California environmental groups seek to drive cattle ranchers off the Inyo National Forrest in the interest of protecting the golden trout, the California state fish, as is discussed in this article. Environmental groups want to completely eliminate cattle grazing in the area by law. Such an argument contradicts a “Coasian Solution” to an externality as discussed in class.
Ronald Coase would approve of the current agreement between that US Forest Service and ranchers in which “three local families… have permits to graze a total of 885 cows on the Kern Plateau. They pay $1.35 a month per cow…”. This solution follows Ronald Coase’s model of internalizing an externality problem through the market. The State owns the land, and cattle ranchers pay to compensate the state for the damages done to the land (in this case damages in loss of fish). According to Coase, the overgrazing issue is rooted in the fact that the “rate has not changed much in four decades”, and perhaps also that “the calves running alongside their mothers are not counted”. The fix, according to Coase, would be to raise the price of grazing enough to fully compensate the state, or possibly to count calves in addition to fully-grown cows. Alternatively, land rights could be transferred to the ranchers, and the state could compensate such ranchers by paying them to stay off designated forest lands, or use alternative fields. As long as the property rights are well defined, it doesn’t matter who is assigned the rights.
Environmentalists claim that government should prohibit grazing in the interest of protecting the golden trout. Coase would argue that an agreement can be reached between ranchers and the state to lead to the socially optimal amount of grazing as long as property rights are defined, and there is costless bargaining.
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