued to dwindle. Scientists worried that the United States’ poor management of a finite natural resource would devastate the helium market for years to come.

Luckily, due to a recent discovery, this does not seem to be the case. In June 2016, a team of researchers from Durham and Oxford Universities discovered a massive helium gas field in the Tanzanian East African Rift Valley. The field is estimated to contain 54 billion cubic feet of helium, enough to meet global demand for several years.

Although the discovery of this reserve has inspired hope that more like it exist in the world, that hope should not translate into careless use and management of existing helium reserves. Our current understanding tells us that helium is extremely rare on Earth, so we must consume and regulate helium reserves with that fact in mind, at least until the development of new technology to make alternative helium production economical. Scientists have recommended banning the use of helium in party balloons (yes, seriously) and implementing helium recycling technology to prevent the escape of helium from MRI machines and other such devices.

HeCd Laser via photopin (license)
HeCd Laser via photopin (license)

The latest discovery of helium deposits presents a fantastic opportunity for Tanzania to finance its development rather than falling into the resource curse. An exemplary model of proper resource management can be found in the Norwegian Oil Fund. Norway, upon discovery of its oil reserves, instituted the collection of economic rent based on the revenue generated from oil extraction, plus oil exploration licensing fees. The resulting revenue was then kept in a trust fund and used to invest both within Norway and internationally. As of June 2015, the fund has accrued $873 billion. Given its size and ownership in companies worldwide, the fund has now become an significant player in international affairs. As such, it pursues economic and social justice through its decisions concerning its holdings, even going so far as to exclude ownership in companies that violate its ethical standards.

If Tanzania is able to collect economic rent from the exploration and extraction of its helium reserves, it could likely enjoy similar success as Norway while providing the world with a critical resource.
Our history with helium is a lesson in the consequences when governments fail to properly manage a finite natural resource. As Tanzania begins to manage its vast reserves of helium, we can only hope that they will heed the lessons of successful natural resource management.

Cover image: By Alchemist-hp www.pse-mendelejew.deOwn work, CC BY-SA 2.0 de, https://commons.wikimedia.org/w/index.php?curid=7601144

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Can Tiny Homes Solve San Francisco’s Housing Crisis?

“Tiny homes,” residential structures that typically measure between 100 and 400 square feet, have been touted by some as an elegant solution to de-cluttering one’s life and embracing a minimalist lifestyle. Examples have graced the pages of every prominent home and garden magazine, and HGTV has three (yes, three!) shows dedicated to tiny homes. In San Francisco, housing activists and city planners are now looking to the tiny home movement as a potential tonic to the city’s worsening housing shortage.

With a vacancy rate at 0.3% and a population influx to the Bay Area to the tune of approximately 90,000 people per year, San Francisco, known for its stunning Victorian homes and hilly streets, is running out of housing. Chelsea Rustrum, a consultant on the sharing economy, believes that tiny home villages have the potential to increase housing inventory at a greatly reduced cost. Compared with the $1000-per-square-foot cost for traditional construction, the per-foot cost of constructing tiny houses falls between $200 and $400. Eager to develop the first tiny home village in the San Francisco Bay Area, Rustrum has assembled a team of 10 people and is scouting for a plot of land. However, she has run into a problem that plagues most new housing initiatives – zoning.

The tiny homes that Rustrum and her colleagues seek to build violate a number of common zoning rules as set by the International Code Council, a domestic trade group. Most notably, they are below the minimum square footage necessary to be classified by as a residence. Rustrum hopes to overcome such zoning obstacles through negotiations with city governments, but changes to zoning laws have become a flashpoint in the debate over the housing shortage and development in the Bay Area. Homeowners consistently try to stymie new construction because they assume that an increase in population density would decrease their own property values. (In actuality, the opposite effect has been shown to occur: increased population leads to increased land values.)

 

Tiny Houses via photopin (license)

 

Even if zoning obstacles were overcome, could the construction of tiny home villages truly reign in the careening San Francisco rental market? Eric Fischer, a San Francisco resident, recently analyzed 30 years of rental prices (the median rent for a 1-bedroom apartment having reached an astonishing $3,500) and created a model that explains housing costs in the city. According to Fischer, it would take a 53% increase in the housing supply (200,000 new units) to reduce costs by two thirds. Given that the entire land area of the city is 7 x 7 miles, most of which is developed, tiny home villages do not pose a realistic solution in San Francisco County, because there just isn’t enough unused land to construct them on.

The Bay Area, by comparison, is comprised of multiple cities, some of which have far more available land than San Francisco. However, there is concern over the effect tiny home villages would have in these areas A criticism of proposed tiny homes developments is that, though less environmentally damaging than traditional tract home developments, they still represent a form of urban sprawl. And more sprawl is not something that the Bay Area can handle right now. The area’s burgeoning population is already crushing public infrastructure. Bay Area Rapid Transit (BART), a major transportation system, has $5 billion in unmet capital needs over the next 10 years, and interstate highway commute times are at all-time highs. Any housing solutions that place people further outside of urban centers could add pressure to already strained transportation infrastructure.

 

Nothing Gold Can Stay via photopin (license)
Nothing Gold Can Stay via photopin (license)

 

With this in mind, it would seem that any new housing construction should occur where economic activity is most concentrated: downtown San Francisco. Problematically, downtown areas tend to have the greatest land values, and traditional strategies for construction in the city center tend to be very expensive (using subsidies and eminent domain), politically treacherous (due to entrenched residential and commercial landlord interests), and ultimately ineffective. While tiny home developments might make the area more affordable for a handful of individuals and families, to effectively turn the tide of this crisis and resolve the housing shortage, government officials must take steps to build up housing inventory in urban centers, particularly in downtown areas near the business district. To this end, the city and state must consider a land value tax (LVT).

American political economist Henry George hypothesized that both property taxes and taxes on the value of improvements (structures) discourage new construction, as any residential or commercial development will result in higher overall property taxes. To expedite construction, Henry George recommended eliminating taxes on improvements and shifting the revenue burden towards higher land value taxation (LVT), which would encourage landowners and developers to increase residential and commercial space in order to pay the land value tax while providing them a respectable return as they provide value to others. LVT naturally becomes even more effective wherever land values are higher, such the urban core of cities. Implemented in cities, LVT leads to a substantial increase in both living and working space.

California faces a unique challenge due to the limits imposed by Proposition 13. Overcoming those challenges in the long term would require a difficult–but not impossible–voter-approved constitutional amendment to completely overhaul the property tax system. State legislators as well as regional and city planners would be remiss not to consider the solution of the LVT, which has had demonstrated success in increasing residential space the United States as well as abroad. For the moment, housing advocates have their eyes on Rustrum and her tiny home villages, a pop culture trend that could provide a short-term solution to a steadily worsening housing crisis.

Cover Image: Boneyard Studios. Licensed under a Creative Commons Attribution-NonCommercial 4.0 International LicenseCreative Commons License

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London Congestion Tax Reduces Traffic Pollution While Improving Infrastructure

Is traffic a daily problem for you? Bad news: If you live in a major metropolitan area, chances are that traffic congestion is only going to get worse. The nation’s roads and highway systems are being crushed as Americans flock to urban areas for economic and social opportunities. In the San Francisco Bay Area alone, traffic on some highways has increased over 25% in the past 5 years. With a cost to Americans of $124 billion a year, plus the unquantifiable impact on quality of life, cities must take action to abate worsening traffic congestion. For some ideas on how to do that, they should look to London.

London is a global financial center with a burgeoning population of over 8 million. As London’s economy and population ballooned in the 1990s, so did traffic, earning the city its reputation as one of the most congested cities in Europe. Government officials took notice and hatched a plan to reduce traffic in the city center, boost ridership of the London Tube and buses, invest in public transportation, and improve quality of life. Their solution? A congestion tax.

 

 

Piccadilly Circus via photopin (license)
Piccadilly Circus via photopin (license)

 

Officials in London created a “congestion zone,” which motorists are charged for entering. First implemented in 2003, this tax was introduced at £5 per day and has since risen to £11.50. Resulting tax revenues, amounting to over £200 million in 2008, have primarily been invested in public transportation improvements. The number of public buses has increased, bus routes have been modified to take advantage of reduced traffic congestion, and roads and bike lanes have been improved.

13 years after its implementation, the congestion tax has been hailed as a success. The number of cars entering the city center has plummeted by 34%, traffic speeds improved between 20 and 30%, and bus ridership increased by more than a third.

The benefits of the tax are not limited to improvements in transit times and increased use of public transit; it has also been a powerful tool for reducing the environmental impact of transportation. The tax has reduced CO2 emissions by a total of 100,000 tons annually, cut fuel consumption by 40 to 50 million liters annually, and led to greater than 15% reductions in atmospheric levels of major air pollutants NOx and PM10 levels.

