Balzac, the remarkable nineteenth-century French author, finished writing The Village Curate in 1845. It contains the following passage: "Many lands, which could feed entire villages and be immensely productive, are publicly owned by towns. They refuse to sell these lands to private owners, in order to preserve their right to allow some 100 cows to graze. On all these public lands is carved one word: Incompetence."
In that one word, incompetence, the author characterized the management and use of publicly owned resources. Pertaining to that subject, he observed and studied two general laws: (1) public ownership necessarily leads to an unproductive and inefficient use of resources; and (2) private ownership is a necessary condition for the productive and efficient use of resources.
What makes these laws general? The answer is quite simple. Private property rights make the individual property owner solely responsible for the consequences of his decisions. This gives the owner an incentive to use his property in a productive and efficient manner. On the other hand, with public ownership, politicians and bureaucrats are never directly and solely responsible for the consequences of their decisions.
A property owner, in order to reap financial rewards, must successfully anticipate the wishes of consumers and satisfy them in an efficient manner. If he is unsuccessful in accomplishing these tasks, he will be penalized by losses. This process, which includes information feedback to property owners, provides an incentive for good performance. Moreover, it provides a mechanism that reallocates property to those who are most competent to satisfy consumers' wants efficiently.
As for bureaucrats and politicians, the market's rewards and penalties are irrelevant. They do not face incentives that foster good performance. The results are clear: publicly owned resources are not used to accommodate consumers' wants efficiently, and public resources are not reallocated to those who are most competent to satisfy the wishes of consumers.
During the past decade, modern statistical techniques have been used to test thoroughly the validity of the two general laws of property rights. These studies, which number approximately 100, confirm the validity of Balzac's observation: private property is always more productive than public property. The implications of this are important today.
The Sagebrush Rebellion arose in response to the waste and incompetence that have characterized federal management of public lands. Now, however, some individuals—particularly some of those responsible for managing these lands—say that because the "right" people now are in Washington, there is no longer any problem. Hence they pronounce the rebellion dead.
Balzac's observation tells us, however, that capacities of a bureaucrat or politician do not make a difference. It is false that public resources can be better used if only the right people are in power and managing public lands.
It makes no difference either whether there is federal or state control over public lands. Hence it is also false, contrary to the belief of most Sagebrush supporters, that a transfer of public lands from federal to state ownership would improve productivity. The only way to improve the productivity and efficiency of public lands is to privatize them.
We must not forget that our Founding Fathers operated with only one fundamental principle—the principle of limited government. This simple principle, on which our Constitution rests, was derived precisely from historical and empirical observations that led the Founding Fathers to build our country on individual responsibility, the respect for private property, and the reward for wisely used freedom.
We must reaffirm this fundamental principle and use it as a guiding light for a successful rebellion. Until we begin to privatize the public lands, we will not have accomplished anything of real economic or moral value.
Steve Hanke is a senior economist on the President's Council of Economic Advisers. This article is based on a presentation at the annual meeting of the Public Lands Council in September 1981 and does not necessarily reflect the views of the Council of Economic Advisers.
This article originally appeared in print under the headline "Privatize Those Lands!".