Why We Need Markets To Know Who Should Own Western Lands

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Why We Need Markets To Know Who Should Own Western Lands

January 14, 2016

As the debate over federal lands continues, those who are jockeying over who controls the land often assume that their own preferred use of the land is the “correct” use of the land. Environmentalists hold that without federal control of land, all lands would be sold off to miners and ranchers who will strip and graze the land into dust. Meanwhile, rancher activists have implied that if federal lands would only be handed over ranchers, then the land would finally be used properly, since — it is assumed — ranching is the only reasonable way to use the land. 

But, the fact of the matter is that we have no idea what the “correct” use of the land is in the absence of market prices. Without functioning market prices, we have no way of knowing if the owners of land would use it for ranching, mining, recreation, or for hunting preserves. That is, market prices would tell us how owners and consumers value a particular piece of land. Without market prices, we have no way of knowing this, and at that point, wealthy special interests tend to take over.  

So how would Western lands be used if markets were allowed to function to allocate “public” lands? We can only guess, although a look at shifts in land use over time can give us some hints. 

To help us understand better how Western economies are connected to land use, and how productive that land is, let's use the beef cattle industry as a case study. And, to keep it relevant to the present debate over federal lands, let's take a closer look at the 12 Western states that include large amounts of federal lands. These include Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming. When I say “West” in this article, I'm referring to these states. 

Do Westerners Depend on the Beef Industry? 

Thanks to popular culture, many Americans often think that ranching in these states is dominant factor or industry in the region's economy. 

Unbeknownst to many, agriculture is far from being the dominant industry in Western states, and cattle ranching is only one part of the agriculture sector. In Colorado, for example, agriculture overall “comprises only 1 percent of production and less than 2 percent of jobs.” Of that one percent, ranching comprises around 60 percent. This means that cattle ranching is well under one percent of Colorado's economy. Ranching could completely disappear from Colorado without causing any major disruptions to the local economy. Among Western states, Montana, by far, has the largest agriculture sector at 5.7 percent of GDP, according to the Bureau of Economic Analysis. All other Western states come in around 2 percent or less. Contrary to the mythology, the economy of the American West is centered on the cities. 

Nor is it true that Western states are at the heart of the beef industry. These twelve states combined amount to only 20 percent of all beef cattle in the US. 

The Beef Isn't Where You Think It Is

This map, provided by cattlerange.com, gives us a sense of the where the cows are in the United States:

This map, however, somewhat misses the mark for what we want. It includes all cattle and calves. We want to know about beef cattle, which excludes dairy cows that do not forage the way beef cows do. If we take the data from the 2012 USDA Census and look only at beef cattle, here are the states ranked by totals:

Among the top states, only Montana makes it into the top ten, and that is largely a function of Montana's immense size — it's the fourth largest state by area. 

But, the cattle ranching heartland is most certainly not in the states with large amounts of federal land. The industry is centered around Texas, Nebraska, and Oklahoma. In fact, those three states alone contain 26 percent of all beef cows in the US. Texas alone contains 15 percent of all beef cattle. 

If we look at the number of beef cows per square mile, we see that the West is even less important. Here, I've looked at total beef cows per state compared to total land area: 


In this case, Montana comes in at 19th, well behind numerous prairie states, and even some southern states. In fact, if you want to see a cowboy rounding up cows, you'd be better off visiting Kentucky, Missouri or Iowa, than Colorado or Oregon. 

The vast majority of beef cattle production (i.e., 80 percent) in the United States occurs nowhere near federal grazing lands, and even the beef production that does occur in those states is not necessarily dependent on federal grazing. 

Now, if we think about it, this distribution should not surprise us at all. Cows are not well suited to the high-altitude and arid lands of the West, and it makes more sense to raise beef in areas where water and pasture are more readily available. 

The fact that beef cattle comprise a rather small portion of the Western economy, however, does not mean that it should be regulated out of existence. I note these facts merely to illustrate that ranching is just one industry among many in the West, and that land use for ranching is just one possible use. Whether or not the industry continues to utilize lands, however, should not be up to government regulators, but to the marketplace, which itself can be quite unforgiving. 

