A Bizarre Economic Analysis, with an Explanation

When I noticed this, at first I thought “WTF?” — it’s obviously a preposterous assertion, as anyone with much experience in the US West (where private lands have been clearcut, strip mined, and overgrazed routinely) can see. In my own state, it’s typically obvious when one moves from private to public timber lands: the public lands — while often still abused — are abused less harshly, typically much less so. Political pressure on the agencies that manage said lands has caused restrictions on the worst logging practices. Private corporations, in contrast, exist to maximize shareholder profits, not to cater to the public’s political preferences.

Moreover, the bit about “patience” is bogus. The chief factor in determining ability to invest in any business is personal wealth, which in a class society is not distributed equally. So the private lands will be owned disproportionately by a wealthy elite, who in many cases won’t even live anywhere near the resource lands themselves. The incentive will exist to do precisely the sort of things the Pacific Lumber Company did in redwood country when they were bought out by corporate raiders: liquidate assets and maximimize short-term profits. The investors won’t care about what’s left in their wake; they’ll have taken their profits and moved on to their next profit-maximizing venture.

I was away from the article over the weekend, and came up with two theses as to how anyone could come up with such an assertion in the first place:

  1. Inexperience, coupled with ideological bias. If one is biased in favor of capitalism, and one has little or no actual personal experience in a natural resources economy (say, because one works in some big East Coast city), then one would have both the motive to make such a proposition and be largely shielded from any contrary information as to how preposterous one’s assertion actually is.
  2. Kleptocracy. In a kleptocratic state, it’s actually possible private ownership could come out on top. The backroom deals giving access to exploit public land might be less certain than a title deed giving one possession of the resource lands in perpetuity, so the motive would exist to extract as much as possible as soon as possible from the public lands. This would be the case if the state is kleptocratic yet relatively stable; in an unstable kleptocratic situation the value of land titles themselves would be questionable, so the incentive would be to plunder as quickly as possible regardless of ownership. Also note that in a kleptocracy, the government is much less subject to public pressure than in a less corrupt society, eliminating the chief mechanism by which public lands get steered toward wiser management.

And lo, when I checked today, I see the article cited was authored in Russia by two Russian economists. Mystery solved.

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