Gold mining and market failure on Morning Edition

Unlike Matthew Kahn and Michael O’Hare, I’m not an environmental expert. I hope they forgive my foray onto their turf.

This morning I heard a charming NPR story, “Mining Resumes At Old South Carolina Gold Mine.” Against the background music of whirring high-tech mine equipment, reporter Greg Collard described the renaissance of gold mining, which provides an economic bright spot for an otherwise-troubled local economy. Then Collard got to this passage:

Greg Collard: The price of gold is selling at record levels. Still, don’t expect gold production to explode in the East, says Michael George. He’s a commodities specialist for the U.S. Geological Survey.

Michael George (Commodities Specialist, U.S. Geological Survey): Out west, it’s all public land, so you can get access to it relatively cheaply. If you’re going to mine out east, you’re going to have to either own the land or own the mineral rights underneath the land, and that can become expensive.

Full stop. Pop quiz for every Econ 101 student: What are the market failures in this passage?

Libertarians and environmental activists don’t often agree. Here is one area in which they really should. For decades, mining companies have received large implicit subsidies to extract resources from public land. They generally don’t have to pay taxpayers a fair market price for the minerals they mine. Many firms can avoid compensating either the taxpayers, local communities, or others for the full costs of environmental damage such activities impose on others.

Gold mining poses significant environmental hazards. As I said, I’m no expert. I suspect we do too much of it—or at least too much of it in the wrong places. The lack of property rights and the lack of proper penalties for negative externalities virtually ensure this.

When companies actually have to pay the full costs by buying mining land outright or leasing it, “that can become expensive.” Isn’t this is another way of saying: “Someplace else, taxpayers are getting ripped off?”