 

Buses and Bikes via photopin (license)
Buses and Bikes via photopin (license)

 

London’s success has inspired other cities to consider congestion taxes. Singapore and Stockholm introduced congestion taxes several years ago, and Beijing and Mexico City are in the planning phases. Efforts to implement congestion taxes in New York City have typically failed due to partisan gridlock, but have gained momentum in recent months.

London’s congestion tax is a powerful example of the positive urban development that occurs when revenue derived from the value of land is invested in public infrastructure. Traffic congestion is largely a consequence of economic growth, which is made possible by a city’s populace and infrastructure. Motorists enter London for economic opportunity. The congestion tax functions as a mechanism by which the city can capture a portion of the wealth earned by non-residents and create the incentives to effectively align self-interest with the public-interest.

A number of economic scholars have compared London’s taxation system with the theories of Henry George. Henry George, an American economist and political theorist of the 19th century, postulated that land is social capital, and profits drawn from land should be shared by all citizens via the use of land value taxation (LVTs). In the case of London, government officials are taxing the use of land by motorists and distributing that revenue to public works projects designed to increase the quality of life for the city’s residents.

As metropolitan areas across the world see traffic congestion worsen rapidly with intense development, a congestion tax is a proven solution worth considering. Not only will traffic decrease, but cities will be able to re-capture wealth generated by its land and use it to improve the city for all.

 

Cover Image: Street Art: Camden via photopin (license)

 

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Big-Oil Prepared for Climate Change While Denying its Existence

A 1997 Mobil Oil ad in the New York Times and Washington Post read “Let’s face it: The science of climate change is too uncertain to mandate a plan of action that could plunge economies into turmoil.”  It continued:“Scientists cannot predict with certainty if temperatures will increase, by how much and where changes will occur.”

But the question is -if the big oil companies don’t believe in global warming, then why are they preparing for it by protecting their equipment from rising sea levels?

A study done by Columbia University Graduate School of Journalism’s Energy and Environmental Reporting Project and the Los Angeles Times looked at how, in the 1980’s, Exxon publicly emphasized the uncertainty of climate change science and then secretly conspired with other big oil companies, spending a billion dollars to prepare their infrastructure.

The companies were protecting the pipelines from coastal erosion, raising decks for the offshore platforms, and adding roads and pipelines in the areas of the Arctic that are warming up. By the end of the 1980’s, groups of environmentalists and scientists were emphasizing the necessity to limit the emissions of fossil fuels because a growing consensus linked the emission of carbon dioxide to climate change, resulting in:  global warming, melting glaciers, and rising sea levels. This caused governments around the world to take notice.

Democratic Senator Timothy Wirth called a congressional hearing in 1988 on the topic. It was stated with almost complete confidence that global warming was occurring. This caused the United Nations to form an Intergovernmental Panel on Climate Change to look at its future impact. This lead to a collection of energy companies, mostly from the coal industry, to form the Global Climate Coalition to fight regulations.

For ten years, this coalition, with a revenue of around $ 1.5 million, spent money on public relations and lobbying campaigns. They suggested that the higher levels of carbon dioxide were good for crops, and without it there would be a shortage in the food supply. It focused on the uncertainty of the changes in the climate and warned that regulations would hurt the economy.

The existence of global warming was never denied. However, they did see some holes in the ability of the models to predict the effects. The coalition was certain that any regulations to reduce emissions would have a negative impact on employment, energy prices, and the standard of living. Even though they used the predictions when building new infrastructures.

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On numerous occasions, the big oil companies prepared for global warming while denying its existence or belittling the possible effects. As the science continued to provide further evidence, the oil companies continued to pump more and more money into the groups that questioned the science. Political and financial interests have made it hard for any real compromise to happen. The sea levels are continuing to rise, displacing many of the world’s poorest people.

In light of this hypocrisy,  companies may claim that they are acting on the idea that, if they are wrong, they want to be prepared. There’s nothing wrong with that. However, why do they keep blocking legislation that would allow the rest of us to prevent and prepare for global warming too?

In light of the gridlock over accepting the notion that climate change is being caused by human activity, it would be helpful to not consider how accurate the models and projected timelines are, but to think instead in terms of risk management along Bayesian grounds, what these companies themselves are already doing. In other words, if there is even a small risk of existential catastrophe, it should be a top priority among governments to try and prevent it. That, combined with the fact that pollution is really harmful for a variety of other reasons, means that we all need to come together on this issue and design a plan to reduce pollution, especially green-house gases.

Here at Earth Sharing, it is clear to us that taxing pollution and the value of urban land is the best way to do that. These methods would not harm the economy. They would actually make it hyper-productive. It doesn’t require consensus on climate change to avoid the risks; we simply need to make companies pay large sums of money when they pollute, so as to incentivize them to reduce their pollution. By letting the debate be framed around absolute undeniable proof of the climate change models, we have allowed the big corporations to obfuscate the real issue, and they are putting us all at great risk as a result.

 

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Top 5 Ways to Fight Pollution

The following list is a combination of things you can do in your personal life and in the world at large to fight pollution. One might think it is important to draw a distinction between these two types of activities because large scale reforms are more difficult to achieve. However, big changes can only occur when individuals take it upon themselves to do what’s right, whether it’s organizing large groups of people or influencing influencers. Simply informing yourself and prioritizing how to most effectively use your energy is an essential first step to making the world a better place.

Fighting pollution and many of the world’s other seemingly intractable problems requires operating with a greater awareness of the policy issues that stand to make the most difference. The 19th century social reformer Henry George said “Until there be correct thought, there cannot be right action; and when there is correct thought, right action will follow.”  Of course, some people have more of a preference for bailing water out of the sinking ship while others have more of a preferences for plugging the hole. This list practically reflects that reality.

1. Eat Less Meat


Livestock production causes many forms of pollution, from being the largest source of greenhouse gases (44% globally), to polluting water (feces, blood, etc) with diseases that can jump from animals to humans. Historically bubonic plague, bird-flu, HIV/AIDS, and Ebola were transmitted from animals to people, and new zoonotic diseases are highly likely given the scale of current factory farming methods. Processing leather is also especially harmful to the environment, most notably in the third world. For instance, untreated tannery wastewater laden with animal parts and heavy metals freely flows through Dhaka, Bangladesh.

Industrial production of animals could be steered toward less environmentally destructive ends, especially by employing permaculture methods, which involve making use of feces. There are supplements to reduce the greenhouse gases released in cow burps (farts are surprisingly not as harmful). However, the most practical solution for individuals concerned about pollution, and other ethical considerations regarding slaughtering animals, is to simply stop buying animal products. Stop buying meat, leather, etc and organize against a factory farm near you.

 

2. Tax Pollution

 

The main argument levied against trying to curb climate change is that such regulation might harm the economy. However, there is a way to curb pollution while simultaneously giving the economy an actual boost.

 

It means taking taxes off productive things like wages, sales, etc (goods) and putting them on (bads) like pollution.  Governments give a lot of free money away to energy companies in the form of subsidies as well. So, simply eliminating those subsidies would remove the distortionary effects that the free-market climate change naysayers ostensibly care about. The more you pollute, the more you pay. This results in less pollution overall.

 

Unfortunately, initial attempts to price carbon resulted in a harmful policy called “Cap and Trade” which actually allots polluting quotas to companies based on how much they already pollute and then lets them sell their unmet quotas to others. In effect, the biggest polluters get to make a huge profit for being the most irresponsible! Companies  also double dip; they pollute up to or more than their limit and then sell their quotas anyway. This in turn allows others to pollute more and to thus exceed the larger carbon cap.


The most effective policy is to simply tax all companies directly (at the same rate), and do away with anything resembling Cap and Trade altogether. We should tax many other pollutants as well, not just carbon. Perfluorotributylamine for instance is actually 7,100 times worse in terms of its effects on climate change.

 

It’s not just corporate giants that need to be financially dissuaded from polluting. We could all use a financial incentive to do the right thing.  We need to tax consumption and improper disposal of harmful consumer products like non-rechargeable batteries and grocery bags. We should offer rebate systems (pay people) to properly recycle and dispose of household pollutants. This is especially important with respect to hormonal treatments like birth control, which wreck havoc on amphibians and larger ecosystems. In the mean time, take advantage of the National Drug Take-Back Day initiative. Those who produce, return, and reuse completely recyclable forms of plastic should be offered a rebate as well.

 

We need to charge higher rent to companies doing offshore oil drilling, and high excise taxes for extracting many types of natural resources. This will discourage and reduce environmental harm. There are a host of other important measures as well, such as  taxing parking, traffic congestion, soil depletion, harmful pesticides and fertilizers, a range of environmental bads.

3. Move to a Denser Area

 

One might imagine that the most environmentally friendly way to live would be to move to a rural area. In fact, this is probably one of the most environmentally destructive things you can do. You would have to live without access to communication, all electronics that is, a grocery store, heating/cooling, running water, medical care: i.e. give up everything, and live completely off the grid. While that might be more environmentally friendly for you alone, if everyone did it, a great deal of habitat would be lost.

