Conclusions and Recommendations
In the leasing of federal lands for minerals production the Department of the Interior seeks three objectives: orderly and timely resource development, environmental protection, and a fair market value for natural resources. We have argued that these objectives may be integrated into a more general rule, and that the department should seek to capture a maximum of the present value of pure economic rent arising from minerals production, where "pure economic rent" is the income which tends to accrue in the long run, under conditions of perfect competition and the absence of externalities, to the owners of natural resources. There are several reasons for this rule. First, it gives a concrete meaning to "orderly and timely" resource development and "fair market value," while recognizing the need to internalize externalities such as environmental damages. Second, it is the equivalent, in effect, to the rule that the Department of the Interior should seek to maximize the (present) value of resources to society. Third, pure economic rent is an economic surplus, the capture of which by the Department of the Interior does not affect output, the price level, or relative prices and the allocation of resources. Fourth, as a form of governmental revenue, economic rent received by the department substitutes for taxes which would affect output, prices, and resource allocation. Thus, following the rule promotes general economic efficiency and tends to maximize the value of resources to society.
Of course, the Interior Department cannot measure pure economic rent a priori and set the price of leases accordingly. Rather, in order to follow the rule it must create conditions conducive to its satisfaction in the normal process of marketing leases. Thus, conditions which reduce uncertainty, increase competition, promote the optimum rate of