Rural Development, Public Goods, and the West

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Rural Development, Public Goods, and the West

• David Zilberman

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Public Goods (PGs) Economics and Policy

• Economists view PGs as goods with
• Nonrivalry in consumption
• Nonexcludability
• They are underprovided by markets.
• One role of government is to provide them.
• Within the political context, the notion of PGs
  is extended to the share values that should be
  pursued by government polices.

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This Presentation

• Presents some of these broadly interpreted public
  goods in the context of the western United
  States.
• Argues that there is much heterogeneity among
  states and individuals that choices of
• What should be pursued by the public sector
• To what extent
• are crucial to the policy debate.

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Heterogeneity of the West
Population density West 49.5 inhabitants per
square mile National 77.98 Texas 78.0
Washington 86.0 California 213.4 Wyoming
5 Agriculture minerals are more important in
lower density states
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Public Goods of Importance Everywhere

• National security
• Knowledge
• Education
• Reduced poverty
• Reduced crime and increase in personal safety
• Reduced unemployment
• Protection against risks
• Reduced congestion
• Environmental sustainability
• Low tax rates

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Public Goods Emphasized in the West

• Preservation of nature/wilderness
• Support of unique resources
• Bodies of water
• Forests
• Land formation
• Lifestyle features
• Preservation of small towns
• Freedom
• Outdoor amenities (hunting and fishing)
• Farming

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Policy Challenge

• How to allocate limited public funds among public
  goods.
• What should be pursued by government and what by
  other organizations.

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Unique Resources in the West Globally unique
western natural wonders Crater Lake Giant
Sequoias Grand Canyon Meteor Crater Monument
Valley Petrified Forest Yellowstone Nationally
unique Cascades Devil's Tower Great Salt
Lake Saguaro Cactus Yosemite Archeological
sites Mesa Verde National Park Dinosaur
National Monument
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History and Special Conditions that Shape Values
and Public Goods

• Everyone values security, poverty elimination,
  education, and knowledge
• The West emphasizes freedom.
• Some will argue that owning concealed weapons
  provides PG.
• Special crown jewels (natural and man made)
  are public goods with high existence value
• Environmental amenities (clean water, survival
  of endangered species)
• Rural western lifestyle
• Minimum taxes
• Which leads to conflict

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Public Goods and Private Benefits

• Some public goods are valued because of the
  private goods they provide.
• The survival of a river is valued because of
  fishing opportunities.
• In these cases the payment for private goods can
  be an indicator of value of a public good.
• Public goods can be financed by payments for
  associated private goods.
• Other public goods have a strong element of
  existence value.
• In these cases the value can be inferred from
  responses to surveys, voting, and direct
  contributions.

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Heterogeneity and Public Goods

• Some PGs are valued across the board, others are
  valued mostly by subsets of citizens.
• Small minority groups may be willing to pay most
  for
• Agricultural land preservation
• Open space
• Old growth forest
• There is no reason why the taxpayers will provide
  public goods valued by subsets of individuals.

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Financing of Public Goods Valued by Subgroups

• Clubs and NGOs like the nature conservancy
  collect funds and provide public goods provided
  by members
• As the case for public matching of private
  contributions to support these public goods to
  address free-rider problems.
• Provision by local agencies.
• Local governments should support public goods
  valued by their constituents.

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Conflicting Values and Public Goods

• Development vs. environmental preservation.
• High taxes and public protection vs. low taxes
  and personal responsibility.
• People self select (vote with their feet) and
  live in communities of like-minded individuals.
• Differences among values of communities will be
  reflected in differences of local public goods
  (Tiebout).

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American Issues of Public Goods Provision

• Asymmetry between resources and tasks of federal
  and state governments.
• High rate of federal taxes
• Low rates of local taxes (my empirical
  hypothesis)
• Suggest a role for redistribution of federal
  money to pursue public goods at local levels.
• The federal government should provide appropriate
  public goods.
• Provide funds to local government to provide
  other public goods.

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On Demography

• Age differences affect policy priorities.
• Communities with aging population value physical
  and economic safety preservation of the old,
  medical infrastructure.
• Communities with a young demographic value
  education, employment opportunities, and growth.
• Policies determine the fate of communities by
  investment in infrastructure
• May lead to a gradual reduction in a number of
  communities and establishments of a small number
  of growing centers.

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And Geography

• Land use and value depend on
• LocationDistance to a reference point (city or
  transport center)
• Amenities Natural and physical capital
• Remote locations with minimal amenities may need
  to be deserted.

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American Perspective on the Government

• On the one hand government is perceived to be
  inefficient relative to private sector (Post
  Office vs. Federal Express), yet
• There is a long tradition of valued government
  activism
• Highways
• Public research
• Support to farmers
• Public agencies are trusted (relative to Europe)
• USDA and FDA(?)
• Public sector scrutiny of airports was demanded
  after 9/11

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History and Role of the Government

• Land grants financed public goods early in
  American history (rail roads, education).
• Led to appreciation of government as supplier of
  amenities, but without much taxation.
• Conflict among
• Desire for government activities
• Unwillingness to pay
• Appreciation of unique capacity of private
  sector
• Fear of monopolies and cartels
• Drove debate on public goods in America.

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Policy Entrepreneurship

• Public sector affected industrial evolution
• By reducing red tape and enhancing competition.
• By strategic investments
• In education
• Infrastructure (highways, Internet)
• Incentives to investors and innovators
• Regional promotion.
• Public investments affected direction of regional
  development (Indias investment in high-quality
  technical universities was key to its IT
  success).

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Rural Development Is Assessed Constantly

• Rural development in the West has not been very
  successful.
• It is constantly assessed.
• There is growing knowledge of constraints.
• Not sufficient vision and best management
  practices.
• Not every region can be developed successfully.
• Regions with better potential should attract much
  of the efforts.
• For some regions, the best strategy is
  out-migration (turn off the lights).

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California Rural Policy Task Force Impediments
to Rural Development

• The threat of conversion of agricultural land to
  urban purposes.    
• Lack of technical assistance to rural
  communities.    
• Need for infrastructure/technical development in
  rural areas.
• Lack of availability of various
  telecommunications technology.    
• Impact of the Environmental Protection Act
  (endangered species).   
• State limitations of timber cutting and
  management practices.   
• Lack of funding for local tourism efforts.    
• Inconsistent state and federal policies and
  priorities.