New Study Supports Oft-Criticized Mining Law

New Study Supports Oft-Criticized Mining Law
May 1, 1998



Critics of the 1872 Mining Law, which governs metal mining on federal lands, are wrong when they contend it is an environmentally destructive giveaway to corporate mining interests. That is the conclusion of a new study from the Washington-based Cato Institute.

In “Two Cheers for the 1872 Mining Law,” Richard Gordon and Peter VanDoren point out that a vast majority of mines are unprofitable. The purchase of such lands, they contend, when adjusted for risk, creates few if any excess profits. The purchase of mining claims “is best viewed as a lottery. . . . The ticket price paid by the winner tells us nothing about whether the lottery operator should raise or lower ticket prices in general,” they point out.

The authors take issue with the calculations of the Mineral Policy Center (MPC), which purports to show that $231 billion in metals has been given away to corporate interests since passage of the 1872 law. Gordon and VanDoren document how the group’s calculations are “severely flawed.” The problem with the MPC analysis, they write, is that it “clearly uses projected receipts without deducting projected costs, and invalidly uses those values as a measure of the giveaway.” Nevertheless, the MPC’s estimate has received wide circulation and is commonly cited by politicians, leading newspapers, and television.

Critics of the current mining law also fail to recognize that even if the initial, 19th century buyers got a good deal, subsequent purchasers would have bought the land at market values. This means their average profits (once again discounted for risk) are no higher than for alternative investment opportunities.

Gordon, professor emeritus at Pennsylvania State University, and VanDoren, assistant director of environmental studies at Cato, conclude that future mining claims should be assigned by auctions. Existing claims should remain unaltered, however, since their current holders likely paid market values for them.

Gordon and VanDoren also find that public ownership of lands, not its leasing to private companies for development, is at the root of many problems in natural resource policy. “We would never accept public ownership as a solution to whatever market failures existed in food markets,” they write. “We should also not accept public ownership in land markets.”