The further away you live from the products and services you use, the more energy and natural resources required to sustain you. If you live in a rural or suburban area, you likely rely on your car for everything; this is what most oil in the US is used for. Lightweight vehicles consume roughly 8 million barrels of oil per day in the US. This is more than commercial light trucks, bus transportation, freight trucks, rail, passenger freight rail, domestic and international shipping, air carriers (which have become much more efficient), recreational boats, military use, lubricants, and pipeline fuel combined (5.4 million barrels).

 

Compare that to living on the upper east side of Manhattan where you can walk down to the store at the bottom of your building. You take the train to go to work and the doctor’s office. You don’t even need to own a car.  People living in the same building also use less energy for heating, cooling, and other activities. Therefore, we could reduce energy consumption the most simply by living in denser areas.

Population growth isn’t the real culprit either. In fact our cities are sprawling twice as fast as population is growing. The far bigger problem is that we are not making efficient use of central urban locations. We can completely reverse this. There is a way.

4. Land Value Tax


Density may sound like a dirty word, but it isn’t. People associate density with slums, but the upper east side in Manhattan is one of the densest places in the world with 46,000 people per square kilometer (PPSKM) in the wealthy section east of 3rd Ave, and 70,000 PPSKM elsewhere. That’s higher than the densest city (as a whole) in the world, Manila (42,857 PPSKM), where slums actually are a big problem.


Still, there are 7,000 privately owned vacant residential lots in New York City. That’s not even counting all of the vacant commercial lots,  derelict structures, and ground level parking.  It’s also not counting short buildings where more consistent construction, of say 10 stories, would be more appropriate. This is untapped vertical space that could be used to take pressure off the greenfields at the periphery.  

 

The goal isn’t to maximize skyscrapers, but to simply to make effective use of central urban locations that are currently wasted. Think of skyscrapers as a kind of vertical sprawl, cramming units upward due to the inadequate use of space surrounding these tall buildings. The tallest buildings in NYC, for instance, are in midtown and downtown, not the Upper East Side. However, the Upper East Side is still much denser.

 

The Upper East Side does not feel claustrophobic. In fact, it’s arguably the most sought after residential area in the world, relatively calm and only a stone’s throw from Central Park. Everyone can enjoy the benefits of such density if we, including you, help enact the right policies.

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It’s all well and good to say that we want more density but what is the most effective means of achieving it? How do we get all of those vacant urban lot owners to make their lots available for jobs and housing? Helping to inform them of the negative effect they’re having is one option, but it would likely have little effect alone in light of the huge profits to be made in real estate speculation. That’s precisely why we should tax the value of the land.

 

Taxing the value of land means that individual landowners in city centers are faced with a decision, do I make my valuable location available for people and business, generating the rental revenue to pay the tax, or do I continue to do nothing and lose money by holding onto ownership of this central  urban location? Should I do something useful with the land, pay the tax and keep the difference, or do I sell the land to someone who will? Either way, the space will no longer be wasted. As all the landowners are faced with that same incentive, there will be more infill and thus less sprawl.

 

Another way of thinking about it is that people can’t easily afford to live in cities due to an inadequate supply of housing relative to the number of people who want to live there. If there were more apartments to people, rent would decrease and people could more easily afford to live near the center of the city. There would be more apartments constructed and renovated. Thus, housing would be more affordable.

Note, the land value tax. and the other taxes on environmental bads mentioned earlier, would replace all other taxes, including taxes on buildings. So, it would mean that renters in urban areas would basically not pay taxes, just rent. The result is that environmentally friendly ways of living and producing would be more profitable than their destructive alternatives. We could have the best of both worlds, lots of innovation and little pollution.

To learn more about the land value tax and its effect on sprawl, see our article Visualizing Earth Sharing.

5. Join the Earth Sharing Movement

Make it a point to signup for our newsletter to regularly engage with Earth Sharing articles, reach out to us, and donate. Join our discussion group on Facebook (LVT), inquire about one of our events,  improve your understanding of economics by taking a course for college credit, and read one of our books.

 

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Economics in Support of Environmentalism

-Mason Gaffney

“Economics in support of environmentalism” – is that an oxymoron? There are economists who put down environmentalists as unwelcome intruders in social policy; there are environmentalists who file economists under “The Great Satan.” Some economists deserve it. I will show how these differences arise, and how we may compose them.

I. Worthy goals often conflict with each other

A. Corn vs. Barley

Growing barley is a worthy goal (especially if you enjoy a little beer). So is growing corn. It would be great to raise as much of each as anyone wants, but the Earth has its limits. A choice and a decision are required. People invented (or stumbled into) the discipline of economics to help with such hard choices, and to console ourselves that we are doing the right thing. The hardest choices are those regarding land use, because there is just so much. We can build more houses, cars, and boats, write more music and drama, spawn and educate more people, but we cannot make another Hudson Valley.

Barley grows on cheap land, and the demand is limited, so the best barley land is used for growing corn. Economics reconciles the competing demands and rationalizes the outcome. It defines the “highest and best use” of land as that yielding the highest net gain, the excess of revenues over costs. Economists include non-cash “service flows” among “revenues,” although they bear watching: sometimes they forget. Thus, economics shows how the market sorts and arranges land uses, giving us a corn belt, a wheat belt, and a cotton belt. Economists pride themselves on this achievement. (Some preen themselves too much, as we will see, and pride goeth before a fall.)

By the same logic, irrigated crops take land from dry-farmed crops; orchards take land from irrigated row crops; housing takes land from orchards and groves; commerce takes land from housing.

Sometimes the rich take land from the poor, provoking sympathy, strong rhetoric, and occasionally effective rear-guard resistance to such changes. Actually, a well-oiled market is often quite democratic. People of moderate income, by crowding, can outcompete those of high income for the same land, as when a Sears or Wal-mart takes the best commercial sites from a Nordstroms or Broadway; or when an old estate is subdivided into five lots per acre. This, too, provokes negative rhetoric, but developers know how to make hay out of this, and mincemeat of their opposition. At this point developers become populists and accuse preservationists and environmentalists of snobbery and elitism. We need an answer for that one if environmentalists are going to command enough popular support to win, and hold the gains. Of this, more later.

Other worthy goals that conflict are open space and water conservation. A major problem in an arid land is that much wide open space guzzles up water. Conserving open space and conserving water conflict directly. Green grass uses more water per acre than almost any farm crop except rice (and rice returns part of it downstream). In cities most water is used not for swimming pools or toilets or washing machines, but for sprinkling lawns. Cemeteries, golf courses, horse-pastures, parks, freeway banks, and the spacious tax-exempt grounds of institutions are the greatest water junkies outside of farming itself, which of course takes much more than all cities.

Something has to give. Thus far it has been wetlands that gave. Once, perhaps, we had too much wetland, but that was long ago. We cannot accommodate all those uses, and save wetlands too, just by having restaurants stop serving water, or putting bricks in toilet tanks. Those are just token or “Goo-Goo” measures for parlor reformers; they distract us from real problems, and substitute for real solutions. What is the highest and best use of water? Wetlands, maybe; more golf courses, maybe not. But we need a rule to gauge “highest and best use.” Is it the market? Read on.

B. New rules

Some of the losers in the market game are not willing to grin and bear it. Instead, they write new rules; they want to play a different game. Soilsmen did this long since. They like to classify land and rank it by its potentiality for growing crops. Farming is – to them – the ultimate value, so it is the highest and best use: cities may have what’s left over. It is perhaps poetic justice that habitat-savers are now doing the same thing to farmers. They conceive highest use as that which saves endangered species: soils and farming may be damned, right along with housing, commerce, transportation, industry, storage, water supply, waste disposal, fire control, education, religion, mining, government, national defense, recreation, and whatever else needs land. All human activities, and survival itself, need land, so that list is a long one. Each constituent of the other uses becomes an enemy.

C. Unresolved conflicts

Both Soilsmen and habitatspersons have a point, we will see, but they have a fatal weakness. Neither has a system that composes conflict with other worthy goals, including each others’. As to cities, both soilsmen and habitat-savers would direct cities away from low-cost, high-productivity land to the high-cost leftover lands. They would not make this an end in itself, of course, but it is the necessary by-product of downgrading urban usage in the competition for land.

Thus, to restore citriculture and habitat in what is now L.A. we would move the city folks to hazard-prone floodplains, steep slopes subject to fire and erosion, quake-prone fault lines and liquefiable soils, etc. We would also move them away from the center, imposing longer commutes, greater auto-dependency, longer utility lines, longer hauls to dispose of solid wastes, more air to protect, more aquifer surface to protect, more land to protect from flooding, etc.

