loz89798

thing to lease land for commodity production, such as timber harvesting, where the output and its value are well known, but it is quite another to do so for wildlife habitat, where the requirements for producing wildlife habitat are not well known and people are not accustomed to purchasing this good through the market.These costs of specifying and monitoring contractstransaction costs, as economists call themincrease with the number of parties to the contract and can be sufficiently high to prevent private solutions.In both cases, the land areas are large enough to accommodate the requirements of the wildlife.But the contractual problems are greater if providing the habitat necessitates contracting with tens if not hundreds of landowners, each with a small share of the land required.With transaction costs much higher, the feasibility of privately providing wildlife habitat declines.The entrepreneur will only be able to cover the higher contracting costs of amassing land for wildlife habitat if the value of the wildlife is extremely high.7Transaction costs also may make it difficult to get people to pay for environmental goods.For example, if people enjoy viewing wildlife and can do so from a public road, a private provider would have to erect a high fence to exclude nonpayers.This is what zoos do, but the cost of exclusion is not trivial, and the nature of the good almost certainly changes because seeing an animal in a zoo is not the same as seeing it in the wild.To the extent that the cost of excluding nonpaying customers is high, people can ride free on the efforts of the entrepreneur to provide wildlife habitat.The result is that providers of environmental goods will be undercompensated relative to what people are willing to pay, thus making it