Ed Lotterman: Land-use laws need tweaking, not scuttling

Special to the Idaho StatesmanAugust 23, 2013 

As our nation becomes more densely populated, we impinge on each other more. What economists call "external costs," where the actions of one person make another person worse off, become more common. Economic theory and much economic history make clear that when imposing such external costs goes unchecked, efficiency in using resources to meet people's needs suffers.

But limiting such costs often isn't easy, particularly when there is no consensus in society about the magnitude of the harm caused. And things get particularly dicey when changing values cause alterations in long-established property rights.

There are some historic rules. For example, common law going back to the Middle Ages holds that the right to use property is limited when such use harms others. And the U.S. Constitution specifies "nor shall private property be taken for public use, without just compensation." But exactly how these and other rules apply in specific situations is murky.

In a local suburb a landowner held onto a piece of developable property for three decades. Now his development plans are being held up because the tract sits near a rare wetland. Regulations require that 24 fewer homes be built so as to leave a greater buffer to protect this wetland.

Is this a case of a property owner being restrained from using his property to harm others? Or is it a case of government taking private property for the public use of maintaining a wetland, the existence of which benefits society as a whole? In this case, compensation should be paid. In either scenario, it's never simple.

If building the 24 additional homes would cause runoff of water and silt to damage homes owned by others, Case No. 1 above would be clear. If the government was going to use eminent domain to turn the wetland complex into a publicly owned nature preserve, the Fifth Amendment would clearly apply. But what if circumstances fall somewhere between the two extremes?

Thousands of people bought land at a time when there were few restrictions on development and then had that use restricted as the laws changed, thus lowering the eventual payback on their investment compared with what it would have been if there had been no change in the law.

In many states regulations to preserve wetlands have become notably more restrictive over the past 40 years, to the disappointment of many people holding developable land. But if there were no measures to preserve wetlands, we would have less recharge of aquifers, faster storm runoff and resulting flooding damage, less wildlife and much other real harm to society. As economic theory indicates, our economy would be less efficient in using resources. So society as a whole benefits if we protect wetlands, but specific property owners are harmed. And the legal rulings so far are that such value-lowering restrictions do not constitute a "taking" that would require compensation.

There are further complications in that while harm to others historically justifies limitations on property use, there also is a well-established legal principle that common reasonable uses that cause only limited harm are allowed.

Vehicle engine exhaust may harm someone or something. But we couldn't move people or things as efficiently without some emissions. Given climate and topography of many parts of the Midwest, it is nearly impossible to raise row crops such as corn and soybeans without increasing soil erosion at least marginally from what it would have been before European settlement. That sediment will cause harm somewhere downstream, particularly if it contains fertilizer or pesticide residues. But without cultivation of such crops and without the use of such modern inputs, we would have far less food in the world.

For centuries, farmers had the legal right to till their soil as they saw fit. Only if there was direct and measurable harm to some adjacent property owner would the legal principle about not causing harm to others apply. There was no consideration of general harm to others hundreds of miles downstream nor of the general loss to society if rivers are turned into turbid drainage channels.

Moreover, farmers are members of a large group that has political power. So regulatory limits on farming practices have very limited political feasibility.

A subsidy carrot is one alternative to the regulatory stick. So there is a federal program that pays farmers for practices that reduce runoff. I have received more than $20,000 for pasture improvements on our southwest Minnesota farm that will, among other things, reduce sediment flows from cropland into a creek. This will reduce sediment and farm chemical residues in the Big Sioux, Missouri and Mississippi rivers and eventually in the Gulf of Mexico.

However, by my nonprofessional calculations, the cost of this program per ton of sediment or pound of nitrates or Roundup herbicide residue is enormous. And while the physical improvements paid for by the program did increase the value of my property, that too was much less than the government expenditure.

The amount by which the cost to the Treasury exceeds the benefit from less pollution plus my increased net worth is what economists term a "deadweight loss." Such losses should be minimized. But again, unrestricted land uses that harm others are not only unfair but also economically inefficient.

The tide of anti-regulation sentiment is rising in our country. Lots of existing regulations are not well-thought out. But simply returning to the barebones regulation we had 50 years ago will clearly make us worse off. Those who think Congress' job is to repeal existing laws need to come up with better alternatives and not just sweep away the imperfect measures we have.

Write Ed Lotterman at ed@edlotterman.com.

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