The Economics of Agricultural Land Preservation

Abstract

Several state legislatures are considering enactment of tight zoning laws to preserve high productivity land for agricultural use. In the vernacular of the day, this land is referred to as (Raup, pp. 2, 3). Apparently, the myriad of tax preferential policies and other planning devices designed to protect agricultural lands from conversion to other uses have not been very effective (Hansen and Schwartz). Some of our best agricultural land continues to be converted to expanding urbanization, transport, utility easements, and for a variety of public purposes. So it is argued by those who advocate zoning for agricultural land that more drastic measures are now needed to stop this avalanche before serious agricultural land shortages occur. Of course, if social action is needed to retain prime land in agricultural use, the land market cannot efficiently allocate land resources among competing uses. The tax preference schemes were enacted to make it less costly to use land for agricultural purposes so that significant quantities of land would be kept in agricultural use that would otherwise shift. But use changes could still occur through the market if value differentials were great enough to offset the production cost advantage created by the tax preference. The crux of the proposed prime land preservation legislation is quite different; it removes the land allocation decisions from the market entirely by using productivity criteria to qualify land for preservation and by granting the power for exemptions and use changes to designated boards. This paper is largely concerned with the economic implications of this drastic policy shift. There must be substantial political pressure for retaining prime agricultural land since proposals are numerous and are being ma e in all sections of the country. It is the thesis of this paper, however, that the economic costs and benefits of such proposals have not been adequately explored and that it is the obligation of agricultural economists to do so. Not even the philosophical rationale for removal of the market from land use decisions has been adequately considered (Ervin et al.). This paper is more of an exploration of this issue than it is an empirical demonstration of ma ket efficiency. The next section discusses the perceived b nefits of prime land preservation; the third section discusses market failure and the alleged justification for social intervention; the fourth section treats the selection criteria that have been proposed to qualify prime land and how the program will be administered; and the final section highlights the major efficiency and equity implications of market removal from land allocation.