D. Danger of isolation through overkill

Sometimes preservationism, like any good cause given power, runs completely amok and makes itself ridiculous. For example, in Downey, California, the Los Angeles Conservancy and the National Register of Historic Places are fighting hard to save – I am not making this up – a McDonald’s drive-in, complete with neon sign! They are serious! Governor Wilson weighed in with this outburst of California pride: “The modern history of McDonald’s will be as important to the cultural history of our nation as the invention of Coca Cola.” (That comparison seems apt enough.) “Preserve for posterity the home of McDonald’s golden arches!”

In Victoria, B.C., the University of Victoria bars people from 2-3 acres of its tax-free campus to preserve habitat for its nesting skylarks, an endangered species. Never mind that they are an import from England, like starlings: now they are being “preserved” to keep things natural. Likewise, a certain residence on a steep slope in the arid Malibu Hills contains an artificial pond, filled with pumped water, but adorned with reeds “to keep it natural.”

Both soilsmen and habitat-persons will become isolated and ineffective unless they forswear extremism, and modify their new rules to accommodate other worthy goals with other constituencies. Until then, they will appear to others to be single-valued ideologues, fundamentalists with siege mentalities. To succeed they – we – must learn to lead larger alliances by offering more complete philosophies and guidelines for policy.

II. The Dereliction of Economists

There is another kind of fundamentalist, the private property kind. The economics profession (my tribe) has, in recent years, largely abdicated its proper role as an arbitrator and gone over mainly to the side of private-property extremism. This is the essential meaning of “Neo-classical Economics,” which is the idiom of most discourse in the field today, both in business and in the profession.

How did economics get so twisted? Don’t blame Adam Smith, or David Ricardo, or John Stuart Mill, or John E. Cairnes, or Knut Wicksell, or Philip Wicksteed, sterling 19th Century writers. Rather, blame J.B. Clark, Karl Marx, Richard T. Ely, Alvin Johnson, Frank Fetter, Frank Knight, George Stigler, and a host of lesser figures who gradually warped economics into its present form. How did they do it?

A. Defining away land

They wiped out land, resources, nature, and the environment as a separate class for analysis. In official Neo-classical doctrine, the world is an infinite reservoir of raw land and resources. Raw land has no value until man does two things:

1. Man subjects land to private tenure. The very act of privatizing land gives it value it lacked before. Land without an owner has no value – take that, Aldo Leopold! You will find this in J.B. Clark, 1886, The Philosophy of Wealth. Clark points out that wealth is created “from the mere appropriation of limited natural gifts …” (p.10). The atmosphere as a whole, showers or breezes, “minister transiently to whomsoever they will, and, in the long run, with impartiality.” Therefore they are not wealth. Those who appropriate them create wealth by so doing. The essential attribute of wealth is “appropriability,” to create which “the rights of property must be recognized and enforced, …. Whoever makes, interprets, or enforces law produces wealth.” It follows that those who pollute the common air, or anything held in common, are not damaging anything of value, since it belongs to no one.

Clark writes of “the essential wealth-constituting attribute of appropriability.” He goes on in that vein: those who seize land and exclude others thereby produce its value. Clark founded Neo-classical economics, and is emulated closely by the “New Resource Economists” of today.

2. Man improves the raw land, pumping value into it. After that it is just like any man-made capital. Raw land has no value: God contributed nothing. Consistently with this worldview, merely eyeing the General Sherman redwood tree adds nothing to GNP, but cutting it down would add a lot. Eyeing it would only raise GNP if you had to pay for it, or had to drive a long way to get there, and bought a kewpie doll while you were there. Likewise, commuting 80 miles a day raises GNP, while finding a homesite near work lowers it.

B. Private property: from means to end

In a proper view of things, I submit, private property is a means to an end. It is not an end in itself; it needs a functional rationale. The end is to get land put to the best use. All the private land in the world was originally granted by some sovereign public person or body, mainly for that purpose, not as a welfare entitlement. Landowners and their lawyers have slyly, over time, turned the means into an end, a fetish they endow with “sanctity.” This is a term they borrowed from absolutist medieval theology. “Sanctity” means the quality or state of being holy or sacred, hence inviolable. It means property may not be challenged, or even questioned. It has become an end in itself, its own voucher. You’re not even supposed to think about it, it is above thought. Taboo!

Neoclassical economics, historically, marked the final, total surrender of the profession to this fetish. The modern economist’s view runs something like this: “I pledge allegiance to the 14th Amendment, and to the overinterpretation of private landowner supremacy for which it has come to stand.” It is ironic to recall that Radical Republicans passed that Amendment, at a time when a “Radical Republican” was one who favored freeing the slaves. The 14th Amendment was designed to protect the rights of freedmen. As interpreted now, the 14th Amendment means that The Emancipation Proclamation itself was unconstitutional! Fortunately, no one has brought that case – yet.

The Neo-classical economists’ view of their proper role is rather like that in The Realtor’s Oath, which includes a vow “To protect the individual right of real estate ownership.” The word “individual” is construed broadly to include corporations, estates, trusts, anonymous offshore funds, schools, government agencies, institutions, partnerships, cooperatives, the Duke of Westminster, the Sultan of Brunei, the Medellin Cartel, Saddam Hussein, congregations, Archbishops, families (including criminal families) and so on, but “individual” sounds more all-American and subsumes them all. This is a potent chant that stirs people to extremes of self-righteousness and siege mentality when challenged.

The resemblance between Neo-classical economics and the Realtor’s Oath is easier to understand when you learn that Professor Richard T. Ely, founder of the modern discipline of Land Economics, was heavily subsidized by the National Association of Real Estate Boards, the utilities, the major landowning railroads, and others of like mind and property interests.

When it comes to violating property rights, air pollution today is perhaps the greatest invader and confiscator of property. Where do economists stand? Once a few of them tried to say, following A.C. Pigou, “let the polluter pay,” and in parts of Europe they still do. In our modern backward thinking here at home, however, it’s not the polluter who is invading the property of others, nor the human rights of those not owning property. Rather, when you tell them to stop, the government is invading their rights. The wage-earning taxpayers must pay them to stop, else you are violating both the 14th Amendment and the “Coase Theorem,” a rationalization for polluting now dearly beloved by Neo-classical economists.

C. Leapfrogging, floating value, and compensation

The environmental damage from those attitudes might not be so bad were it not for leapfrogging, urban disintegration, and floating value. Leapfrogging is when developers jump over the next eligible lands for urban expansion, and build farther out, here and there. This has been a problem in expanding economies ever since cities emerged from within their ancient walls and stockades, but in our times and our country it has gone to unprecedented extremes, with subsidized superhighways and universal auto ownership and truck shipping.

Alfred Gobar, savvy real estate consultant from Placentia, has recorded the amount of land actually used by city and suburban dwellers for all purposes. From this, he calculates that the entire U.S. population could live in the state of Missouri (68,965 square miles). That would be at a density of 3625 people per square mile, or 5.67 per acre. That is 7683 square feet per person. On a football gridiron, this is the area from the goal to the 16-yard line.

He is not being stingy with land, at 3625 persons per square mile. The population density of Washington, D.C., is 10,000 per square mile, with a 10-story height limit, with vast areas in parks, wide baroque avenues and vistas, several campuses, and public buildings and grounds. This is also the density of Whitefish Bay, Wisconsin, a well-preserved upper-income residential suburb of Milwaukee, with generous beaches and parks, tree-lined streets, detached dwellings, retailing, and a little industry. San Francisco, renowned for its liveability, has 15,000 per square mile. More than half the land is in non-residential uses: vast parks, golf courses, huge military/naval bases, water surface, industry, a huge regional CBD, etc., so the actual residential density is over 30,000 per square mile.

On Manhattan’s upper East Side they pile up at over 100,000 per square mile. They do not crowd like this out of desperation, either. You may think of rats in cages, but some of the world’s wealthiest people pay more than we could dream about to live that way. They’ll pay over a million dollars for less than a little patch of ground: all they get is a stratum of space about 12 feet high on the umpteenth floor over a little patch of ground they share with many others. They could afford to live anywhere: they choose Manhattan, they actually like it there!

Take 10,000 per square mile as a reference figure, because it is easy to calculate with, and because it works in practice, as noted. You may observe and experience it. At that density, 250 million Americans would require 25,000 square miles, the land in a circle with radius of 89 miles, no more. That gives a notion of how little land is actually demanded for full urban use. It is 9.4% as big as Texas, 4.2% as big as Alaska, and 7/10 of 1% of the area of the United States.

And yet, the urban price influence of Los Angeles extends over 89 miles east-south-east clear to Temecula and Murrieta and beyond, at which point, however, it meets demand pushing north from San Diego. Urban valuation fever thus affects much more land than can ever actually be developed for urban use. Regardless, most owners come to imagine they might cash in at a high price, with high zoning, at their own convenience, with public services supplied by “the public,” meaning other taxpayers. This is the meaning of “floating value.”

If their land is downzoned for farming, open space, or habitat, they regard it as a “taking,” and plead the 14th Amendment. Once we buy into the Sanctity (Holiness, Sacredness) of private property, we owe them. If we think of the public’s buying large quantities of it to preserve habitat or open space, the price is already high above its aggregate value, and the new demand will push the price higher yet.

