Politics & Property in Natural Resources
Andrew P. Morriss
Texas A&M School of Law; PERC - Property and Environment Research Center; George Mason University - Mercatus Center
October 6, 2008
U Illinois Law & Economics Research Paper No. LE08-011
Modern discussions of natural resources focus on increasing public control over extractive industries proposing measures that range from increasing the public's share of the gain via royalties and taxes to regulating extractive activities to prevent environmental problems to outright expropriation of private investments. This Article argues that such efforts are counterproductive because the fundamental economic problem of natural resources is producing the knowledge necessary to locate and extract resource deposits. The public benefit comes from enabling the use of the resources and the increased economic activity their discovery produces rather than from royalties or expropriation. The key question in designing natural resource laws is thus their effects on the incentive to discover and manage resources. Private property rights in natural resources are the best way to provide such incentives. Fortunately, the combination of property rights and tort law principles (trespass and nuisance) enables property rights to solve environmental problems related to natural resource extraction as well.
Number of Pages in PDF File: 68
Date posted: October 7, 2008