Summary of
The Endangered
Endangered Species Act

The Law and the Agencies

Different Drummer first looks at the the basics--the law, the history of the law, and the agencies that oversee it, including the FIsh & Wildlife Service and National Marine Fisheries Service.

Case Studies

We then present several case studies, three of which were commissioned especially for this issue. Moreover, we also found that attempts to recover species are nearly always hampered by organizational resistence within the agencies that, by law, are supposed to make species recovery their first priority. These two problems--threats to species from subsidized activities and obstacles to recovery with federal and state agencies--cast doubt on the success of the Endangered Species Act as it is currently written.

Analysis of the Problem

With the above as background, we do a detailed analysis of why species decline and what must be done to fix it. In brief, our conclusions are:

The Basic Cause of Species Decline Is Institutional

It is tempting to view endangered species as an ethical or moral problem: Endangered species are good, anyone who does anything to hurt them is bad. But this view is both deceptive and polarizing.

It is much more productive to view the issue as an institutional problem: Outcomes such as extinction or recovery are a product of institutional design. Given the very same people, some institutional structures are more likely to lead to extinctions while others are more likely to recover rare species.

Given the institutional structures we live with today, it is almost a wonder that any species survive. There are three major institutional barriers to species recovery:

  1. American wildlife law traditionally treats fish and wildlife as a commons and discourage or forbid private landowners from getting any advantage from having wildlife on their land. In fact, state agencies have been known to penalize landowners who go out of their way to enhance wildlife habitat by demanding continued enhancements without compensation.
  2. The vast array of federal subsidies to well intentioned but often misguided goals constitute one of the most important threats to many, if not most, listed species.
  3. The Endangered Species Act insists that federal resource agencies, such as the Forest Service and Bureau of Land Management, give first priority to species recovery. But the incentives within those agencies still lean to resource extraction. Thus the agencies tend to resist recovery efforts.

The Current Act Is Not Working

Our goal, then, is to design institutions that will avoid extinctions and promote recovery of threatened and endangered species. Does the current Endangered Species Act accomplish this goal?

While quantitative analysis is difficult, the short answer is "no" for three reasons.

  1. The law has stopped few of the numerous federal subsidies that pose the real danger to many, if not most, listed species.
  2. Even where federal agencies are supposedly trying to protect endangered species, they often put up obstacles to recovery.
  3. The act has given some private landowners incentives to harm habitat and has certainly produced a serious backlash against endangered species preservation.

The Act Takes the Wrong Approach

The Endangered Species Act has failed because it takes a command approach to the problem: In essence, it orders people to save endangered species, often at their own expense and despite whatever counterincentives they may face.

At best, the law does nothing about existing institutional structures that give people the wrong incentives. At worst, the law itself creates incentives to destroy wildlife habitat. Recent amendments to the law have modified some of the perverse incentives in the 1973 act, but still have done nothing about the perverse incentives that predated that act.

We Must Fix the Act with Incentives

If our goal is to save endangered species, and we consider the problem to be institutional rather than moral, then the approach we should take must emphasize incentives rather than command. The best system of incentives ever devised is the free market, because markets respond quickly to need, learn quickly from failure, and fairly assess trade offs and costs.

Many endangered species aren't easily amenable to markets; if they were, they might not be endangered. But some species could be included in the market, yet are not because of government regulation. Other species may not be marketable, but have proxies that are. Market-like incentives could even be created to save many species that are totally unmarketable.


We quickly review a number of alternatives that have been proposed to change or improve the law, including Senator Slade Gorton's bill, the Clinton Administration's actions, and proposals coming out of the Keystone Institue.

Although there is tremendous amount of controversy over one point--whether the Endangered Species Act should regulate private landowners without compensation--there is broad agreement among nearly everyone that the act would be more successful if it relied more on incentives. Many environmental activists even admit that the act itself creates a perverse incentive for landowners to destroy habitat before it can be regulated.

Yet none of the proposals that we could find addressed any of the basic causes of species decline: laws that treat wildlife as a commons; the subsidies that threaten so many species; or the agencies whose incentives lean toward habitat degradation.

Fixing the Law

Based on this analysis, we present five basic proposals for fixing the law that, if implemented, would address all of the causes of species decline. No package of proposals is perfect. But this package will save more species at lower cost and generate far less controversy among private landowners than the current law.

1. Create a Biodiversity Trust Fund

A biodiversity trust fund could be used to buy land, buy conservation easements, pay landowners or land managers to use or avoid certain practices, or pay "bounties" to landowners whose land provided habitat to listed species. This would make private landowners eager to see species listed rather than opposed to the law.

2. Turn the Act into a Subsidies Killer

A "budget squad" would have the authority to impound funds from subsidized federal programs that harm listed species. A fifth of impounded funds--at least $200 million per year--would go to the biodiversity trust fund; another fifth to the departments of Commerce or Labor to help worker transitions. The remainder would be used to pay off the federal debt.

Different Drummer also proposes that the budget squad would include representatives of the agencies that would get some of the impounded funds, so they would have incentives to find and eliminate subsidies. This would have the triple benefit of reducing threats to endangered species, increasing funds for biodiversity, and reducing federal deficit spending in a way that allows members of Congress to avoid blame.

3. Reform Public Land Management

Despite their historic differences, federal land management and federal endangered species management suffer from a common problem: Congressional micromanagement and resort to command control rather than incentives. The federal lands will also play a crucial rule in endangered species recovery. Federal land reform should therefore be a key goal of endangered species advocates even though it may require separate legislation.

Two major reforms are needed. First, federal land management should be funded exclusively out of a fixed share of net public land user fees, thus insulating the agencies from meddling by appropriations committees. Second, federal land managers should be allowed to charge fair market value for all resources.

These reforms will allow federal land managers to respond to incentives offered by the biodiversity trust fund. Managers will also respond to recreation needs, which will act as a proxy for species that prefer unfragmented landscapes. Finally, the increased receipts provide another source of revenues--an estimated $650 million per year--for the biodiversity trust fund.

4. Experiment with Property Rights

The Fish & Wildlife Service, biodiversity trust fund, or other appropriate agency should be allowed to assign various forms of property rights in a particular species to states, non-government organizations, or perhaps even for-profit companies. This may improve the chances of recovery for some species that the federal government might not have the resources--or political will--to protect.

5. Eliminate Regulation of Private Land

In attempting to regulate private land, the law unfairly imposes huge costs on a few people and generates increasing hostility to wildlife and the idea of protecting endangered species. If the regulations worked they might be easier to defend, but in many cases they do more harm than good. We can save more species without them.

Saving Species with Incentives

Finally, we present a number of different ideas for protecting species that can be done either by government agencies or by outside organizations. This article is based on a much longer research paper of the same name.
ESA Table of Contents | Different Drummer | Electronic Drummer