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06/27/2005

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» Two Undercompensation Problems from Crescat Sententia
The contributions from Professors Posner and Becker about the ongoing fight over Kelo prompts me to point out that there are two different ways in which "fair market value" undercompensates for the actual values people place on their homes. 1:... [Read More]

» Becker and Posner on Kelo and Eminent Domain from Accidental Verbosity

Via Arnold Kling, both Gary Becker and Richard Posner have interesting thoughts on Kelo and eminent domain at The Becker-Posner Blog. It's not exactly light reading, but most of this stuff isn't, and I've seen worse. They are deta...

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» MORE GOOD KELO ANALYSES from Knowledge Problem
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» Eminent Domain from Deliciously Evil
The recent supreme court ruling about eminent domain just creeps me out (not as much as if I were American though). The fact that now the government can take land for anything in the public interest, and this no longer means a school or road. If yo... [Read More]

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Comments

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Paul Deignan

It is difficult to establish a simple dividing line between what is and what is not a public use

I disagree. The Constitution was ratified by the people of the United States who based their grant of sovereignty by the plain wording of the document. There should be no great mystery as to what "public use" is and is not.

"Public" describes a group of people in a scope of an organized/governed community. "Private" is the complement of public. Since all members of the community in that scope are members of the public, then what is public is equally accessible to all.

So, if my government takes some property for public use, I expect to be able to use it.


P.S. Looks like the comments here were deleted from last night.

Peter Pearson

Just out of curiosity, would Robert Mugabe's current urban renewal project (burning slums in Zimbabwe) meet the Supreme Court's "public purpose" requirement?

Wes

While definition of "public use" may, like the definition of "political freedom", have a substantial gray area that makes a simple dividing line difficult to establish, in both cases there are simple tests that can establish when a particular action is beyond the pale.Digressing slightly, unlike property that has been created using individual labor, there is no inherent moral right for an individual to own land. While collective ownership of land by the general public is most proper from a moral perspective, that is not to say that the general public should not lease pieces of land to private individuals. Property taxes are an imperfect system of collecting rent but to the extent that land appreciates in value that value most properly belongs to the general public.Anyway, back to the question at hand, a basic requirement for "public use" as it relates to eminement domain should be that ownership transfers to the general public. Of course, there is also a need to prevent political corruption with respect to the land use once it is owned by the general public but preventing political corruption is (or should be) a fundamental requirement of all governments.

Mike

"To me, the only reasonable interpretation of 'fair compensation' is the worth of property to the present owners." WTF?! OK, so they want to take my house for a freeway. Guess what? To me it is worth 50 billion dollars. This is nonsense and would effectively render eminent domain un-useable--just say what you mean.

TheWinfieldEffect

Here is my proposal, Becker:

"Only entities with state sovereign immunity may be beneficaries of the eminent domain power."

Steve Bartin

Professor Becker should be commended. He is one of only people I've seen question the concept of eminent domain after the Kelo decision.Kelo has been brewing for decades. A society that allows redistribution of wealth through income taxes, property taxes, and regulation will eventually lead to seizure of private property. Eminent domain is simply theft pure and simple but is allowed because some government official is involved as opposed to a burgler.When the Supreme Court came down with the infamous Euclid vs. Ambler Reality decision in 1926,zoning and regulation of property were given the green light.Eventually,this over time has lead to private parties wanting to take others private parties property. All in the name of "public interest". The income tax is a property seizure. There really is no half-measures here. Even in states that limit eminent domain takings for private use: a municipality can and does seize property claiming it will be for public use and then changes its mind some months later. I've tried to keep track of the commentary on Kelo over at my blog.http://nalert.blogspot.com/

Zathras

I have some questions for Gary Becker, Richard Posner, or anyone else who has read Kelo.

Does either Kelo or pre-Kelo practice distinguish between an economic development project such as that in New London, which purports to create new jobs and hence new tax revenues, from a economic development project that aims to attract employers to one location from another, thus transferring jobs and tax revenue with them?

States and localities try to attract lure businesses away from one another (and, sometimes, away from foreign sites) all the time, through tax incentives and subsidies. Does Kelo increase the likelihood that state or local governments will use eminent domain to, for example, secure favorable sites for new sports venues in order to entice franchises to move from one city to another? Could such transactions be the object of federal legislation?

I have less trouble than Posner does distinguishing a private entity serving a public good (like a utility building a pipeline) from one that can claim only that it (or its employees, or its tenants) would pay higher local taxes than the current owners of a given piece of land. Even if one does not recognize this distinction, however, does it not seem somewhat myopic to treat local government claims of economic development at face value in cases that might involve economic development in one place at the price of economic degradation somewhere else?

