Who Owns America
Land
Use Planning for Sustainability
John
Ikerd
University
of Missouri
Presented at
the Western North Carolina Land Use Forum, Asheville, NC March 7, 2001.
Who owns
America? We generally presume that America is owned by the people of America.
But, which people of America – all of the people, or just those people who own
personal property? Who owns the space that constitutes the geography of America
– all of the people or just those people who “own” land? Those who own
something get to decide how it is used. So the answer to the question, “Who
decides how land is used?” also answers the rhetorical question of “Who owns
America?”
Land use
decisions in the United States have their foundation in the economic concept of
private property. In America, those who own private property may do with it
pretty much as they see fit, including exchanging ownership with others, as
long as it does not interfere with the private property rights of others.
Restrictions on use of privately owned land, therefore, are limited to
restricting actions that might affect use rights to other property held by
other individuals.
With relatively
minor exceptions, land use decisions are determined by the economics of the
market place. Provisions are made through laws of eminent domain to acquire
private property for public use, without the consent of owners, but not without
just economic compensation to current landowners. Only land uses of a criminal
nature, deemed to be of clear public harm, may be restricted without
compensation.
Land use may be
restricted by various types of zoning as well. But in reality, economic
considerations commonly dominate planning and zoning decisions. The question
invariably becomes how to maximize economic development with the minimum
negative impact on community residents. Requests for changes in zoning are
typically motivated by a desire to put land to a higher economic use.
Opposition to changes typically is motivated by the desire to protect private
property rights. Communities rarely use the tools of planning and zoning to
ensure the long run ecological and social well being of the community as a
whole.
So, with minor
exceptions, private property may be put to its highest economic use. The
concept of highest economic use gives legitimacy to competing private property
rights, but commonly ignores, or even denies, any right of the community, the
public as a whole, to participate in all land use decisions. Economic theory treats
a community as a collection of individuals, not as an entity with rights
separate from, or in addition to, those of individuals of which the community
is composed. In addition, conventional economics does not even consider
potential ownership rights of future generations. Rights of intergenerational
transfer of ownership are based on the premise that to prohibit or limit such
transfers would unjustly restrict current private-property rights. Free market
economics makes no provision for future generations, other than those reflected
in the self-interests of current decision-makers. Thus, economics drives land
use decisions in the US.
The question of
long-run sustainability presents a serious challenge to conventional economic
thought as the foundation for land use decisions. Over the past decade, many
different people have used a variety of definitions of sustainable development.
However, the underlying theme of nearly all such definitions is one of
intergenerational equity – a responsibility to meet the needs of the current
generation while leaving equal or better opportunities to those of all
generations to follow. In common language, sustainable development applies the
Golden Rule across generations – doing for those of future generations, as we
would have them do for us if we were of their generation and they were of ours.
The three
cornerstones of sustainability are ecological soundness, economic viability,
and social justice. Any system of development that is not ecologically sound
eventually will diminish or destroy the foundation for its productivity, and
thus, is not sustainable. Any system that is not economically viable will not
be able to maintain control over use of its resources, and thus, is not
sustainable. And any system of development that doesn’t meet the needs and
expectations of society will not be supported by society, and thus, is not
sustainable. The three are not separate goals or objectives, but instead are
three separate dimensions of the same whole -- as with the three dimensions of
a box; height, length, and width. Any object lacking any one of those three
dimensions quite simply is not a box. Any system of development that is not
ecologically sound and economically viable and socially
responsible just quite simply is not sustainable over time. All are necessary
and none alone or any pair is sufficient to ensure sustainability.
Thus,
sustainability requires that we look beyond the economics of short-run,
self-interest to the broader set of issues affecting quality of life or human
well being over time. Sustainability requires that we raise our economic
thinking above short-run, self-interest to consider the long run health and
productivity of the natural ecosystem, not just the optimum means by which it
may be exploited for our short-run gratification. Sustainability requires that
we broaden our economic thinking beyond self-interest to consider the well
being of the community, or society, as a whole, not just the sum of the welfare
of individuals who make up a community or society. The economics of
self-interest is an important dimension of sustainability, but it is but one
among three. Things ecological, social, and economic must be considered as
complementing dimensions of the same whole, not as competing objectives that
can be pursued separately.
The
inadequacies of short-run economics in guiding long run decisions can be made
clear through an illustration using fairly basic economics. The economic theory
involved in this illustration may seem unduly burdensome to those not familiar
with economics. But it’s important to understand that an appropriate
interpretation of economic theory supports a sustainable use policy that is
very different from the land use policies of the US today.
