The Tragedy of Centralization: The Political Economics of American Natural Resource Federalism

Abstract:     
This article develops a formal model of the centralization of natural resource regulation, and applies that model to explain selected episodes in the history of American natural resource regulation and to critique the Supreme Court's constitutional federalism doctrine. On this model, political pressure for centralized control over the development of public natural resources arises as a virtually inevitable consequence of economic development and geographic market integration. The model reveals the fundamental normative ambiguity of centralized controls over natural resource development. On the one hand, centralized regulation of natural resource development responds to a fundamental inefficiency that arises because local jurisdictions are unable to internalize the full, global value of preserving open access resources. From a distributional point of view, however, such centralized controls may have the effect of penalizing late-developing jurisdictions simply for being latecomers to the interjurisdictional development game. Moreover, unless one believes that the political bargaining process is always efficient, centralized resource development controls may simply represent inefficient rent-seeking by older, more heavily developed jurisdictions.

These general normative implications of the model have direct application to the Supreme Court's Dormant Commerce Clause jurisprudence. The Court has consistently misunderstood state schemes that give state residents discriminatory access to state natural resources as economic protectionism when, as the analysis here shows, they may be necessary to create political support for the conservation of state natural resources.

In addition to this normative analysis, the article tests the model's predictions about when and why regulatory centralization has occurred against both qualitative historical data and more quantitative contemporary data on the federal Endangered Species Act. Original and previously unavailable data are presented here which show radical disparities across states in the actual applicability of the Endangered Species Act's takings prohibition, and which show also that Congressional positions on the ESA are influenced as much or more by whether the ESA actually applies to limit land development in a state or district than by political party affiliation.

Keywords: Natural resource regulation, Federalism, Endangered Species Act, Political Economy

JEL Classifications: Q20, H40, H77, K32, L51

Accepted Paper Series