The signals we can’t see

We all see prices when we go shopping. Prices help us to budget the hard choices between that prime steak or hamburger meat.

When it comes to public policy, however, prices are obscured by politics, so the signals they send to us as consumers and investors is distorted. When a public resource is regulated or controlled by government, prices take a back burner to demands for ideological purity.

As the Legislature considers the transfer of federal public lands to Nevada, we confront the problem of what ranchers would pay for their AUM (animal unit months) under the new state-owned regime.

The left believes that cattle ranching is heavily subsidized by lower grazing fees on public rather than private lands. They claim that Cliven Bundy “owes” the taxpayers over a million dollars for his refusal to pay what they claim is taxpayer-subsidized grazing fees. Many environmentalists are so convinced that taxpayers are subsidizing ranching they call for an end to public land ranching altogether and want to leave the range to bisons, burros and horses.

Because the Bureau of Land Management (BLM) and US Forest Service (USFS) set their grazing fees by a federal government formula, rather than by market pricing, determining the truth can be complicated. Prices should signal what the actual supply and demand for a resource is. Without market prices, any study will necessarily be somewhat arbitrary. There will be different methods of evaluation and different indices of value. Only totally free markets show the complete picture of how assets are valued.

That Nevada ranchers are generally in favor of the land transfer is an indication they are willing to take on higher prices if it means more control of our resources. Rancher Cliff Gardner, a veteran of the battle for Nevada control of the public lands, told the Nevada Land Management Task Force that federal regulations and control of water rights, as well as the environmentalists’ politicization of land use, were major costs state ownership would mitigate. Elko County confirmed his testimony that the opportunity costs involved in dealing with federal bureaucracies cost the county millions in wasted time.

When studying the differences between private and public grazing fees, the value can be obscured by non-fee factors that only markets can reveal. Family ranchers are not just profit-maximizing firms. Studies show that some ranchers prefer to pay more to graze on private lands because of the value they put on the scenery they will enjoy at work. Private land leases can include amenities like livestock and water management services. Private grazing lands are generally of better quality than public lands. Studies confirm that non-fee costs are significantly higher on public lands than private lands.

A major BLM study of the comparative costs of public and private land leases in New Mexico, Wyoming and Idaho concluded that 34 percent of cattle grazers on BLM land, and 62 percent of those leasing USFS land, paid more in total costs on public land than private land.

The Nevada Land Management Task Force estimated that Nevada could earn approximately $7 to $29 per acre for the lands transferred to the state over administrative costs. The wide discrepancies depend largely on whether the new lands contain major oil or mineral deposits. If they are right, the recovered lands held in a public trust will provide new revenue streams for public education and other services.

Nevada ranchers seem willing to pay more to the state of Nevada than they would to the feds. More control over their livelihood is worth it.