Here is a case showing how this works. The Los Angeles Metropolitan Transit Authority (MTA) needed the old Union Station, northeast of downtown in a run-down neighborhood, as the centerpiece of its new, integrated mass transit system. With the decline of interurban passenger rail traffic, the old station was unused. The owners, mainly Southern Pacific, asked more than MTA offered, so MTA invoked its power of eminent domain and condemned the land. The case went to judgement, and in 1984 the court awarded SP an amount about twice the going price for land in the area. The court’s reason was that the coming of mass transit would raise values around the new central station, and SP should be paid as much as neighboring landowners would be able to get after the station was built.

Thus, land originally granted to SP to help subsidize mass transit was used instead to obstruct and penalize mass transit. Private property had become an end in itself, Holy and Sacred, a welfare entitlement, rather than a means to an end. MTA (the taxpayers) had to pay a price for land based on the unearned increment that its own construction and operation was expected to create in the future.

Later, MTA was to stint on subway construction, resulting in subsidence on Hollywood Boulevard, but there was no stinting on paying off SP for doing nothing: the award came to $84.7 millions. This is how the 14th Amendment works in practice, making private property an end, sanctified for its own sake, rather than a means to a higher end. It makes landowners the spoiled children of the national family, inflating the cost of every program that entails acquiring land. It means there is no chance that the public, whether through government or the Nature Conservancy, can preserve more than token areas of habitat by buying it: it would bankrupt us.

D. Siege mentalities

The result of sprawl and floating value and the Sanctity of Private Property and the 14th Amendment (as construed) is to put conservationists-environmentalists-ecologists under siege. Here is a sharp, clear statement of it from Vivian Null, San Bernardino Audubon Society.

“Once humans lived in small groups surrounded by expanses of wilderness. Today, human civilization has pushed our natural world into ever smaller, fragmented pockets of deteriorating habitat. As a result, we are living in an age of mass extinction.”

I sympathize with the view expressed, and understand what outrages provoked it. When it comes to solutions, however, we have a problem. Being under siege fosters a siege mentality. “Science,” for all its virtues, can also be an ideology. To the layman, self-styled “hard” Scientists can seem more hardheaded and hardball than scientific. They can seem single-valued, self-righteous, imperious, and – dare I say it? – even a bit arrogant at times. At the same time landowners also feel under siege. You may observe how developers rage about having their land set aside for the likes of Stephens Kangaroo Rats, Three-toed Lizards, and California Gnatcatchers. The ideology of Science and the ideology of Private Property have become clashing absolutes, no more able to come to terms than Kach Movement militants can compromise with Islamic Fundamentalists. What can we do? It helps to read some history of the successful Conservation Movement of the Progressive Era.

III. Gifford Pinchot’s Winning Formula

A. Defining “Conservation”

Gifford Pinchot was a great leader of the Conservation Movement. He defined his central term, conservation, as “The greatest good for the greatest number for the longest time.” Caviling theorists sometimes pick at that famous phrase, since you cannot maximize three things at the same time, but that is unfair, since he was not being technical. He was making a speech, and obviously what he meant was that those three elements should all be considered, and none was to be slighted.

Notice especially the middle clause, for the greatest number. Conservation was not just for landowners, or any other elite. Conservation was part of the Progressive Movement, which had sprung from the Populist Movement. Social equity was at its core. Here is some more of Pinchot’s speech (to the 1st National Conservation Congress, 1909):

… the third principle of conservation. It is this: the natural resources must be developed and preserved for the benefit of the many and not merely for the profit of a few. … public action for public benefit has … a much larger part to play than was the case … before certain constitutional arrangements … had given so tremendously strong a position to vested rights and property in general. … by reason of the 14th Amendment to The Constitution, property rights in the U.S. occupy a stronger position than in any other country in the civilized world. … it becomes then a matter of multiplied importance, … when property rights once granted are so strongly entrenched, that they shall be granted only under such conditions as that the people shall get their fair share of the benefit which comes from the development of the country which belongs to us all. The time to do that is now.

You modern habitat-savers, your foes score points against you by calling you “elitists.” Sure enough, you do appear a bit above, and therefore outside the mainstream, especially when you talk down to people from the eminence of “Science.” Pinchot saw that brick coming and dodged it before it was even thrown. He teamed up with the populists; he spoke as a man for the people, even if not quite of them. Can you say the same? Is there a place in your plans, and your hearts, for Joe Sixpack?

Here is a list that the Southern California Association of Governments (SCAG) has published from its recent public opinion survey of public issues. Preserving habitat and endangered species are not even among the top 17 priorities listed by citizens. Neither are private property rights. Their top three concerns are crime, education, and jobs. Politicians have preempted the crime issue, but no one is doing a thing this year for education and jobs. Take a leaf from the successful Gifford Pinchot: team up with some populists. Move into the vacuum left behind the gale of anti-crime oratory. No one is serving the constituency for education and jobs.

Other populist issues high on the SCAG list are homelessness, affordable housing, job training, and child care.

B. Finding common ground

On what basis shall habitat-savers identify with median Americans? We share a problem: we are all victims of private property rights carried to extremes. Abraham Lincoln, the original Radical Republican, once spoke to the effect that whenever landless people cannot find work and shelter, then the rights of private property have been carried too far and must be curbed. We have seen what Gifford Pinchot said.

“… natural resources must be developed and preserved for the benefit of the many and not merely for the profit of a few. … the people shall get their fair share of the benefit which comes from the development of the country WHICH BELONGS TO US ALL.”

Belongs to us all? Was Pinchot a Communist? Not likely: he was a Republican, an active political one, twice Governor of Pennsylvania.

We have too little time together to develop that fully, but here are some ideas. First, environmentalists might rethink what we mean by “open space.” To Pinchot, “open” meant the space had public access. Today it often means the reverse: golf courses, duck clubs, sacred Indian lands, private beaches, cemeteries, farmlands, vacant speculative holdings, unpoliced parks taken over by gangs, protected and posted habitat, water from which swimmers are excluded for power boats, rights-of-way closed to hikers, University experimental plots, and so on. In this sense, there is more open land in downtown Manhattan than in many of our rural and sylvan areas. Many a water reservoir is open to beavers, ducks and geese, who routinely powder their noses there, but not to humans who seldom do, and can be trained not to.

To get more support for habitat, find ways to open it to people, putting more funds and effort into behavioral controls if necessary. In Pinchot’s day, people spoke unblushingly of “character training,” and practiced it. Pinchot himself said, “the training of our people in citizenship is as germane to it (conservation) as the productiveness of the earth.” Wilderness clubs preached and taught responsible behavior in the wilds. The Boy Scouts taught it, churches taught it, schools taught it, forest rangers taught it, camp counselors taught it, community leaders taught it: you heard it all around, and it did help shape your character. It was a great community effort, enlisting broad support and conviction. Then, in that less mobile, less commercialized, more communitarian age, social control over public behavior came naturally. We came to take it for granted, until it silently slipped away. Today it may take more conscious effort, but it was done then, it can be done now.

Second, go with the flow for economy in government. For most of our lives now, we have looked to big government to resolve disputes by buying out both parties. We would have government pay top dollar for land, if needed, and then hire scientists to manage it for habitat. Thus, both sides dream of cutting into line at the government trough: but the trough is empty, and the taxpaying public is in a foul mood. Rather, let’s look for ways to cut spending by curbing subsidies to urban sprawl. I shall return with particulars.

IV. Pinchot on “Development”

Gifford Pinchot, the father of Conservation, was not against developing land. In his own words:

” The first principle of conservation is development, the use of the natural resources now existing … for the benefit of the people who live here now. There may be just as much waste in neglecting the development and use of certain natural resources as there is in their destruction by waste. … Conservation, then, stands emphatically for the use of substitutes for all the exhaustible natural resources, … (water power and water transportation are his examples). … The development of our natural resources and the fullest use of them for the present generation is the first duty of this generation. …

In the second place conservation stands for the prevention of waste. … ”

So Pinchot was against waste, so what? Who isn’t? This could be just a banality, but he gives it a new turn. To him, waste means failing to use renewable resources. His example was hydropower, which he would substitute for coal and oil. That is not such a good example today, when we cherish our few remaining wild rivers, but today urban land makes an even better example.

“Urban land?”, you may ask. “What has urban land in common with falling water?” Economists (who are not all bad) classify urban land as a “flow resource.” They liken it to flowing water because its services perish with time, whether used or not, and we are trapped in the one-way flow of time. Likewise, urban land is not depleted by use. It is an even better example of a “flow resource” than flowing water itself, because, as we are so conscious today, “unharnessed” flowing water may have other downstream uses. Even in wasting out through the Golden Gate, it may repel salinity. The unreaped harvests of idle land, however, flow down the river and out the gates of time like lost loves dimming, and golden moments we let slip away beyond recall.

