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Friday, December 05, 2014


Private Ownership of Natural Resources

Too often today do we hear about "greedy" capitalists exploiting natural resources for their own personal gain.  People see the clear cutting of forests, the exhaustion of farmland, extensive drought, and so on and so on, and immediately associate it with greedy capitalism.  But their blame is misplaced.  To truly understand why resources are being exploited, people must first turn their attention to the government policy in place.

Take, for instance, the example of clear cutting.  Many people see patches of barren land in otherwise lush forests and immediately begin to think of exploitation.  They believe that "greedy" capitalists are clear cutting forests only for their own personal gains (seen as profits).  But what they fail to recognize is the government policy in place that allows certain firms to exploit the resources in the first place.  Because most forest land in the United States is "public" land owned by the government (so technically owned by no one), firms must get permission to use the land or the resources on it.  But since they don't own the land, only the rights to its resources for a particular amount of time, the firm's only incentive is to cut as many trees as possible as quickly as possible.  They don't have the incentive to replant trees because they do not own the actual capital value of the land itself.  This sets up an incentive structure that is much different had the firm actually owned the land it was using to harvest resources.

The simple solution to the problem (at least in the case of clear cutting) is to allow private ownership of such lands and the natural resources they possess.  When a private owner owns a certain acreage of forest and he decides to harvest timber from it, he must do so responsibly in order to satisfy future demand.  If the owner decides to cut all the trees at once, he would have to wait a number of years before his resource base replenished itself.  He feels obligated to take care of his land (such as replanting trees once they've been harvested) because if he doesn't, the future success of his timber business will be in doubt.  The incentive structure has thus changed, and the change demands that the owner be responsible with his land and the valuable resources (as determined by consumers) that it possesses.  

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