U.S. ranks #36 worldwide in protecting physical property rights

Hernando de Soto is a Peruvian economist who founded the Institute for Liberty and Democracy and who gained international notoriety and acclaim for his thesis that economic development and a vibrant market economy depend on the ability of poor people to gain legal recognition of their land rights and be able to use it as collateral for loans. One of the offshoots of his work is an annual International Property Rights Index. The 2012 Index ranks the United States #18 overall among the 130 countries analyzed and #23 for physical property (i.e., land). The study found a strong correlation between higher property rights index scores and GDP per capita. You can read the full copy of the report here.

 

In arriving at its rankings in the physical property area, the IPR looks at the strength of a country’s property rights systems, judicial protection for those property rights, and how clearly property rights are defined. In the sub-area of protecting physical property rights, the United States ranks #36. I suppose it may surprise some who see the United States as the ultimate bastion of private property rights that its ranking is not higher. Those who believe our system of private property is under constant attack from local, state and federal governments.

An example of these concerns was provided by a just announced Supreme Court decision holding the the compliance orders of the EPA are subject to judicial review. The case involved an Idaho couple and their attempt to construct a house on a small lot (< 1 acre) in a residential subdivision where other houses had been constructed. After they began bringing fill to the site, the EPA issued an order demanding that the lot be restored to its original wetlands condition and threatened fines of up to $75,000 per day for failing to do so. A unanimous court ruled that the landowners were entitled to their day in court to determine whether their lot contains any wetlands.

 

Sacketts' home near Priest Lake, Idaho

 

Sagebrush Rebellion redux

Updated: May 15, 2012

Brewer vetoes AZ bill.

As if battles with the federal government over immigration and health care weren’t enough, several western states have embarked on a campaign to wrest control of tens of millions of acres of federal lands in the West. Utah is furthest along with the governor there having just signed into law a measure asking the federal government to give back more than 20 million acres of public lands. Not to be outdone, the Arizona Senate just passed SB1332 which would require the federal government to transfer nearly 30 million acres (or roughly 40% of the state) to the state by 2015 or face the imposition of property taxes. Governor Brewer somewhat unexpectedly vetoed the measure acknowledging that it was unconstitutional and would have imposed a huge budget liability on the state if the federal lands were actually put under state control. Measures are expected to be introduced in Colorado, Nevada, Idaho and New Mexico.

Coupled with these legislative efforts are a new raft of lawsuits alleging that the federal government reneged promises made at the time these states entered the Union that federal ownership would be temporary. While most legal commentators agree that this issue has been resolved in the federal government’s favor repeatedly over the years, that doesn’t address the very different public-private land ownership patterns between states in the Mountain West and the rest of the country.

Its clear from comments being made by sponsors of the bills that if they are successful they believe state ownership will pave (literally and perhaps figuratively as well) the way for more aggressive resource extraction and development. The issue has even reared its head in the Republican primary where Senator Santorum has said if elected he would work to transfer much of the federal lands to the states and sell them to private interests. The Cato Institute, a libertarian think tank, has recently issued a lengthy study discussing possible reforms to federal land management including the transfer of such lands to the states.

Environmentalists have been quick to  raise the alarm of what such a transfer would likely mean for treasured wilderness areas such the red rock lands surrounding Moab, Utah. As this issue evolves it is almost a certainty the public trust doctrine will be invoked by those seeking to insure continued management of such lands in a manner that promotes the interest of the general public rather than a small group of private parties interested only in economic development. A recent Nevada Supreme Court decision did just that in applying the public trust doctrine to a dispute about whether the state had to transfer some land recently acquired from the federal government to a county.

While the takeover is supported by many in the Tea Party, in this case it is environmentalists who are raising the disastrous impact such a transfer of land could have on state budgets.