The Effects of Resource Policies on Income Distribution

Abstract

T HE general focus of this paper will be on how income distribution affected by the policies, mostly federal, that allocate water and grazing in the West. The emphasis will be primarily on the agricultural uses of the resources in question. The approach used to appraise is rather than to prescribe ought to be. The distributive impact of policies per se will not be evaluated; instead, the evaluation will center on practices common to resource policies of many kinds (as, for example, underpricing of resource services). The basis for evaluating will be the differences between the way income and wealth are distributed by existing resource policies and the way they would be distributed by a perfectly competitive market. Four questions about policy effects on income distribution will be considered. First, what the effect of a certain policy-associated practice upon the income and wealth distribution among firms within agriculture? Second, what its effect upon agricultural income and wealth distribution among geographical areas? Third, how does the practice affect income and wealth in agriculture relative to the whole economy? Fourth, what its relative impact upon the distributive income shares accruing to various productive factors used in agricultural production? Among the various practices that will be appraised, one recurs again and again. This administered pricing, in which the resource (or product of the resource) priced below the value of the marginal product. Such pricing inevitably leads to a set of rationing procedures in which leases, permits, rights, etc. are used to determine which competitive users get the resources. Over and above policies which price and allocate resources, the government engages in direct expenditures to develop and conserve resources. These run the gamut from appropriations to build large multipurpose dams to various small and inexpensive conservation practices on individual farms and on the public lands to protect soil resources and watersheds and to increase range productivity. Some of these expenditures are considered to be reimbursable and are thus recoverable by the government. Some are not. Both types of expenditures usually increase resource productivity, however, and the way they are dispensed geographically has a vital influence on the distribution of income and wealth.