From Rangeland to Cropland: Land Use Changes Over Time 

It is not a law of nature that the West be cattle country. The fact that the West ended up being associated with cowboys and cattle drives is largely a function of popular culture and a brief period in American history when Western lands were so cheap and remote, that they lent themselves — in response to market forces — toward being used as cattle pasture. 

For example, by the 1870s, with the Indians largely forced onto reservations, the West became an attractive place to graze cattle. Unlike sheep, cattle do not require daily supervision, and in a region with few or no roads, the land was not useful for much other than pasturing cattle on it. In other words, since cattle can be raised on land with few improvements (besides making water available), it made sense to put cattle there before other people began to arrive and develop the lands for other purposes. 

Indeed, the movement of cattle Westward allowed for lands back East to be freed up for purposes other than cultivated pastureland. This is part of the reason that by the 1940s, the forest land in the East began to get larger after centuries of deforestation. Eastern trees were no longer being cleared to make new pasture lands. (The grasslands out West never had any trees to begin with.) 

Land Use Changes With Access

Over time, however, the spread of roads, railroads, and other improvements (including massive amounts of federal spending) greatly change the value of land, and the purposes for which it is best suited. The arrival of large scale irrigation will often lead to range land being converted to cropland, and ready access to water will bring urban development as well. 

Now, many will claim that total rangeland in the West is being underutilized because federal land restrictions prevent cattle production from meeting its full potential in the West. There is no doubt that federal regulations are highly restrictive, and make it more difficult for small businesses (including small ranches) to succeed in this respect. Regulations also cause distortions in the market. Overall, however, we saw that market forces were already causing grazing lands to contract well before the EPA came along. 

In fact, from 1890 to 1930, rangeland in plains and northern Rocky Mountain states fell by about 184 million acres — an area the size of Texas — while cropland increased by 165 million acres. According to Kenneth Frederick and Roger Sedjo, “the dominant factor in changing land use during this period was conversion of rangeland to cropland.” Cropland, which was relatively more productive than rangeland, disappeared less quickly. 

Land use, then as now, was influenced heavily by consumer demands for food and land. As consumer wants changed, the most profitable use for a plot of land changed, depending on its climate and proximity to trade routes and water. 

As Peter St. Onge shows here, the nature and value of land also changes significantly as access to it changes. Thus, as access increases to what was once remote range land, farming and crop cultivation becomes more feasible. 

Both Private and Federal Land Was Abandoned as Grazing Land 

This is what happened in the West after World War II. In spite of the larger historical decline after 1890, range land did increase again from 1930 until it peaked in 1940, and then went into steady decline from the 40s to the 1990s. Cropland remained steady, however, during the same period. Rangeland declined as land went to other purposes such as urban areas, roadways, recreation, and water preservation efforts. 

There was indeed a decline in federal land use over this time. By 1985, 89 percent of animal unit months (AUMs) came from private ranges and irrigated pastures with only 6 percent coming from public ranges. Since at least the 1980s, federal lands have provided only 7 percent of the grazed forage nationwide. 

But, we also know that it's not just government rangeland that has declined over this time. For example, according to Knight, Gilgert, Marston, et al, “From 1982 to 1997, 45 percent of pasture and rangeland taken out of grazing was converted to urban development.” Given that public lands rarely are converted to urban development, we can guess that the lion's share of this rangeland was private land that ceased to be rangeland because it became more valuable for urban development. 

Many Public Lands Would Likely Go to Non-Ranching Purposes 

Over time, to the extent to which markets have been allowed to function, we've seen that land usage can change significantly over time depending on consumer demand, accessibility, and geographic conditions. 

There is no one type of land use that is the “correct” type, and a claim that a particular industry has a “right” to the land can only be purely arbitrary unless expressed through market preferences.  

Specifically, there is no reason to believe that economic conditions in a privatized land-use marketplace might not further diminish the role of ranching in the West, even without government interference. The market is not necessarily the rancher's friend. 

