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June 21, 2005

Revenue Enhancement: Good v. Evil

I hear a lot of internal Forest Service chatter about revenue enhancement these days. I guess I just don’t get it. My management training led me to believe that we ought not to try to run public service institutions like a business.

Even if for some reason we decide (or have decided) that revenue enhancement is the order of the day, we must remember that “revenue,” like profit in a business, is not something your maximize or “enhance.” Rather revenue would be a measure of performance, to see if, say, a certain level of revenue might cover a certain proportion of cost. Revenue is then just one more thing to consider, among many, in devising plans, programs, and projects on public land. And it would only be such if we explicitly set up policy goals to cover some costs with revenues.

Also, there are important reasons beyond, “Let’s not run public service organizations like a business,” why we might want to think twice about revenue enhancement on the public lands in particular.

To begin, it might prove useful to think about why we are even talking about revenue enhancement. There seem to be two main threads of thought. First, people are talking about enhancing revenues to cover shortfall in budgets, relative to traditional budget levels. We might call this the “necessary evil” thread. Second, people are talking about enhancing revenues in order to be more businesslike in running government agencies.

Following the “necessary evil” thread, we have to think about lesser and greater evils. In particular we have to think about what evil lurks in setting up marketing institutions for the public lands. Following the “businesslike” thread, we have to think hard about why we have service institutions (public and private) and how and why we manage them differently from business organizations. We will look at each thread in turn. In between the two, we will sandwich a third, which we will call the “unnecessary evil” thread.

Revenue Enhancement as a Necessary Evil
Some believe that revenues need to be collected because people get goods and services from the public lands and they ought to pay a fair or just price for what they get. In essence this is a private good or service argument and carries a good deal of sway in our culture. People who believe this way are easily drawn into the argument that we have for too long subsidized the private gain of the few from the public lands. People ought to be required to pay-up and reduce of eliminate the subsidy they have for too long received at the expense of others in society.

[Personal disclosure: I do not believe the “necessary evil” argument, neither the “outright good” argument captured in enhancing revenues to run government more like a business. So I don’t devote as much text space to them in this post as to the “unnecessary evil” argument. I welcome a follow-up post, or might even redo this one with a coauthor to offer up a more balanced approach, if people step up to the challenge of portraying the other two positions in a better light.]

Revenue Enhancement as an Unnecessary Evil
Some people disagree with the “necessary evil” argument. Those who disagree on a basis other than, “It’s traditional not to charge,” usually end up arguing something like, “We deserve a space apart from the crass commercialization of everything in our culture.” They continue with, “It is a small price paid by all for this opportunity afforded to all—particularly if we keep facilities and infrastructure primitive.” People who argue this way often represent the public lands as a res publica, a public thing that ought not to be reduced to a bunch of private things.

Jack Turner in The Abstract Wild followed in the footsteps of both Thoreau and Leopold in decrying what Turner labels "Economic Nature." Turner says,

Instead of seeing modern economics as part of the problem, they see it as the solution. .... [M]oral, aesthetic, cultural, and spiritual orders are then merely subjective tastes of no social importance. It is thus no wonder that civility has declined. For me this new economic conservation" ethic" reeks of cynicism--as though having failed to persuade and woo your love, you suddenly switched to cash. The new economic conservationists think they are being rational; I think they treat Mother Nature like a whorehouse. (p. 58)

Turner suggests an alternative path:

Imagine extending the common in "common good" to what is common to all life—the air, the atmosphere, the water, the process of evolution and diversity, the community of all organisms in their common heritage. Imagine extending "community" to include all the life forms of the place that is your home. Imagine "accounting" in its original sense: to be accountable. What does it mean to be accountable, and to whom and to what purpose? What's "a good deal" with the Universe? Imagine an economics of need. Instead of asking "What is this worth?" ask "What does this forest need?'' "What does this river need?" (p.67)
Following Turner's path we might then compare costs of alternative means toward socially and culturally desired ends, but there is arguably little place or no place for concepts like “revenue enhancement.” We use economics only to appraise alternative means toward stated, chosen ends. We would not use ecomics to maximize or enhance anything.