The
illustration is based in production economics. Production economists relate
production, or output, to the use of various production inputs through
something they call a production function. Output is assumed to be “a function
of” – a consequence of – the use of inputs. Inputs can be either classified as
variable inputs or fixed inputs. Fixed inputs are those things that contribute
to production, but are assumed to be fixed in quantity during a given time
period. The amount of output within a given time period then will be determined
by the amount of variable inputs applied. For example, in the case of crop
production, for any given year, land is generally assumed a fixed input and
fertilizer would be a typical variable input. The production or yield of the
crop then is said to be a function of the amount of fertilizer applied.
All
economically relevant production functions are characterized by three stages
of production, although the first and third stages are rarely observed in
actual practice. During both the first and second stages of production, as more
variable inputs are applied production increases – more input results in more
output. However, during the first stage of production, each additional unit of
input results in more output than did the previous unit of input – output is
increasing at an increasing rate.
If it is
profitable to produce at all, it will be profitable to increase input use until
the end of the first stage – to increase inputs as long as each added input
results in more output than did the previous unit. In some cases, money to
purchase variable inputs may be limited. In such cases, it would be better to
let some of the fixed input go unused than to limit the use of inputs to some
point in the first stage of production. For example, it would be more
profitable to let some of the land remain idle than to limit the amount of
fertilizer per acre to some point in stage one of production. As long as
production is in stage one, increased yields from applying more fertilizer to
fewer acres would more than offset reduced yields from farming fewer acres.
At the
beginning of stage two, each additional unit of inputs still adds to total
output, but begins increasing output by a smaller increment than did the previous
unit of input/Output is still increasing, but at a decreasing rate. It may be
profitable to continue increasing input use during stage two, but only so long
as the value of each incremental increase in output exceeds the cost of an
additional unit of input needed to produce it. So the optimum amount of inputs
used will depend on the added amount of output per additional input, price
received for the output, and cost for inputs. Higher prices received for the
output and lower costs of inputs increase the optimum level of input use and
consequently the optimum level of output. For example, if corn prices are high
and fertilizer costs are low, it will be profitable to apply more fertilizer
and produce more corn per acre than if corn prices are low and fertilizer costs
are high.
The third stage
of production begins at the point where additional quantities of variable input
result in decreases, rather than increases, in output or production. This stage
of production may not seem too logical when applying fertilizer to a crop in a
field, but it would be obvious if you were trying to raise a corn crop in a
flower pot. At some point, the added fertilizer will begin to inhibit growth
and may actually kill the plants rather than nourish them. At any point in
stage three, it would be more profitable to use less, rather than more,
variable inputs per unit of fixed input – as less input would result in more
output. In other words, beyond this point, production can be increased only by
using more of the “fixed” input. In case of crops, beyond stage two, production
can be increased only by cultivating more land.
The rational
range of production is defined by stage two. At any point in stage one, greater
production could be obtained by using less of the fixed input and at any point
in stage three more output could be obtained by using less of the variable
input. It simply doesn’t make sense to use more of either fixed or variable
inputs to get less output, even if all inputs were free. This leaves stage two
as the only economically rational range of production. During stage two, total
production is increasing, but at a decreasing rate. As indicated previously, it
is not possible to determine the economic optimum level of production
without knowing prices of production and inputs. But, if there is a profit to
be made, it will be made somewhere within stage two, the range of rational
economic production.
The separation
of stages of production also provides some other useful information about
efficient use of fixed and variable inputs. The end of stage two is the point
of maximum total output from a given amount of fixed input – for example, the
maximum yield of corn from an acre of land. Consequently, at the end of stage
two, the cost of “fixed input” per unit of output is at its minimum – e.g. the
cost of land per bushel of corn is at its minimum.
Conversely, at
the point marking the beginning of stage two, total output per unit of variable
input is at its maximum. Beyond that point, each increase of input results in
smaller increments of output, thus reducing total output per unit of variable
inputs. Thus, at the beginning of stage two, the cost of “variable input” per
unit of output is at its minimum – e.g. the cost of fertilizer per bushel of
corn is at its minimum.
Although we
cannot determine optimum levels of input use without knowing prices of output
and inputs, we can draw some important conclusions regarding optimum land use
under some fairly general conditions. For example, we know that if variable
inputs were free, it would always be profitable to increase their use to
the point of maximum total production per unit of fixed input, the end
of stage two. Increases in value of production that would be feasible prior to
that point could be achieved without any added cost. We also know that if land
were free, it would never be profitable to use inputs beyond the point
of maximum production per unit of variable input, the beginning of stage
two. Any increase in production beyond that point could be achieved at a lower
cost by using more land rather than by applying more variable input to a lesser
amount of land.