In other words, the claim that privatization of localization of land would necessary be to the advantage of agricultural groups is a logical leap that ignores the realities of market economies. 

It remains likely that in some areas, ranching would continue to be the most economical use of the land. On the other hand, ranchers would be quite unable to afford land in other areas if land is privatized. In 1997, for example, land values varied immensely across the West as one survey found that agricultural land average values ranged from $121 in New Mexico to $633 in Idaho. Meanwhile, 14 percent of counties in the West had land values above $1,500 per acre. Statewide totals, however, mask the diversity of regional differences and micro-climates that are common in the west. Were large amounts of federal land to enter the market, that may indeed push overall prices down, but ranchers would still have to compete with hunters, conservation trusts, and many others for the land. 

The diversity and constantly-changing valuations of land also illustrate the impossibility of proper management through bureaucratic government fiat. 

Finding More Productive Uses for the Land 

Agriculture has long been a sector with relatively low productivity in terms of land usage. By this, of course, I don't mean that it's “useless” but that it uses a relatively large amount of land for the wealth produced. Indeed, without industrialization, and the spread of tractors and mechanized farming, agriculture would be even less productive per acre than it is now. 

In places where access to ranching lands increases, and those lands become more profitable for other uses, a fall in demand for beef (in this case) can make other uses for the land such as recreation, hunting preserves, mining, or other uses, look much more attractive. 

What If Consumers Want Less Beef?

Over the past thirty years, for example, the demand for beef has fallen. This has happened in spite of the fact that Americans need spend less for basic food staples than ever before, presumably freeing up more income for a traditionally expensive item like beef. 

Back in 1960, Americans spent nearly 18 percent of their income on food. Nowadays, the percentage is closer to 10 percent. 

But, this has not saved beef from an increasing consumer indifference. Bloomberg notes that demand has fallen in response to recent rising prices for beef, but the overall  long-term trend has been downward as well. From 1985 to 2009, annual average beef consumption per capita fell from 79 pounds to 61 pounds. Over the same time, chicken consumption rose significantly from 52 pounds to 80 pounds. Pork consumption remained stable. 

This decline in demand occurred in spite of the fact that the inflation-adjusted price of beef was actually lower in 2009 (approx $4.60/lb) than it was in the late 1980s, when it was around $4.80/lb. 

Given that remote Western rangelands are not well suited to raising either pigs or chickens, and as beef demand declines, it stands to reason that these lands will become less and less valuable as forage land for beef, and more valuable for some other purpose. 

The Sovereignty of the Consumer 

Whatever the reason is for changes in the demand for beef, the fact remains that it is up to the consumers. 

The whims of consumers can change significantly over time, and this puts pressure on agricultural industries. Whether or not they survive is ultimately up to whether or not they can again recapture the favor of the the consumer. As Ludwig von Mises observed long ago, businesses can only succeed by supplying the consumer with what he wants. 

Often, however, the term “consumer” can cloud what it is we're really talking about. We're talking about people. 

Thus, if people decide they do not wish to eat beef, then the lands that cattle ranchers use will become more valuable for other purposes. Owners who convert grazing lands to purposes that meet the desires of people will be rewarded. Owners who are not responsive to the people's needs will be punished.

Naturally, government interference in their process can only prevent these lands from being used in a way that responds to the needs and desires of human beings. If federal lands are closed to mining and agriculture, then people who want goods that rely on mining and agriculture will be impoverished by higher prices due to government intervention. 

If people would prefer to hunt and fish in mountain areas instead, then they would be impoverished by government efforts to prevent this. 

But how can we know how to best use the land? Only the  market — by reflecting the desires of people — can tell us since only markets and prices can tell owners what should be done with land. Whether or not we think that ranchers — or any other industry group — are nice people or good Americans is irrelevant to whether or not land is best used for ranching or for some other purpose. Its up to people exercising their preferences through the marketplace to decide if ranchers should be able to continue, or if they must go into other lines of work. 

Government ownership of these lands can only lead to attempts to approximate markets through the political process, but this process all too often ends up responding to the most powerful and wealthy special interests, while ordinary market participants are punished and ignored. 

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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