We might also look at Richard Behan's book, Plundered Promise: Capitalism, Politics, and the Fate of the Federal Lands. Like Turner, Behan is not fond of what we've done in the name of economics and efficiency regarding the public lands and other "commons." Behan believes that American capitalism has been corrupted and American politics has become predatory--preying on the assets and wealth of the public at large by bestowing the benefits on the few, particularly politicians and bureaucrats themselves and the corporate "few" that help keep the politicians in office, and by dispersing the costs broadly.

Behan notes that in America, unfortunately, "We have deliberately chosen to dedicate the federal lands not to public purposes but to the production of private wealth." He notes that despite a hundred years of cultural evolution and change, "the production of private wealth [from our public lands] has continued without challenge or even serious question. .... The idea of seeking public benefits from our public asset simply never took hold." (pp. 3-4)

Neither Behan nor Turner believes it is too late for us to mend our cultural ways. Like Turner and Behan, I too ask that we rethink our frame, when dealing with the public lands. Quoting Behan,

Because of the peculiarities in the U.S. Constitution .... there is no national and enduring res pubica, a "public thing" to bind Americans together in a tangible sense of community. .... [T]he federal lands hold great promise as a res publica for the American people. .... The barriers to realizing this promise, and the root causes of our overuse of the federal lands, lie in the nature of what our economic and political institutions have become. They have become the agents of plunder. (pp. 5-6)
Oversimplifying, it might boil down to this line from a country western song, "When it comes to love, you don't count the costs." At least we ought not to count the costs as we might in running a business enterprise. And if we resort to crass commercialization of the public lands we ought to think hard as to Turner’s whorehouse allegation.

Still, we ought not to just throw money at problems hoping that somehow we will effect common good. We have to look deeply into the mirror, at ourselves and our institutions, including what it means to be accountable—to whom and for what purpose? An answer might be found, in part, by adopting simpler ways to manage, and smaller ecological footprints on the land.

Revenue Enhancement to be More Businesslike
Many people advocate that we make government and public service more businesslike. When such talk is meant to admonish us to make government more accountable, recognizing the rightful differences between for-profit and for-service organizations, I find few things to quibble about.

But when talk degenerates into, “Businesses do it better,” I have a whole library of venerable sources to draw from to refute such nonsense. For example, in Management: Tasks, Responsibilities, Practices, (1973) Peter Drucker outlines “three popular explanations for the common failure of service institutions to perform [up to expectations in the private sector]:”

  • Their managers aren’t businesslike
  • They need better people
  • Their objectives and results are intangible
Drucker explains why all three are alibis, not explanations. On being businesslike and efficient Drucker says,
The belief that the service institution will perform if only it is put on a businesslike basis underlies the many attempts to set up such services as separate public corporations…. There may be beneficial side effects such as freedom from petty civil-service regulation. But the intended main effect, performance, is seldom achieved. Services essential to the fulfillment of the institution’s purpose may be slighted or lopped off in the name of efficiency.
On needing better people, Drucker says,
There is no reason to believe that people who staff the managerial and professional positions in our service institutions are any less qualified, and less competent or honest, or any less hard-working than [those] who manage businesses. Conversely, there is no reason to believe that business managers, put in control of service institutions, would do better than “bureaucrats.” Indeed we know that they immediately become bureaucrats themselves.
Drucker says that belief that service institutions objectives and results are intangible is at best a half-truth. He says, “Achievement is never possible except against specific, limited, clearly defined targets, in business as well as in a service institutions. … But the starting point for effective work is a definition of the purpose and mission of the institution, which is almost always intangible.” (pp. 137-140)

Where To from Here
It proves difficult to imagine the public lands without “fees.” Fees have been a part of Forest Service management from early days. But that doesn't mean they have to play an increasing larger role. It also proves difficult to imagine that the politics of our culture will not continue to cry out for “revenue enhancement.” So be it. I do not need to like it. And all of us have a responsility to advocate for betterment as we see it. We must all continue to challenge our institutions, our values, our very being as a culture. If we do not, we deserve the culture we get as a byproduct of our silence.