What is this “service” of urban land, that we should be mindful of it? For one thing, using central urban land conserves all the hydrocarbons and other resources otherwise needed to traverse it. Compact urban settlement is a direct substitute for oil, with all that implies – and it implies a great deal, which I will leave you to fill in.

Second, using good central land saves all the costs of settling on other land – including the cost of taking more of the shrinking habitat from endangered species. Therefore, habitat-savers should emulate Pinchot and favor development in the right places, the better to oppose it in the wrong places. This is the great lost secret of conservation our times have forgot. You cannot beat development by opposing it everywhere it pops up. People need land for all kinds of legitimate things, and they will have it. To stop urban sprawl, you must support compact, efficient urban development, including healthy, timely renewal of older cities, inner suburbs, and neighborhoods.

V. Urban Sprawl

We have met the enemy, and it is US (Urban Sprawl). Let’s analyze this beast, US.

A. Development is not identical with Sprawl

Many people carelessly equate urban growth and urban sprawl, but they are not the same, not at all. Cities may grow like the posh upper East Side of Manhattan with 100,000 per square mile, or San Francisco with 15,000, or Riverside, California with 2500, or Oklahoma City with 734. Metropolitan regions are even more varied. We have seen that 250 million Americans could fit nicely into a small part of southern California, were it compactly settled at moderate urban densities that are actually found in practice, as in the upper middle class suburb of Whitefish Bay, Wisconsin (10,000 per square mile).

Urban sprawl, which creates a psychological effect of great crowding, is not the product of development as such, but of leapfrogging. Leapfrogging means chaos, with development in the wrong places and times. Infilling, on the other hand, is anti-sprawl. It is the cure for sprawl.

B. Sprawl is not a quest for open space

A common belief is that the search of open space is the main force behind sprawl. You may test that by observing high density, cookie-cutter subdivisions scattered throughout the land. Within each such development, you are living at urban densities. It is when you get onto the freeway to commute, or shop, or take the kids to school or the dentist, or worship, that you experience open space. You experience it as a negative resource, an obstacle between where you are and where you want to go.

C. Sprawl is not the product of free choice

A favorite fallacy is that sprawl results from free individual choice. In fact, sprawl results mainly from subsidies to sprawl, enforced through taxation and/or utility rate regulation. Thus it is imposed, not freely chosen. The classic case, which exemplifies the whole genus, is postal service. It costs you 29¢ to send a letter across the street downtown, or from rural Idaho to rural Florida. The generic name for such subsidies to sprawl is “postage-stamp pricing” (a species of spatial cross-subsidy), which gives you the idea.

In British Columbia, people move around a good deal by car-ferry, because of the terrain. The Provincial Government (“The Crown Provincial”) runs the system. There are many lovely little islands in the Straits of Georgia, between Vancouver Island and the mainland, favored by the wealthy, the exclusive and reclusive. Being more sybaritic than Henry D. Thoreau, and politically puissant, they have demanded and received car-ferry service. This service costs about $10 for every $1 in revenue. The resulting deficit is covered by raising rates on the main plebeian line, Victoria-Vancouver. Naturally, these cheap ferries attract new visitors to the islands, and new demand for land there.

D. Looking for Mr. Goodbar

Here is how we get urban sprawl with leapfrogging. Remember the last time you moved and went househunting? You saw some mouthwatering homes, but they were not for sale. You had to find motivated sellers, and pick from what they offered. It’s the same with builders. They scour the exurbs seeking motivated sellers. Ideally the most motivated sellers would line up by distance from the existing city, but the market is not ideal. Each seller is moved by his personal circumstances, not the geographical location.

Potential builders are little concerned with the social costs they might impose, so long as others are to bear them. Thus, they sometimes settle for and build on steep lands (like Malibu Hills) with flammable brush and erosion problems, on flood plains (like Victoria Woods subdivision in Riverside), on soils subject to liquefaction in quakes (like Northridge), in canyons and arroyos, on lands with limited access for emergency equipment. They even build on lands without water supply, even in arid southern California, then demand water and get it, secure in the knowledge that Sacramento rejected a recent move to ban development in areas with no assured water supply.

E. The public pays twice

Let’s go back to those Channel Islands in British Columbia, with subsidized car-ferries. Naturally, as I said, these cheap ferries attract new visitors to the islands, and new demand for land there. Developers and hopeful subdividers bid up land prices. This is not what the old settlers had in mind: their environment is threatened, including the habitat of endangered species. They appeal to the Crown, which subsidizes their ferries, to help them preserve land for habitat.

They want the government to buy some of it, paying the high prices created by the ferry subsidy, to keep it from use by people who might use the ferries. Thus the government would pay twice: to subsidize the ferries, and then to retire the land at the high prices made possible by the ferries. Failing that, they want the Crown to downzone most of it. The landowners are not charged when the ferries raise their asking prices, but demand compensation when downzoned.

Here, in microcosm, is the American problem with sprawl and habitat. Multiply that ferry subsidy a thousand times, and you have the Great American System of Public Works and Services for Private Gain. First the public pays to bring urban demand to remote lands; now the landowners, the spoiled children of the national family, demand to be paid again for downzoning or selling that same land to preserve habitat. They demand payment not to cash in on the opportunities we just gave them free.

Thus far, it is true, the courts have let us downzone without compensating. However, now a storm has gathered. Proposition 300, on the ballot in Arizona, demands compensation for downzoning – it is aimed at the Clean Water Act and the Endangered Species Act. There is a movement in Congress to compensate for any Federal regulation that devalues land by more than 50%. It is led by Congressman Billy Tauzin, a Democrat from Louisiana. You can imagine what a more conservative Congress might do. Speculative landowners may soon get everything they demand, leaving heavy debts to which their light tax payments now contribute very little.

F. Proactive solutions

How do we dig out from this one? I’ll repeat: go with the flow of cutting public spending by cutting down subsidies to urban sprawl. They are a major source of the problem. We’ll never win the environmental fight until those subsidies are withdrawn.

A second proactive solution is to motivate and help the owners of good land to sell or develop it. To help them, make infilling a positive goal. If you put impost fees on new buildings, do so only in outlying areas that require new public services, not on new buildings that help renew places like South Central L.A. If you ration sewer hookups, save them for central land with street improvements already in place.

Those are the carrots. A good stick is also needed. We have seen how leapfrogging results from the scattered locations of motivated sellers. We can motivate sellers near-in, and in compact increments as we expand spatially, by raising land taxes there. Proposition 13 makes this difficult, but not impossible: many special assessments have the essential motivating quality of land taxes, with a different legal form, that exempts them from Proposition 13.

I could wax rhapsodic about the results to expect from such taxation, but have done so elsewhere and will leave it with a word: visit Sydney, Adelaide, Brisbane, Copenhagen, or Johannesburg, which have made use of this principle to excellent effect.

VI. Dig deep

These are basic issues, and call for bold actions. Do not waste your time on wimpish meliorism, or “Goo-goo” thinking. For example:

It is said we need a land use inventory. We already have lots of them: people have been classifying land for decades. The question is, what shall we do with them?

It is said we need “risk ratings.” These are subject to manipulation and juggling, like benefit/cost analyses of recent ill fame. The question is, who will control the ratings, and to what ends?

It is said we need fire models. We have fire models; they were already chic in 1950. The question is, how to keep scattered homes out of fire-prone areas, where they make prescribed controlled burning nearly impossible. The question is how to keep the State and the fire insurance industry from cross-subsidizing these homes by averaging their risks in with others.

Rather, let us study how to emulate the model of Butchart Gardens, near Victoria, B.C. Butchart doesn’t sound like a gardener’s name, and sure enough, Mr. Butchart was a hardrock miner who attacked the earth and left a great ugly gash in it. Ah, but Mrs. Butchart, she wanted space for a garden, so she made one there. She rediscovered the truth that land is not just the matter that occupies space, it is space, always renewable and reclaimable. Now Butchart Gardens is one of the world’s great beauty spots, drawing visitors from everywhere – in the summertime you hear every language there. Our decayed central cities, too, may bloom again like Mrs. Butchart’s garden. Let us make it our model.

This paper was presented by professor Mason Gaffney at Community Stewardship of Environmental Resources, a program sponsored by the Community Regional and Environmental Studies Program, Bard College, Annandale-on-Hudson, NY, 24 October 1994

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Detroit Conference: Reclaiming Our Land and Water

Detroit, Michigan

Once Detroit was motown, the home of Mustangs, Chevies and Cadillacs, of Aretha, the Jacksons, the Temptations. What happened? How can it be turned around? How can other cities escape the suffering that Detroit has endured?

