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ANWR and Private Property

April 22, 2002

Tags The EnvironmentGlobal EconomyU.S. EconomyThe EntrepreneurEntrepreneurship

During the debate on whether or not to drill for oil in the Arctic National Wildlife Refuge (ANWR), the U.S. Department of the Interior has posted Website pictures of the actual area where oil would be drilled--and those pictures conclusively demonstrate that the pictures of mountains and abundant wildlife shown on television news broadcasts are misleading at best and dishonest at worst.

Of course, environmentalists and their congressional supporters have cried foul, for they would have us believe that scenic fields, mountains, and wildlife would be ground into oblivion from oil drilling. But the Website pictures tell us a different story.

Yet, the most important decision element has been missing from this debate, something that neither the pro- nor antidrilling groups have addressed as they have argued with each other. Because ANWR is government property, the entire debate becomes skewed, as the issue of the Socialist Calculation Debate so eloquently presented by Ludwig von Mises raises its head again.

First, let us look at the reasons given both to drill or not to drill. Those who favor drilling say that (1) it makes sense to increase the available supply of oil products to consumers in the U.S., especially given that much of the crude oil purchase by Americans comes from the volatile Middle East; (2) the process of drilling would disturb only a small portion of ANWR, so the environmental damage at worst would be minimal; and (3) the location of ANWR is so remote that very, very few people will ever visit the place anyway.

Environmentalists and their supporters counter with (1) any drilling will disturb a "priceless" and "pristine" wilderness that has "existence value" on its own; (2) the known reserves in ANWR by themselves would only amount to a six-month supply of oil in this country at current usage; (3) forcing conservation measures on citizens would "save" more oil than is found in ANWR; and (4) the only real beneficiaries of drilling in ANWR would be private oil companies.

Thus, we are left with the reality that the political process--which amounts to power by the group that either shouts the loudest or has the most votes in Congress (or both)--will decide whether or not consumers will be able to use the oil located under the Arctic tundra. For all sorts of reasons, people should be alarmed that an important question like this is decided, not by individual buyers and sellers in the marketplace, but rather by what amounts to mob rule.

Should we drill in ANWR? While I personally believe drilling there might be a good thing, in truth I cannot answer that question one way or another. The reason is simple: ANWR is not private property, and one cannot engage in accurate economic calculation in its absence. Let me explain.

Most of Alaska has been in the federal government's hands since 1867, when U.S. Secretary of State William Seward "purchased" Alaska from Russia. At the time, the sale was derided as "Seward’s Icebox" and "Seward’s Folly," but it also most likely was unconstitutional, since Seward did not do it at the direction of Congress. (Of course, at that time, Congress was also doing its best to shred the U.S. Constitution by its imposition of Reconstruction regimes on the Southern states.)

Like much of the land in the Western states, Alaska finds most of its real estate controlled from Washington, D.C. Furthermore, much of this spectacular land is set aside in the form of national parks and wildlife preserves. For example, Dwight D. Eisenhower set ANWR aside during his presidency during the 1950s, and its very designation means that it will never be held in private hands unless Congress were to do a complete about-face--something that is quite unlikely.

As Mises pointed out, the designation of private property is crucial when one engages in the very kind of economic calculation needed to determine whether or not oil companies should drill for oil in ANWR--or anywhere else. For example, let us assume that I own a tract of land in the Appalachian Mountains near my home. Furthermore, let us assume that I am likely to have a large coal deposit beneath my property--and that I also own the mineral rights to it.

I have a number options when it comes to making my decision. First, I could leave the land alone and let no one disturb it. Second, I could build a personal home there or even subdivide it and let others build homes as well. Third, I could mine the coal. Fourth, I might be able to do a mix of the first three options.

My decision of what to do with the land will be based upon how I value the land and its alternative uses--something that is entirely subjective. I will weigh the costs and benefits as I see them in determining my choices.

According to Mises, socialism was doomed to failure because the lack of private property, plus the absence of a profit and loss system, meant that accurate economic calculation would be impossible in those regimes. Instead of order, there would be chaos--something that was borne out time and again as we witnessed the poor performances of socialist economies. When Mises made these observations during the 1920s and 1930s and beyond, many of his peers derided him, calling him a "reactionary" and a "mossback." In the end, they were forced to call him right.

Guess what? The Socialist Calculation Debate applies to the ANWR debate.  As I noted before, we have no way to engage in the necessary economic calculation that tells us whether or not it is worth the time, money, and effort to extract oil from ANWR. As long as ANWR remains in government hands, this condition will continue.

I see two, and only two, scenarios that would give us economically satisfactory outcomes. One would be for the government to permit oil companies to outright purchase the land that would be used for drilling. If there were no oil to be found in the mountainous areas of ANWR, or if the costs of extracting oil in that hostile region were too high, one doubts that oil companies would be interested in disturbing even a small flower there, much less the caribou. Oil companies would decide according to the perceived costs and benefits of finding and drilling for oil.

My other scenario would be for environmental groups to purchase the land in question and set it aside for their own use. This "solution" is not entirely satisfactory, as environmental groups are nonprofit corporations and patterns of ownership would not yield the same results as what might be the case if individuals owned that land. Whatever the pattern of ownership, the sale should be open to all, and not rigged so that one group or another would be able to take over the land because of political favoritism.

In fact, I hold that the federal government should be selling all of its lands, whether in Alaska or elsewhere in this country. The idea that government is an ideal "protector" of resources has been a sick joke. Mises understood that long before these debates even were taking place, and the results should convince the rest of us as well.

William Anderson, an adjunct scholar of the Mises Institute, teaches economics at Frostburg State University.  Send him MAIL.  See his Mises.org Articles Archive.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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