Posted by Dave on June 21, 2005 at 05:37 PM | Permalink


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Posted by: Jerry Ingersoll

I think a distinction ought to be made between collecting fees on the one hand, and establishing revenue maximization as our goal on the other.

Very few Americans would disagree that we ought to charge for some private uses of public resources. If I want to pump public oil from public lands or cut public timber, I am converting scarce public resources to my private profit. Those resources are no longer available to others who might want them or to future generations, and the public deserves some compensation. If I occupy a portion of public land with my private recreational residence, the land it sits on isn't available to anyone else, and again the public deserves some compensation. Charging fees here isn't a question of running the government like a business, but of securing something to the public for the use of their property.

A related case applies to costs incurred by the government as a result of my use. When I camp in a developed campground, I'm not really paying land rent but am covering a part of the cost of operating and maintaining the campground (pumping the toilets, hauling the trash, providing water). I can camp for free in the woods, but if I want the extra services provided by the campground, I pay a fee. This fee also ensures that the government doesn't unfairly compete with private campgrounds, and helps place a "value" on the campsites so that people don't reserve or occupy them unnecessarily.

These kinds of fees have been with the FS ever since its inception, and apply to other public lands and resources as well. We can argue about whether we charge the right amount for the right land uses, or about whether those are legitimate uses in the first place, but if the principle we're discussing is these kinds of fees, I'm firmly in the "outright good" camp for reasons having nothing to do with running government as a business.

On a broader note, there are legitimate questions about the role of fees in providing public services generally. Since government services cost money to deliver, it comes down to a question of who pays. Some public services are paid for collectively by everyone (through taxation). Other services are paid for individually by the users. Generally, those services that are closest to "pure" public goods (e.g., police, national defense, fire protection, wilderness, clean air and water) are paid for by general taxation, and those public services that most resemble market commodities (e.g., airport security screening, timber, use of RV hookups at a campground, land for ski areas) are paid for at least in part by user fees. Many public services fall somewhere in the middle, and fees are often graduated. I pay a fee to ride public transit to work, but the fee covers only a part of the cost of operating the subway (and none of the capital cost of constructing it in the first place). As a general principle, I think this makes good sense, though there's always plenty of room to argue which services should fall into which category.

None of this should be objectionable. Government should, in my opinion, charge royalties for private use of public resources. Government should also charge fees for some services as a way of distributing costs between general taxation and private consumption.

What I think ought to be objectionable is any attempt to make revenue maximization our primary mission. If that's really what we're all about,the private sector can do it better. The reason these lands are public in the first place is to provide something different -- something that markets alone will not provide (or at least not as well). Now that doesn't mean that revenue shouldn't be considered at all. If Bill Gates is willing to pay the public $ 10 billion for the exclusive use of a piece of public land, that's $ 10 billion that could be used to pay off part of the national debt, cure cancer, educate children, or construct trails on national forests. The public (through their representatives in Congress) should consider those tradeoffs.

The FS mission has always involved provision of commodities as well as public goods. We try to serve as a model for sustainable development. Gifford Pinchot wanted, both at Biltmore and the FS, to prove that forests could be managed sustainably in a way that still generated a profit -- that we could secure public goods from forests without costing the public money. He was only partially successful at his proof (at Biltmore as well as in government), but I'm not sure that the effort was itself objectionable.

Collecting fees for some uses of national forests? It depends. But I believe some fees are clearly "good." Making revenue maximization our overriding priority? That I'd find closer to "evil."

Jerry Ingersoll | Jul 6, 2005 11:25:41 AM

Posted by: Bill Ham

I am thankful that I was given the career as a land surveyor. In the first six months of this year I managed to get 52 days with my "Boots on the ground" and I would like to think that the 8 miles of line that we have posted in that time has some real significance. I agree that we as an agency are moving too much to a corporate life style. I believe that the decision to move HR and budget to a central location will only cause us more heart burn in the future.

Bill Ham | Jul 8, 2005 12:17:27 PM

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