In the 1960s, in the town of Southfield, the Detroit suburb where the Council of Georgist Organizations (CGO) annual conference will take place, a forward-thinking Mayor, James Clarkson, and an expert Assessor (Ted Gwartney, who will be one of our featured speakers) implemented reforms that made Southfield one of the fastest-growing cities in the country. Southfield’s success reprised the tax and business climate Detroit enjoyed in the early 20th century, the policies that made it the USA’s automotive capital.

detr

This conference will explore that fascinating history, and bring together social scientists and reformers from around the world to focus on innovative solutions to today’s most “intractable” economic problems. The CGO looks beyond the ideological limits of “Left” or “Right” to explore viable Third Way policy solutions that can move society toward greater equality, without sacrificing prosperity.

For rates and reservation information, please click here. Here’s a PDF version of our brochure.

Source: Council of Georgist Organizations | Apr 27, 2015

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Whither Homo Economicus?

by Lindy Davies

You walk up to a food counter in a train station. You have five minutes to grab a bite before you have to board your morning train. A grumbling young woman, who exudes contempt for you and for every other customer in the line, charges you a premium price for a leathery, slapped-together breakfast sandwich which, nevertheless, takes another three minutes to get to you. She and her colleagues are distracted; each of them likely has a long list of personal problems — but all you know for sure is that she has made your breakfast transaction thoroughly unpleasant. You have encountered Homo Economicus.

eatit“Economic man” is a key template for economic analysis. It assumes that we respond to the problem of scarcity with profit-maximizing behavior— or in other words, we try to secure material gain in the hardest-nosed, most self-interested way. Many people are uncomfortable with this idea: is it a simplifying assumption — or is it simply nonsense? People bristle at the notion of self-interested maximization. What about fun? Family? Spiritual Life? Cat videos?

And, anyway, we are often observed choosing to do things that aren’t “economical.” Someone drives into a convenience store twelve days in a row and buys a soft drink. The buyer could make a single trip to a supermarket and buy a twelve-pack of same beverage for 40¢ less per bottle. Who knows what constitutes economic behavior? Perhaps the soda-drinker had a crush on the cashier. Perhaps he liked to thumb through the magazines on sale there. And, anyway, the soda has zero nutritional value, so it’s really hard to say what’s going on in any sort of practical terms, but, well — he keeps buying those sodas.

“Economic Man” in Economic History

This issue isn’t new; it was recognized by the classical economists. John Stuart Mill was the first to refer to “economic man.” He made it clear that he saw Homo Economicus not as the whole person, but only that part of the person which concerns the science of political economy,

…an arbitrary definition of man, as a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained.

Henry George added the clarifying insight that the desires we seek to satisfy are entirely subjective. Contra Adam Smith, George pointed out that our desires aren’t necessarily selfish; they might be spiritual, or altruistic. Whatever our desires are, anyway, we try to satisfy them with the least “irksome toil” (and, what constitutes “irksome toil” is also subjective: one person’s hard labor might be another’s best fun).

When we undertake irksome toil, unwilling to do so without compensation, seeking to do as little of it as we can — our behavior falls under the definition of Homo Economicus. Obviously, we want to spend as little time as possible in that state. We want to get mere profit-maximization out of the way so that we can enjoy our free time.

Despite the tremendous progress of labor-saving technology, there is still work that people have to do. People are still called upon to pick up garbage, change diapers, unclog drainpipes, guard convicts, seize territory, do laundry, teach children, serve all-night customers, patrol streets… and, even, write books. Will there ever be enough labor-saving inventions to get the Homo Economicus out of human lives? In Sacred Cows and Other Edibles, Nikki Giovanni offered an interesting point of view on this question:

I like my profession. I hope the telephone operators, the hamburger turner at McDonald’s, the pressure checker at Kentucky Fried who see to it that those spices and herbs get really deep in the chicken are proud, too.

colonelAt first, I thought Nikki Giovanni (whose poetry I like very much) was being facetious. She had the talent, drive and good fortune to enjoy a career as a poet. That didn’t necessarily make her life easy, but I think she’d choose it over frying chicken for Colonel Sanders. Eventually, though, I realized that her point is unassailable: if the chicken fryer doesn’t care about her work, everyone suffers. True, she is underpaid; most workers are. But, jobs are scarce: more personable and diligent workers are eager to take her place. Giovanni is telling us that, despite the manifest injustice of our society, one can still choose to be a person. Remember that young woman at the breakfast counter? She was resigned to being Homo Economicus — and you’re not going back to that breakfast counter, if you can possibly avoid it.

You might point out that it is in a worker’s economic interest to be more pleasant, so she can hold onto her job. But, I suspect that she cares very little for this job; she considers herself to be a worker, (impersonally, insultingly) hired to do a (dull, underpaid) job; perhaps her situation is a notch above abject slavery, but it’s not far above it. She is, in a word, alienated.

Is Social Progress Linear?

“Alienation” is something that Marxist theory has a lot to say about; indeed, it is said to be the basic condition of workers under the capitalist more of production. Marx saw workers as suffering from a four-fold alienation: from the things they made, from the process of making them, from their own selfhood, and from other workers. This cubicle of alienation in which workers (inevitably) find themselves is a big part of the reason why Marxist theory sees revolution inevitable, and capitalism doomed.

Others, however — such as Henry George — see the possibility of fundamental reforms that would make a market economy work for everyone. If we all seek to reduce the amount of irksome toil we have to to perform, it follows that a progressive society would be able to reduce the net amount of time that its people spend behaving as Homo Economicus. This would imply a continuum of social progress. At the bottom is slavery: a slave, compelled to perform “irksome toil” to survive and avoid punishment, is pure Homo Economicus. At the top, we might find an artist: getting paid for for work that was done for the sheer joy of doing it.

Then there is the joyous, painful endeavor of raising children — where does that come in on the scale?

Let’s consider a few examples:

Autoworker Aaron works for $17/hr in a nonunion Toyota plant, and has to make a decision about whether to join a union. He decides against it, because $17/hr is better than any alternative that’s available to him, and he doesn’t want to jeopardize his job.

Autoworker Betty is a member of the Communist party working at the Totota plant, and works behind the scenes to organize coworkers. Her activism is frowned on by her supervisors, who stick her with unpleasant tasks and don’t recommend her for promotion.

Dad Charlie chooses to forgo his career and stay home with the kids. His wife makes good money, but has a stressful, long-hours, fast-track career. Charlie’s role as a home support person makes it all work.

Mom Diane chooses to forgo her career and stay home with the kids. They’ve moved to a low-rent area and her husband is working part-time. They don’t have much money, but they have plenty of time together as a family.

Mom Ellen and dad Frank both work full-time. The kids are in pre-school, and after-school activities. They need to do this to keep up with their mortgage and all the other payments, and try to put some money away for the kids’ college educations.

Dad Greg and mom Harriet would both be working full time, if they could both find jobs. As it is, they work as they can, often on conflicting schedules. They’ve had to get help from friends and family to get by, and finding responsible supervision for the kids is a constant challenge.

diyNeighbor Ian worked overtime to save up enough to hire a contractor to build an addition to his house. Neighbor Jim made sure to have a flexible work schedule (at a lower pay scale) and built his home addition himself.

Can you divide the Homo Economicus behavior from the “for my own good reasons” personal behavior? Which of those examples do you admire? Which do you feel pity for? The further we rise, economically, above abject servitude, the more ambiguous this question gets. It gets harder to separate the time we spend making a living from the time time we spend pursuing personal satisfaction — each blends into the other.

The question is by no means simple. A progressive society, as we’ve seen, is one that succeeds in reducing the net amount if time its people spend as Homo Economicus. But, if we cannot clearly separate out the portion of our labor time we spend that way, then how can we make that distinction? How can we tell (in the aggregate) whether we are gaining or losing?

On the other hand, “gaining,” in the sense of moving along the line on which society is advancing (or retreating) might not be the only option, or the best way to look at things. Marxist theory sees human society as moving along a time-line from feudalism, through capitalism, on the way to socialism and the Workers’ Paradise. Henry George’s conception of social development also sees society as moving along a line, either forward toward a progressive society that maximizes both association and equality, or regressing, failing the promise of civilization, declining into a new dark age. Marx, I suppose, would transform Homo Economicus into Homo Comunismus, a fit and happy team player. Henry George would reduce Homo Economicus to a vestige, no more onerous or stressful than brushing one’s teeth. (Some versions of Marxist utopia, as well, have technological development enabling workers to sample many jobs and switch them at will.) These outcomes are, at best, a long way off. In the meantime, is self-interested maximixation all we have to look forward to? (Or as Nikki Giovanni put it, “Spam, Used Cars, and More of the Same”?)

When was Homo Economicus Born?