Paul Deignan

We should also consider that a private entity is not responsible to the electorate of a community if it should decide to route pipes circuitously through your house, the competitor's share holder across the street, kitty corner, and that of the head of the local 523 which didn't see fit to negotiate with the private company on a favorable terms.

Public means public. Private is what is not public. We need to maintain this public accountability to avoid corruption.

The SCOTUS decision in Kelo was an abomination to the Constitution.

George


This ruling inadvertently (or not) defines and
enshrines what being rich is during this current (hopefully) short and distorted time frame; it could be designed to prolong said time frame (also known as the Real Estate bubble).

The ruling reveals an utter ignorance of economics; was there no economic advice either sought or given during the Court's discussions?

The essence of all human social and economic behaviour is free association. This ruling will have a spill over effect on other basic rights and freedoms.

George (Canada)

Prakash

Henry George's single tax might resolve this issue. Replace all the melange of taxes that are present with the single tax upon land value. Let owners of property self-assess what that land/location is worth. Let them be taxed according to that. If they get tempted to put a price too low, then they will be in trouble anyday the government wants to use eminent domain against them. The local government just looks into its files to see how much the owner thinks his/her land is worth. And about the house on it and relocation costs, the market prices for all these are known without any problem. Any house/insurance assessor can give you the worth of the structure upon the land. So, the just compensation criterion atleast is resolved.

Emil

---
"To me, the only reasonable interpretation of 'fair compensation' is the worth of property to the present owners." WTF?! OK, so they want to take my house for a freeway. Guess what? To me it is worth 50 billion dollars. This is nonsense and would effectively render eminent domain un-useable--just say what you mean.

Posted by Mike at June 27, 2005 03:28 PM | direct link
---

Well, but you would sell your house for a billion dollars, wouldn't you? Or how about 100 million, maybe even 10 million dollars, no? Anyway, the point Becker is trying to make is that average valuation (market price) is not the same thing as marginal valuation.

The issue you are raising, however, is valid. Private valuations are by definition unobservable so people will have the incentive to misrepresent them for their own benefit. The owner of a lucrative property in a sense enjoys a monopoly power over the government and would like to extract as much rent as possible. In fact, at the extreme, the owner will be able to extract the entire social surplus of the project. The problem is one of bilateral bargaining. Still I think it is possible to design a truth-telling mechanism (maybe something along the lines suggested by Prakash) that will give people their private valuations while preventing them from extracting rents. And that will certainly be better than the current situation where all the bargaining power is in the hands of the government.

Another important point is that there might be a multiplier effect operating. The current ruling, by increasing the probability that a given property will be expropriated at an "unfair" (to the owner) price, will certainly decrease the owner's valuation. In the market, that will translate into lower property prices which in turn will push the probability of unfair expropriation even higher.

Cogliostro Demon

What troubles me most is that you canít trust any of the justices to be consistent. As a practicing trial lawyer it is important to me that our system tries to do justice. In my world, Judges try hard to reach decisions justified by the law. Juries struggle to ascertain credibility and work in union to follow the law judges instruct them on. Judges on the court of appeals carefully sift through the record assuming that the trial judge was correct, and skim quickly over petty squabbles, but act quickly to correct mistakes that matter. If I didnít believe that justice is served in the courts of my county, I could not live with myself practicing law.
I read a breathtaking article by Tony on the morality of capital punishment which has helped my understanding that the conservative position is not necessary evil. http://www.firstthings.com/ftissues/ft0205/articles/scalia.html However, no sooner does one think the man has some principals, he turns out to be a fair weather federalist, deserting his philosophy at the first whiff of ganga. Domestic violence in the workplace does not implicate the commerce clause? OK, I can buy that. Shoot, we southerners know the federal government can be brutal, keeping them our of our lives canít be all bad. But, to say that the hemp plants growing in the back 40 do implicate the commerce clause? Nonsense. Tonyís just making up the reason behind the decision to get to where he wants to get. Heís just one of those activist judges everybody whines about.
Now, here I am, just finding out my newfound hero has feet of clay, when, WHAM, half the takings clause is removed! You silly children, ìnor shall private property be taken for public use, without just compensationî does not mean it has to be a public use. It means, ìnor shall private property be taken without just compensation.î That public use stuff, surplusage. Now, move along.
If the law is rigged, why am I wasting my life when I could be selling cars and making some real money?

nk


http://www.nytimes.com/2005/06/30/garden/30lava.html

"With Vulcan As My Landscaper"
By PATRICIA LEIGH BROWN
Published: June 30, 2005

What are your thoughts on this?

Noah Popp

O'Connor just announced her retirement.

