Money or Nothing: The Adverse Environmental Consequences of Uncompensated Land Use Control

Abstract

The conventional wisdom holds that requiring compensation for environmental land use controls would severely limit environmental protection efforts. There are increasing reasons to question this assumption. Both economic theory and recent empirical research—focused primarily on the Endangered Species Act but potentially applicable to other environmental regulations that create similar incentives—demonstrate that failing to compensate private landowners for the costs of regulation discourages voluntary conservation efforts and can encourage the destruction of environmental resources. The lack of a compensation requirement also means that land use regulation is "underpriced" as compared to other environmental protection measures for which government agencies must pay. This results in the "overconsumption" of land use regulations relative to other environmental protection measures that could be more cost- effective at advancing conservation goals. Although any specific compensation proposal would present implementation questions, there are reasons to believe that a compensation requirement could improve environmental conservation efforts.