Even an intuitive grasp for
the meaning of the three stages of production is sufficient to understand some
fairly critical conclusions regarding the economics of land use. From a
short-run economic perspective, production should be increased beyond the point
of minimum cost of inputs, the beginning of stage two, to a point where value
of additional production no longer exceeds added cost of inputs. If inputs
become cheaper or new technology allows more production per unit of input, the
optimum level of input use will move nearer the end of stage two, to higher
levels of production in pursuit of more profits. As a consequence less land
would be required than before to produce any given level of optimum total
production.
This is the
economic rationale for the politically motivated “high-yield” farming movement.
The basic argument is that if we use more commercial inputs and new production
technologies to increase production per acre of land, more land can be set
aside for wildlife and other non-agricultural uses. Alternatively, if we rely
on less input-intensive farming methods, total production will fall, making it
necessary to farm more land to meet the food and fiber needs of people. This
would require the use of more environmentally fragile lands, some of which is
currently set aside for wildlife. It is not likely a simple coincidence that
high-yield farming maximizes input use and is supported by those who sell or
promote inputs – thus, the political motivation for its promotion. However, the
economic argument is valid only from the perspective of short-run,
self-interest economics.
The conclusions
are totally different if we instead take a long run, sustainable economic
perspective of the land use question. Nearly all the agricultural inputs that
are variable in the short run are fixed over the long run. For example, fossil
fuels, commercial fertilizers, pesticides, and machinery are all derived from
finite, non-renewable stocks of natural resources. Thus, the long-run supplies
of such inputs are finite or fixed, not variable, although their use in the
short run may be variable.
In the long
run, our only variable resource is solar energy. Living organisms, including
people, represent renewable resources, but living organisms are dependent on
finite natural resources as well as solar energy. Every productive resource on
earth quite realistically can be depleted, even used up, over some finite period
of time. But, the continuing supply of energy from the sun is expected to
continue for billions of years into the future. Solar energy is as close to
being an infinitely renewable variable resource as anything that humans can
conceive.
Geographic
space is required to capture solar energy. Land occupies geographic space.
Thus, land – as space – serves as a proxy for the only long run, variable
resource. Of course, land has characteristics other than space -- such as
topography, organic matter, texture, and water holding capacity – which
influences its productivity and potential market value. But, the non-spatial
aspects of land are finite, and thus, may be depleted over time. Land as space,
while fixed in total at any point in time, represents a virtually infinite
supply of solar energy that may be utilized in varying quantities over time,
and thus, represents a variable long run resource.
Ironically, those things
that are variable in the short run are fixed over the long run, and the one
thing most fixed in the short run. As we should expect, that which appears to
be optimum from a short run perspective appears to be far from optimum when one
takes a long run perspective. Returning to stages of production, since solar
energy is the only variable resource and since it is free, the economic optimum
input use and output will be at the beginning of stage two. In the
long-run sustainable context, this is the point where production per unit of long
run fixed resources (short run variable) is maximum. This also is the point
where we get the maximum possible total production from the only long run
variable resource, and the only unlimited and free resource, which is solar
energy.
Conventional
economic theory claims that maximum production from use of short-run variable
(long run fixed) inputs will be ensured by competition. However, conventional
economic assumptions have several critical flaws. The most obvious is a lack of
competition, at least competition in an economic sense. The persistence of ten
to twenty percent annual returns of investment in the food industry, for
example, is clear evidence that profits are not competed away, as would be
necessary to maximize the efficiency of input use. However, even in competitive
economic sectors such as farming, competition does not ensure minimum costs of
production, and thus, maximum efficiency in use of resources. Successive
innovations force farmers to continually move from adoption of one new
technology after another, limiting the competition among farmers using the same
technologies and preventing markets from reaching their theoretical competitive
equilibrium.
Even more
critical flaws of conventional economics relate to assumptions concerning the
nature of fixed and variable resources. In the short run economic situation,
fixed resources, such as land, are assumed to have no cost. By assumption, they
have no alternative use within the short-run timeframe, and thus, no opportunity
cost. However, land is not assumed to be free in the sense that additional land
could be obtained without cost. If fact, the opposite is true. Economists
assume that in the short run no additional land is available at any cost. If
land costs were included in short run economic analysis optimum use of variable
inputs would always exceed the point of maximum efficient use.