Michael Martin

I think it's true that the fairness of compensation does not scale down very well -- i.e., that condemnation proceedings carried out at the local level are not as likely to result in fair compensation as condemnation proceedings carried out at the state or federal level. The small players just don't have the resources individually, or even the resources to get organized as a group to fight larger interests. It's too bad that the high court hasn't taken the opportunity to recognize that more explicitly in its opinions. I think this may have been what O'Connor was groping for in her dissent.

carol herman

Female human, to be sure. With a question. Now that O'Connor is leaving the bench, isn't the threat greater than a "big business friendly" judge will be appointed to replace her? Moving not just from an advocate of "state's rights," but to one where the business interests of conglomerates are met, first?

By the way, on Kelo, do you know as a non-lawyer what I find interesting? That our Constitution says NOTHING about "local governments." They are the fantasy creations of states. Who sprinkle fairy dust on these entities. Creating them at will. And, the can ABORT THEM, TOO. Because the Constitution only covers: the Feds. The states. And, the People. With the People getting less and less at every turn.

I wonder why, a court as bad as Rehnquist's has been allowed to get away with it all these years. Especially because he LIED to get onto the bench in the first place. How? He was a racist in 1952. And, he POLL WATCHED to be sure Blacks couldn't vote on his watch. In Arizona. (And, Arizona, it seems, has been blessed with an awful lot of powers not expressed in our Constitution, while he, and O'Connor set up there, dividing the pie.) What's it going to take to fix this up?

Dave

Carol Herman raised an interesting point. Maybe somebody more educated on the law could comment on the states rights over local governments here. Do any states currently have laws against eminent domain or clarifying the terms "public use" and "just compensation"? We do still have states rights in this country, right?

TheWinfieldEffect

CAROL: "Female human, to be sure. With a question. Now that O'Connor is leaving the bench, isn't the threat greater than a "big business friendly" judge will be appointed to replace her? Moving not just from an advocate of "state's rights," but to one where the business interests of conglomerates are met, first?"

I do not see how a pro-big business judge is necessarily a bad judge. I can imagine that would quite horrible in the worst-case scenario of a purposeful polluter that pumps cyanide into the underground water streams upon which draw elementary school water fountains and the judge who applauds their innovative spirit by liberally quoting Adam Smith and John Locke. But in many of the cases before the Supreme Court that involve large corporations fighting each other, or corporations fighting government agencies (or state agences run by eleced officials, e.g., the perenially overreaching Eliot Spitzer), often times the side of big business is the side that supports private rights and individual liberties against the government. The DOJ was quite overzealous in its prosecution of Arthur Andersen for political reasons, and SCOTUS was quite decisive in unanimously striking down the conviction. But, technically, the decision was pro-big-business. Moreover, a pro-big-business judge would generally be a "libertarian" -- but the attorneys at the Institute for Justice, self-identified libertarians -- are the ones who opposed the municipality seeking to deprive this woman of her interest in her home in Kelo.

MICHAEL: "The small players just don't have the resources individually, or even the resources to get organized as a group to fight larger interests. It's too bad that the high court hasn't taken the opportunity to recognize that more explicitly in its opinions. I think this may have been what O'Connor was groping for in her dissent."

O'Connor certainly was groping. But she might have been better off simply signing on to Thomas' dissent, which will make the history books, while her lesser dissent probably will make the next edition of Bryan A. Garner's "Incoherent Legal Drafting: A Primer". In any event, the smaller players certainly have the benefit of libertarians in academia (e.g., Richard Epstein, who submitted an amicus for Lingle), in public policy (e.g., Michael Greve of the American Enterprise Institute), and in public interest firms (e.g., Institute for Justice, Washington Legal Foundation). All they need are the right facts, and the trumpets will sound.

CAROL: "By the way, on Kelo, do you know as a non-lawyer what I find interesting? That our Constitution says NOTHING about "local governments." They are the fantasy creations of states. Who sprinkle fairy dust on these entities. Creating them at will. And, the can ABORT THEM, TOO. Because the Constitution only covers: the Feds. The states. And, the People. With the People getting less and less at every turn."

I could reply to this argument by ridiculing it ("The Constitution is silent also on the issue of intercontinental ballistic missiles purchased by North Korea, but that does not prevent its provisions from applying to situations involving them."). Instead, I will take it seriously: "Because the Constitution is silent on the powers of municipalities, then it does not apply to them." Of course, this is truer than you think: municipalities are devoid of state sovereign immunity and can be hauled into federal court. You can sue City Hall. By contrast, only rarely can you sue the Governor's Mansion, and only rarely may Congress authorize it. So the fact that municipalities are not mentioned in the Constitution results in them have lesser powers than States (not greater), and what powers they do have are derived from the State. Given that a master/slave relationship exists between States and municipalities, as States may destroy municipalties at will, if one is afraid of abuse of power by municipalities, one should be afraid of the States -- as it is States that exercise total dominion over municipalities without the ability to be personally sued. It is States that may abscond scot-free. But wait. States are bound by the Constitution to the Federal Government and the Federal Government is bound by the Constitution to the will of the people, and so there is accountability all around.

