HOW LAND USE AFFECTS MONTANA'S ECONOMY: Do National Parks and Open Spaces Attract Economic Development?

• Author: Sonora, Robert

Like most, if not all Western states, Montana is blessed with a seemingly endless variety of environmental endowments. Many of our natural resources can be used by the economy in one of two ways. First, land can be used as a direct input for the production of other goods, e.g. timber or coal. Secondly, the land can be used as an amenity.

Land amenities are defined as the value derived from the land--uses other than as a direct input to production, such as from recreation or environmental, cultural, historical, wildlife and nature conservation value. Land's use value is defined in terms of how much people enjoy it as a service, such as for tourism.

Roughly 37.5% of Montana is publicly owned land with a variety of uses, mostly in the western third of the state. The land is managed by numerous state and federal agencies who must balance the resource versus amenity characteristics of the environment. The underlying question is: Do land amenities lead to economic growth and prosperity?

Lirst, we need to define a couple of terms. Economic growth refers to the long-run steady march of economic progress over long periods of time, say 30 years. Progress at the regional level is generally measured using familiar concepts, such as total income and overall employment. However, total income and employment are not generally good measures of economic development. Economists agree that what causes growth are changes in productivity and, on aggregate, population growth. In turn, productivity is the result of the accumulation of skills, ideas, innovation and/ or improved institutions. Economic growth is an appealing goal as it leads to improved standards of living, better health, more leisure and improved environmental quality.

On the other hand, short-term economic fluctuations are caused by transitory events, such as business cycles and other shocks to an economy, like a disaster or government stimulus spending. The effects of these shocks are generally short lived--less than say five years--and have no permanent effects, all things being equal. Natural disasters can be very painful in the short run, but they usually die out quickly. The 2018 Camp Fire in Northern California's Butte County destroyed the town of Paradise. While employment has yet to fully recover, in terms of income it had no lasting impact.

Research to Date

Much of the research on the relationship between land amenities and growth does find a positive and sometimes statistically...