When
considering the long run, all inputs are variable, and land will never be a
free economic resource. In a market economy, land will always have a positive
price. There will always be more people who want to control and use land than
there will be land available. In a market economy, the control and use of land
is rationed by price, and the greater the demand for a given supply, the higher
will be the price. As a result, a conventional long run competitive equilibrium
would always result in over-utilization of non-renewable inputs and
under-utilization of land. So, even economic competitive markets would not
ensure efficient land use in short run and virtually ensures the misuse of land
over the long run.
Where does this
leave the argument for high-input, high-yield agriculture? The only logical
conclusion is that high input use, while resulting in high yields in the short
run, simultaneously depletes finite stocks of inputs at higher than optimal
long run rates. The result is lower than optimum total production over the long
run, and ultimately, greater than optimal reliance on solar energy and land
use, over the long run, as input stocks are depleted. In the long run, more
land will be required for agriculture, leaving less land for wildlife and other
uses, because productive inputs will have been prematurely exhausted. Thus,
high-yield agriculture makes economic sense if one is pursuing short-run
self-interest, but makes economic nonsense if the goal instead is long run
sustainability.
So what does
all this mean for land use planning? It means that markets cannot be allowed
to allocate the use of land as space. This is the most important conclusion
of the foregoing illustration of short run versus long run economics. The same
reasoning holds for any type of land use where non-renewable materials are
placed upon the land to create something of economic value. Markets place
positive prices on economic inputs, resources, and products. Those things that
are most scarce – that are less available relative to the aggregate desire and
ability to posses them – will command the highest market prices. Higher prices
both ration the scarce supplies among those who are willing and able to pay and
provide an incentive for increased production to reduce the scarcity. Higher
prices limit the use of resources and inputs in scarce supply and
simultaneously encourage increased production to reduce the scarcity. But land,
as space, cannot be allowed to have a positive price without misallocating its
use, and higher land prices quite simply cannot create more space.
Land prices
guide the use of land toward its highest valued short-run economic alternative
– whether for residential development, factories, farms, or wilderness. Those
using outdated economic theory have falsely assured us that we will realize the
highest total value from a given stock of land by allowing free markets to
allocate land use. Some portion of the total value of land will reflect its
inherent productive capacity, whether in agriculture, recreation, or other
land-based production processes. That portion of land value can be allocated by
market prices. However, much of the value of land represents its value as space
– a geographic place to carry out some activity, or simply as space to be held
or controlled. The value of land as space must be allowed as a public good.
More
specifically, land as space, as a collector of solar energy, must be treated as
a free resource if we are to achieve its long run, optimum use.
Any market value placed on land as space will cause it to be used too
intensively, using too many finite or non-renewable inputs on too little land,
and will deplete resources at a faster than optimum rate. Thus, long run
sustainability will require a rethinking of fundamental concepts of private
property, specifically of what it means to own land.
The concept of
private property has never meant the right to do whatever one chooses with the
property they own.” Conditional” ownership was always implied, if not always
stated. A new condition on land use is needed to ensure sustainability. Land
“ownership” cannot convey any right to degrade the productivity of land, if
land is to be used sustainably.
Thus, the “owner” of land cannot be allowed to possess, and thus cannot
convey to another, the right to use land in ways that are inconsistent with
long run societal well being. If society, rather than the individual, makes the
ultimate decisions regarding how land is used, land as space will have no
market value because there will be no right of alternative use for its owner to
convey. Its price will reflect only that portion of its value that is
associated with its potential productivity in its current use.
Traditional
remedies to unsustainable land use, such as lawsuits and environmental
regulations, will not provide lasting solutions. Traditional remedies are based
on the principle of conflicting self-interest, rather than the collective
interest of the community as a whole. Lawsuits, at best, only compensate
individuals who are damaged by the actions of another – even in the case of
class actions. Environmental regulations invariably reflect some compromise
among conflicting individual interests, which settles to some minimum common
denominator in a society driven by short-run, self-interest. Communities must
find the courage and the means to act as a whole, for the long run well being
of the community as a whole, considering both current and future generations. Sustainable
land use is not a matter of compromise among conflicts; it is a matter of
finding harmony within.
Communities may
use zoning laws to pursue their objectives where they are allowed to do so
under current state law. In cases where state or national laws prevent a
community from protecting its resources from economic exploitation, the laws
must be changed. But zoning, as currently practiced, is only a “band aid”
treatment for a potentially fatal disease. Those with the greatest economic
interests ultimately prevail. New means must be found for allocating land use
that will remove any economic incentive for rezoning land to allow more
intensive uses. Land must be treated as a commonly managed natural resource,
rather than an economic commodity that can be bought and sold to the highest
bidder.