It may be, however, that in terms of economic behavior, society does not move in a line. There may also be a recursive process at work. Another possible starting point for social/economic development is the traditional society. There are various kinds of traditional societies, of course, but compared to the paradigm we’d call modern, industrial or developed, there are things they have in common. I think it would be accurate to say that the behavior we’ve been calling Homo Economicus was rarely, if ever, exhibited in traditional societies. True, there were fights over land and resources, and there was even slavery. There was drudgery and hardship; winters were long; lifespans were short. Nevertheless, in no indigenous culture was it the norm for people to spend substantial portions of their time performing meaningless tasks in exchange for things. We take this behavior for granted; our ancestors didn’t.

likitIn an earlier stage of industrial development the “labor time” model made perfect sense. It didn’t matter that the work might be meaningless, because the efficiency of industrial production made it possible for everyone to be better off. As productivity continued to increase, workers could organize to collectively bargain for better wages. In the United States this process reached its peak in the industrial golden age of the 1950s and 60s. While not everyone was happy (African Americans, for example, were effectively excluded from the general prosperity), millions of US workers were quite happy to get paid $25 an hour, with pensions, health plans and paid vacations, for being Homo Economicus.

It seemed like such a good plan: you get a decent job, put in the hours, get raises, buy a house (a comfortably appreciating asset), raise kids, send them to college, and then get rewarded for your career of homo economizing by settling into a well-provisioned retirement. But then “our jobs” started getting sent overseas, real wages stagnated or fell, and things started getting confusing. Raising a family started to require two full-time salaries. In the prevailing myth, June Cleaver and her friends had happily done the cooking and the childcare as their part of the family bargain. Now, suddenly, they were too busy, and these “household” tasks increasingly became part of the economy. Should June have received Homo Economicus wages for handling all those poopy diapers?

Such a question would never have come up among the unassimilated Sioux, or Inuit, or Australian Aborigines, the Kalahari Bushmen, or the artists of Lascaux or Mesa Verde. Such societies had their problems, to be sure, but alienation, in the sense that Karl Marx described, was not one of them. The Georgist economist Fred Foldvary put it this way:

Human beings did not start out poor, hungry, needing development. Primal man had natural wealth from the bounty of nature. Only after humanity turned to agriculture and conquerors took the land did the brave hunter become a lowly peasant working for a wage pittance from dawn to dusk while the lord dined on wine and game hens under chandeliers. Only after the descent to serfdom does development beckon with the promise of increasing productivity.

It has long struck me that the economic analysis of Henry George, dealing as it does with the pervasive, unavoidable role of land in society, offers a key theoretical bridge between traditional and modern ways of seeing the economy. When indigenous people admonish European colonists that “The land does not belong to us; we belong to the land,” they are not being romantic. They are making an entirely reasonable and true statement that arises from a worldview in which there is no Homo Economicus. That statement only seems quaint from the point of view of industrial society, which is predicated on owning the land and controlling its resources.

digitBut: industrial society has reached a turning point. We can no longer afford to reckon “economic growth” without factoring in its effect on the natural world. And we live in a dysfunctional society in which, in James Baldwin’s words, “not even the most spectacular recipients of this prosperity are able to endure these benefits; they can neither understand them, nor do without them, nor can they go beyond them.” (Soccer moms cannot escape this dilemma in their SUVs.)

I think we need to return — without turning away from the benefits of science and technology, for there can be nothing evil in science and technology per se, only in the self-serving uses to which we put them — to a life in which we are part of where we live, in which we are nurtured and informed by our place and our community. By doing so, we may be able to develop a sustainable understanding of “economic growth.” And then we can finally put Homo Economicus to rest. Not because there will no longer be work to do — but because the challenges of devising a sustainable future will leave us no time for the “irksome toil” that industrial development so usefully, efficiently, imposed on us. What we have to do will be too important not to care about. We will have to keep it real.

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Will California become a barren waste land?

-Darris Hawks

For several years Californians have debated the issue. On one side, extreme environmental groups are demanding water-rationing before it’s too late. On the other… republicans.

 

It is a serious issue, to be sure. Water levels have been falling in California since long before this most recent drought. In fact, NASA satellite data shows that water storage in California has been at a net loss since 2002. That’s more than a decade and “San Francisco” sounds prettier than “Mad Max- California edition.”

 

Mad Max

 

The same NASA data shows that between the Sacramento and San Joaquin river basins, the water level is 34 million acre-feet- almost one and a half times the size of the biggest water reservoir in the entire United States- below normal. Was it just a bad year? Frankly, no. Californians (read: Americans) just suck at conserving water (read: anything). California has lost more than 12 million acre-feet of water yearly since 2011. During droughts, farmers have no choice but to tend their fields with groundwater and farming is so water-intensive that many wells can’t even reach down to the groundwater anymore.
Are you ready for a scary fact? It’s time for a scary fact: California only has one year of reservoir water left based on current usage statistics. Are you ready for an even scarier fact? California doesn’t even have a contingency plan. They’re kind of just flying by the metaphorical seat of their collective pants and hoping for the best.

 

Don’t worry California, I’ll tackle this one. We don’t need to ration water and we certainly don’t need to… republican the issue. Not only will I solve your water problem, I’ll also tackle your public revenue problem and eliminate some poverty while helping small business.

 

Here’s what you do: everyone gets X kilo-gallons of water for free per month. Anyone who goes above that gets charged increasingly higher water usage fees. This will mean that people conserve water to avoid paying more. What do we do with all that money? You distribute it to the households that didn’t go above the limit so that you’re rewarding them for conserving. Now those families have more money to spend around town and the state doesn’t have to worry about huge water shortages anymore.

 

*Phew*
That was a close one.

 

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In Europe, the Polluter Gets Paid

The NGO Carbon Market reported last week that European businesses make billions from free carbon quotas. For the average European Joe, this must sound absurd and incomprehensible. Wasn’t the European Union Emission Trading scheme intended to make the polluter pay? Perhaps the question is: who is being paid, then? Other–bigger–polluters, so it seems.

The idea is that by putting a “cap” on carbon emissions, goods and services that rely on emitting carbon should become more scarce–at least until technology makes it possible to produce them with less emissions–which means more expensive, too, as the same number of consumers compete for a smaller supply. With the human factors of production (labor and capital), this higher price provides an incentive to increase supply, which will eventually bring the price down again. This is the called the “price mechanism.”

However, with natural scarcities such as land and government created scarcities such as permits, this cannot happen. Instead, they generate a flow of income called “economic rent.” Such income is called “unearned” because it does not reflect any kind of human effort. This is the economic mechanism through which European corporations are making big money out of carbon permits–for absolutely doing nothing.

photo credit: Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems via photopin (license)

Pollution permits, though a government created mechanism, reflect natural scarcity–the capacity of the earth to process waste and regenerate resources.  Producing more waste causes harm to humans and other life, both now and in the future. Ignoring this harm allows businesses and individuals to “externalise” costs, meaning that the damage is paid for by someone else. This means that the price for some goods is artificially low, and thus, again because of the price mechanism, there is an oversupply of these goods. One way to deal with this problem is through so-called “Pigouvian taxes” (which should rather be called Pigouvian fees), which charge the true cost of pollution directly to the polluters. This fee serves as an incentive both to consume less of the polluting products and to create technology that avoids pollution in the long term.

These Pigouvian taxes require that we assign a fixed monetary value to the damage caused by pollution, which should be the price of repairing the damage. However, they provide little actual control over the amount of pollution produced, since it is possible for people to continue to produce an equal amount of waste but consume less of something else to compensate for the cost of Pigouvian taxes (i.e. the case of inelastic demand).  Therefore, they don’t make sense as a solution when we lack the means to repair the damage but do have information about the maximum capacity of waste nature can absorb.

Putting caps on pollution through permits could offer a valid alternative. However, it would be essential that the economic rent of these permits be captured by the government. After all, each individual has a right to an equal share of natural resources, including the capacity of the Earth to absorb waste. This distribution can be accomplished by renting out the permits periodically to the highest bidder. A benefit of this system would be that the environmental cost would be set by the market and would decrease with development of technology to prevent pollution (because of lower demand).

Water Pollution
photo credit: via photopin (license)

Such a system would capture all of the unearned income paid for by consumers. The money collected should then be distributed equally to all citizens according to the rightful share of each. Those citizens that generate more waste than their fair would thereby compensate those that generate less. This system is socially justifiable because poor people pollute less in absolute terms and will thus benefit financially. The additional income could also be used to reduce taxes on the lowest incomes.

The European Union chose not to capture this economic rent, which would have resulted in a much more efficient allocation without generating unearned income. Under the current system, economic rent is “capitalized” into the selling value of the permits. This is intentional: supposedly, the incentive to buy and sell these permits will cause them to be allocated to the best use. The problem is that in a market of capitalized economic rent assets, there may also be speculation and actual under use of the assets, because as long as you can exclude others, full use is not required. If this isn’t bad enough, European governments actually gave away the valuable permits to large polluting businesses, a huge free handout on top of their historically externalised cost.

In these times of high public debt and slow economic growth, European citizens are constantly told they must suffer austerity and/or high taxes for their own benefit. It is time that the European population learns about economic rent and holds its representatives responsible for their lack of economic judgement in environmental policies.

Cover Image: [Houses and factories] (LOC) via photopin (license)

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