Wetlands/Farmlands

The wetlands of the upper Midwest, especially in the pothole country of the Dakotas and Minnesota, provide a classic case of conflict in resource utilization. On the one hand, the wetlands, when drained, have value as productive agricultural land; on the other, they have value as a vital part of the ecology of migratory waterfowl. The extent of drainage in the area during the postwar period, together with crop surpluses, has raised questions about the continued conversion of wetlands into arable land.

Some wetlands are temporary, having surface water only after rain storms or the spring thaw. Others form permanent lakes or swamps with depths up to ten feet. These wetlands, which extend into the prairie provinces of Canada, constitute the major breeding and resting areas for waterfowl along the Mississippi Flyway. They also provide food and cover for other birds and for aquatic furbearers. Without these marshlands the domestic waterfowl population would be reduced, and duck hunting in the Midwest would by affected by the disruption of migratory habits.

To the farmer, wetlands are often a costly nuisance. It takes longer and costs more to plant in irregular patterns around the wet spots. Machinery often becomes mired and may suffer damage. Finally, the crop depredation caused by migrating waterfowl, reduces the farmer's returns.

Theoretically, the farmer is able to obtain some return from the more permanent wetlands by marketing muskrat pelts or selling trapping rights. He may also lease waterfowl hunting rights, but competition from free public hunting areas often makes it difficult for him to obtain a price high enough to warrant maintenance of his property as wetlands. The temporary marshes, which hold water only during the spring, generate little or no revenue, however, and consequently are likely targets for the trenching machines.

Drainage is made even more attractive by several government programs. The U.S. Department of Agriculture grants technical and monetary assistance that defrays part of the capital cost of draining eligible land. Liberal interest rates are available to farmers who wish to borrow to finance their share of the capital expenditure. And finally, price support programs increase the expected revenue from the crops grown on the reclaimed land. Thus, the USDA programs both reduce the farmer's cost of drainage and increase the expected cash return from cultivation.

There are social costs involved in land reclamation, however, which are not considered by the farmer. The wetlands are important as breeding and hunting areas, but the farmer finds it difficult to capture their value, and the hunter finds no adequate method of expressing his desires for preservation of the habitat. For most productive processes, the lack of a procedure by which option demands can be exercised is not a serious problem. When people wish to consume some of the product, they simply bid for it in the market. If none is being produced at that time, production will resume if the price offered is attractive enough. But if it is difficult or impossible to resume production of a commodity once the process has been interrupted, disregarding option demand may lead to a misallocation of resources.

In the case of waterfowl hunting, it may be technically impossible to provide the desired product if much of the habitat has already been converted to arable land. It is probably a bit extreme to make the analogy to the problem of regrowing the redwoods after the forests have all been logged, but the comparison illuminates the dimensions of the task. The difficult nature of reconverting arable land into waterfowl habitat cautions against allowing an unregulated market to determine whether waterfowl habitat should be retained or drained.

Clearly, a divergence exists between private and social values in the wildlife sector, with the benefits of waterfowl population maintenance accruing primarily to hunters, and much of the burden of the maintenance being borne by farmers. It is precisely because of this divergence that the market is apt to fail as a mechanism for allocating wetlands, and too few marshes are likely to be preserved.

Reclamation of some permanent wetlands seems likely, especially in southern Minnesota. Since 15-25 percent of the birds killed in the state are taken in the south, drainage of hunting areas here is potentially serious. However, it is quite difficult to assess with much precision the opportunity cost of a reduction in the stock of permanent wetlands in southern Minnesota. Drainage of wetlands in Minnesota has implications for hunting throughout the Mississippi Flyway.

If waterfowl breeding habitat in Minnesota (or in any other southern breeding grounds) were eliminated, migratory waterfowl would continue north in search of satisfactory nesting sites rather than crowd onto the reduced southern habitat. Thus, if the breeding grounds throughout the rest of Minnesota are at their carrying capacity, reclamation of permanent wetlands in southern Minnesota is likely to have significant impact on both the number of waterfowl nesting in Minnesota and on the hunting harvest (Minnesota resident birds have a much higher probability of being shot within the state than do birds whose nest site is elsewhere). Forcing birds to migrate to remote breeding grounds will reduce the hunting quality in the state.

If the breeding grounds in the Dakotas and southern Canada are also at their carrying capacity, then drainage of permanent water in Minnesota will have a depressing effect on the size of the continental waterfowl population (and hunting quality) as well, because the displaced birds will be forced to move to northern Canada where they seem to reproduce less plentifully. Only a small percentage of the continental waterfowl population, however, nests in southern Minnesota. Drainage throughout all the southern breeding grounds would have a more significant impact, of course.

If wetland resource misallocations induced by subsidies are judged to be socially undesirable, then some program to prevent the continued erosion of the stock of both permanent wetlands and many temporary wetlands is necessary. Much of the reclamation would cease if subsidies were not provided to the agricultural sector and if competitive prices existed in the market for agricultural commodities. With price supports in effect, however, drainage becomes privately profitable despite the fact that it is socially inefficient.

Terminating price supports would correct much of the problem, but the price support program is well entrenched and has withstood more compelling attacks than this one. However, it might be possible to eliminate payments that encourage socially inefficient drainage and to substitute payments to farmers for maintaining wetlands that are judged to be important for wildlife habitat. In fact, such payments (called easement payments) are currently authorized under state and federal programs, but these programs are underfunded and unwieldy and do not provide adequate means to significantly retard the rate of agricultural reclamation of wetlands. A more vigorous program along these lines might be undertaken and could be financed from a number of revenue sources. One source of revenue (and probably the most feasible one politically) for such a program would be from a tax levied on duck hunters. It might seem inequitable to single out duck hunters and ignore others, such as trappers, photographers, naturalists, and so on, who also obtain direct benefits from wetlands, but administrative difficulties are likely to rule out a more broadly based beneficiary tax.

Or, it might be possible to finance an easements payment program out of general government revenues if the payments were viewed as income maintenance payments (in the same sense that price supports are) as well as a means for promoting allocative efficiency. The program could be administered by the Department of Agriculture just as the agricultural support program is.

Another way of dealing with the problem would be to prohibit drainage without a permit from the Fish and Wildlife Service. Requests for permission to reclaim land would have to be made to the FWS, which would evaluate the ecological characteristics of the land to determine its importance as wildlife habitat. Permits would be granted only for land with little or no value as wildlife habitat.

A mechanism for evaluation is already provided under Public Law 87-732, requests for financial assistance in defraying drainage costs being referred initially to the FWS for approval. The same administrative machinery could be enlisted to consider applications for permits to install drainage facilities. Building permits, pollution control measures, enforced compliance with zoning restrictions, and wilderness preservation legislation stand as ample precedents for such restraints where adverse third party effects are encountered. Similar means might be considered in connection with drainage activity.

Adapted from Competition for Wetlands in the Midwest: An Economic Analysis, by Jon H. Goldstein, published by RFF, 1971.