It is generally assumed that requiring compensation for regulatory takings would hamstring environmental conservation efforts. Forcing the federal government to pay landowners who lose the ability to modify their own land because it is designated as endangered species habitat or a jurisdictional wetland could well reduce the regulatory appetite of federal agencies (assuming the compensation came out of their budgets, rather than judgment fund), but would environmental protection suffer as a result?

In a new paper,"Money or Nothing:The Adverse Environmental Consequences of Uncompensated Land-Use Controls," I argue that the conventional wisdom is wrong. Compensating landowners for the costs of environmental land-use controls could actually enhance environmental conservation. Why? First, such compensation would reduce, if not eliminate, the incentives uncompensated land-use controls create to destroy or degrade ecological amenities on private land. Several recent empirical studies confirm theoretical predictions that such incentives are substantial, and lead to the significant loss of habitat. Because most endangered species rely upon private land, this is a big deal. Second, there is reason to believe that environmental agencies over-rely upon land-use control as a conservation strategy, and that substituting other conservation strategies could be more cost-effective. Requiring compensation, and mandating that such compensation be paid from agency budgets, could encourage greater consideration of trade-offs and thereby enhance the effectiveness of conservation programs.

A draft of the paper is now available on SSRN. I hope to expand on some of these points in a series of posts next week.