One could also take another tack. The Constitution mentions intrastate commerce, presuming that local commerce exists. (I am sure one can find the word 'local' in the Federalist Papers.) But perhaps that is not so. Perhaps we truly live in an age of a national economy, where a pebble in one end of the pond sends a ripple all around the nation. Perhaps there is no purely local commerce. In that case, while the Constitution certainly presumes the existence of local commerce -- it does not exist.

Your argument, Carol, leads to quite a different conclusion than you are prepared to make. It leads to the conclusion that where the Constitution is silent it can mean that the unmentioned entity is powerless and where the Constitution speaks it can mean that the mentioned entity does not exist. Thus, you cannot rely on the mere presence of text alone. Even if you are a textualist or an orginalist, you must engage in some degree of hermenuetics. And that isn't my argument, Carol, it's Justice Scalia's.

Molly

Can you write a bit on the G8--perhaps what they have done in the past that has been effective. For some reason, I do not recall ever hearing much publicity about it until this year.

erich

1) I agree the distinction between public vs. private use is essentially meaningless as far as whether a property "ought" to be condemnable, w/ the following exception: restricting condemnation to those cases where individuals are personably unable able to capture the benefits of ownership seems to me to limit (if not eliminate) the incentive for eminent domain where the reason is merely for the purpose of acquiring rights at below FRV (fair retention value), Lucas vs. South Carolina Coastal Council being the obvious case proving this point. "Public use" limitation may be desirable as a proxy for an “inability to transfer personal wealth” limitaion, not because public and private use, by themselves, have any useful distinction as GB noted. (a prev post claimed this is obvious - not so: where I live both White Sands Proving Grounds and Los Alamos were obtained by eminent domain. You are NOT welcome to use either but i expect you will @ New London.
2)"Fair Compensation", IMHO, is basically what is at issue. Here, as in the "public" vs. "private use", i find the distinction between "objective" and "subjective" value equally tilting @ windmills. FMV DOES have the distinction of being observable, and if that is what folks mean as "objective" i agree, but in the end ALL value is in the “eye of the beholder” and subjective, something Ricardo discovered centuries ago in explaining the price differential between water and diamonds. Objective is often merely a proxy for the extent to which subjective values are commonly held. I suggest we recognize that. In GB’s example of the elderly women, her value differs from ours at least because of age -she has just fewer years over which to amortize relocation costs, and a much greater investment in the information about her location, be it were to trade, or where to find that 1945 letter, or how many steps it is in the dark to the bathroom. She would have MUCH more to lose by moving, all other things being equal. This is not rocket science, and while nonrevealed (non-market) values can likely never be totally accurately ascertained w/observing an actual trade, SURELY we can do better than FMV by observing, making hypothesis, and testing them. We can list and explore what values we share and how we would quantify them as function of age, length of ownership. (I seem to recall GB actually either wrote a paper on that (or at least part of a mimeographed MS- am I wrong? it’s been a few lifetimes ago- it had to do w/ finding common attributes of old products in predicting a 'new" products demand curve) It is my belief/experience that compensation is such a contentious area, not because folks can't agree on quantifying the adjustments to FMV, but because those folks who NOW own those uncompensated rights are unwilling to give them up. Again, why should we surprised at that?

3) "Should" there be Eminent Domain, in the sense of society as a whole? Haven't got a clue. Do I prefer retaining eminent domain? Yes, because where is used w/ real attempts at fair compensation (Portland, OR comes to mind), i like what I see. After all, this is an issue ala Hayek of how information is best used, and the speed of response. David Friedman may be the only individual on this planet more anarchical than I, but there are cases for all of us where central command is preferred. But let's at least TRY to keep individuals "whole" in a forced trade, in "my eyes" if not in the eyes of the evictee and pay FRV, not “FMV”. We’ll have fewer condemnations, but I suspect i’ll prefer that as well.

Jack Q. Public

Gentleman,
I think you are looking at this entire situation in the wrong perspective. Jack proposes no action until the Supreme Court renders their decision. In this case, we would then take a grassroots approach, to find investors and collect monies to purchase their personal homes... how many there may be. If these judges are so inclined to interpret the constitution's "public use," then so shall it reign for all.
I wonder how big of a Wal-Mart you could fit on a 40 acre estate, or how many storage units we could fit in Greenwich, or where we could place a 7-11 on some quaint beach-front property. Did I hear a bulldozer start?
Sounds like public use to me... maybe an ACLU case?
Any comments? Feel free to reply!

Sincerely,

Jack Q. Public
Propertytown, U.S.A.

Anonymous

nice
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Anonymous

thanks
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Anonymous


شات سعودي

Anonymous

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