July 15, 2019

Economic View: Preserving the Wealth That Conservation Built

Here, the public sector corrected a market failure. The individual companies dumping into the river were collectively ruining the neighborhood. When the government regulated their behavior, it ended up unlocking loads of private sector value. Though there are many examples of government regulations run amok, or of pointless public investments — and we should eliminate them — let us not forget the important situations where government can prevent market failures and unlock value.

A recent study by David Albouy, Peter Christensen, and Ignacio Sarmiento-Barbieri, economists at the University of Illinois, was revealing. The researchers estimated the value of public parks to homeowners living near them using data on 600,000 homes sold in New York City, Philadelphia and Chicago. The study, “Unlocking Amenities: Estimating Public-Good Complementarity,” found that when the crime rate in a city neighborhood declined, the value of private real estate near parks soared. Investing in public safety paid dividends in the private market.

Similarly, reduced pollution and more national parks can be immensely valuable, too. Closing a national monument to allow oil drilling — or terminating the Land and Water Conservation Fund — might help a company make more profit in the short run. But a vast array of benefits will also be destroyed. In a direct effect, hunters, kayakers, backpackers and visitors will simply stop going, and the Interior Department says these people spent $50 billion on recreation in federal lands last year.

But think about the broader harm done by this zero-sum mentality. Accessible public lands and vibrant wildlife bring people to small towns and rural areas. They attract tourists and give residents a reason to stay, and give an enormous boost to the private sector in the very places the administration is trying to help.

A shortsighted approach to public assets and the environment threatens to repeat at a national level the mistakes cities made when they industrialized waterfronts and spoiled what could have been the crown jewels of their landscapes. You would think that someone whose name is on a billion-dollar building on the banks of the Chicago River would understand that.

Article source: https://www.nytimes.com/2018/11/02/business/preserving-wealth-conservation-environment-built.html?partner=rss&emc=rss

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