Civil
laws are clearly designed to protect property rather than people – to bring a
civil case, one must have suffered some loss that has private, economic value.
In civil court, those without property, and no potential to acquire it, can
have no claim because they have nothing to lose. Cases brought to protect the
“rights of future generations” make no sense to those who view protection of
private property as the only legitimate role of the courts.
The inherent
common property nature of land as space certainly is not a new concept. In 1796
revolutionary writer Thomas Paine, in his paper, Agrarian Justice, pointed out
that all land was initially held in common. Thus, the previous removal of land
from the commons deprived those of later generations of their common birthright
– the right of access to land. Initially, land could only be removed from the
commons if there was as much and as good land left for any others who chose to
claim it. Consequently, land taken from the commons had no market value – by
definition, it could not be scarce. A similar argument can be made to support
the rights of future generations to as much land as good land as we have today.
And to protect this right, land, as space cannot be allowed to have a market
value.
Economist,
Henry George in his 1879 book, “Progress and Poverty”
proposed that all use value of land be taxed away to prevent the pricing of
land as a market commodity. A more logical approach today might be to devise a policy
for capturing any increases in land values attributable to rezoning for higher
market valued uses in order to compensate those whose land is rezoned to
lower-valued uses. This would remove any economic incentive for current or
future owners to rezone land to either higher or lower valued uses, and would
make it much easier for the community as a whole to make logical long run land
use decisions. A similar capturing of capital gains in land values attributable
to growing population demands would remove speculative incentives for land
ownership and would generate public funds to sustain and enhance the
productivity capacity of land.
Sustainable
development ultimately will require that land use decisions be made by means
that find harmony among long-run economic, social, and ethical or moral
concerns. It makes no more sense to buy and sell the right to misuse
land than to buy and sell the right to misuse another person. Land,
particularly land as space, is a fundamental resource upon which all life depends.
It cannot be allowed to belong to anyone individually or to us in total as a
collection of individuals -- just as people cannot belong to other people. Land
belongs to the earth just as people belong to the earth, to the collective us
as a whole – inseparable, indivisible, across all generations.
We may
logically buy and sell those things that enhance the productivity of land --
for those uses with impacts that fall within the realm of legitimate
self-interest. But we cannot allow markets to allocate the use of land as
space. We may logically decide some land use issues by a vote of the people --
for those uses with impacts that fall within the realm of community interests.
But, many uses of land as space have impacts on future generations, and future
generations cannot vote. Such land use decisions must reflect our fundamental
values concerning the responsibilities of being human. Such issues cannot be
resolved by economics or politics; they rest on a fundamental code of ethics or
morality. They arise out of a consensus of what is fundamentally right and
wrong.
Many issues
concerning the natural environment are fundamentally moral or ethical issues.
We should not be buying and selling pollution rights, because no individual has
the moral right to pollute in the first place, and thus, has no right to sell
it. Businesses may argue that society has given them that right, through the
political process. But, no society has the right to pollute, so it cannot
convey that right to a business or anyone else. Pollution of the environment is
fundamentally, morally wrong, the same as it is morally wrong to kill, to
steal, or enslave. The environment can assimilate some level of waste, as
society can tolerate certain amounts or kinds of killing, stealing, or enslaving.
But, those things are still morally and ethically wrong, regardless of the
ability of society to survive them. We don’t condone or encourage them by
allowing people to openly buy or sell the right to enslave another person, nor
vote on whether one person should be allowed to kill another for personal
reasons. We cannot prevent pollution, but it is always morally wrong to degrade
the natural environment.
No one has the
wisdom to plot a true course toward a sustainable human society. At this point
in time, we simply don’t know how we can meet the needs of the current
generation while leaving equal or better opportunities for those of future
generations. But, we are beginning to learn some things that we cannot do. We
cannot allow the economics of short-run, self-interest to determine the use
of our land. We know that the relentless pursuit of profits and growth will
degrade and eventually destroy the resources upon which the future of human
life on earth depends.
The people who
“own” the land do not “own” America – they only own a right to use the land. No
one really “owns” the land, but we people do have a responsibility to see that
the land is used wisely. We all share this responsibility – all of us equally.
Thus, we must be given an equal voice in deciding how the land of America is to
be used. Ultimately, we must reach a consensus to use the land sustainably, if
there is to be a future for America and Americans. Ultimately we must discard
the outdated paradigm of short-run, economic self-interests for a new paradigm
of sustainable economic, ecological, and social development. We may not own
America, but it is still our responsibility to ensure that the land of America
in used sustainably.