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Pam Brown

A "holdout" (homeowner) is simply a self-interested maximizer. This is a bilateral monopoly. If the homeowner can obtain a price which extracts the profit stream the developer (buyer) anticipates, minus a penny, the outcome isn't inefficient. Whether the government should side with one party over the other is unknown. And both sides will eventually bear some form of taxation of market gains at the conclusion of the private transaction. The presumption that maximization of tax revenues is the best vehicle for furthering "public interest" is questionable. First, wetlands and endangered species don't pay taxes but these 'idle resources' are not surrendered to private developers. Second, the long term growth and incentive effects for the economy are ignored. What of the small-cap entrepreneur with a profitable concept "in the pipeline" he's developing out of his garage and marketing on ebay? His property is vulnerable to seizure by a large rent-seeking competitor who will claim rights to the land based on the legal observation that "short-term tax revenues" will be enhanced. This is not a free-market outcome nor conducive to R&D advance and risk taking, but does fit the interest-group model of regulation. I sent a letter, published in the WSJ on 6/26, about the arbitrary nature of the KELO ruling so disturbing did I find the decision: "In a 'hot' real-estate market experiencing rising prices, the "fair market value" [or 'just compensation'] for land is whatever that homeowner can obtain for his/her uniquely situated property. This new (current) price is decided by the two transacting parties alone, and no one else: the homeowner and Walmart, or the property owner and the commercial developer, etc. The Supreme Court ruling in fact mandates the opposite of a market outcome. It relieves the other party, the large commercial group, of the need to strike a truly market-based, voluntary contractual market agreement with the individual homeowner..." Very excited to find your blog.

Paul Deignan

It is ridiculous to be stuck on this "holdout" fixation. Either the condemned land is for public use or it isn't.

If there is a great societal need to gain the benefits of the use of some land, then the answer is clear: comdemn it and make the whole enterprise public. If not, then the government has no interest in the matter over the long run in a seizure as there are innumerable private decisions made that hang on the government doing no more and no less than what is written in the law.

Note that the tendency of the partisans is to only assess those costs and benefits that are relevant to themselves. This is an abuse of informations flows akin to that common to centrally planned states.

Keep the information flows coincident with the costs, and actuation efforts.


Speaking of holdouts...

I really liked this one:



So we're back to the begining. Ultimately, the qestions come down to:

1. What constitutes "Full Compensation"?
2. What constitutes "Fair Compensation"?

Simply market value at time of sale/purchase or negotiated value. Simple market value eliminates the "holdout" issue of a negotiated value.

John Noble

Private developers can use straw purchasers. A local government that holds months of hearings before approving a redevelopment project cannot.

As to full and fair compensation, I contacted Linda C. Davis, a real estate broker with 28 years experience in southern Connecticut, including the New London area. She says:

"Susette Kelo bought her house in 1997 for $56,000. She was offered $123,000 in late 2000. This was†an extremely fair offer - a very†very generous offer. She would never have received that price if the house was listed. This is pretty typical of the houses that were purchased."


Maybe the Kelo decision isn't quite so bad. SCOTUS defines "public use" very broadly, allowing cities to condemn practically anything. But the states can narrow the use of eminent domain or erect new tests, e.g. pay 1.5x market value, put it to a vote, wait until the next election cycle, submit plans to a state agency for review, etc. States can limit public use only to government use, if they want. Since "public use" is a fuzzy term, let the states decide what it means for them (via their citizens votes, of course).

While I disagree with New London's rationale, the voters are still capable of fixing things. This is a rare case where SCOTUS actually got out of the way, IMHO.


"That is, if government land-acquisition costs are raised by limiting eminent domain, other taxes will have to be levied to pay for the higher costs."

I agree with your statement however I have become increasingly aware of just how little freedom we have left.

For example...land ownership is considered a fundemental right of all Americans. Yet in reality this ownership is merely an illusion. If we change the words "property tax" to the word "rent paid to the government" one can begin to see my point.

You really can't own land in this country and with the use of "eminent domain" you can't necesarily keep renting your property from the government. At any time so desired the government can step in and take your property away.

I realize all of this is nothing new. The power of eminent domain, as far as I know, has always been law. Property taxes have also been around a very long time. What concerns me is how we all just accept these things while waving our American flag and saying "America the home of the free"!

So I guess my point is that if someone "holds out" for more money than their property is really worth....so much the better. I say make it as expensive as possible for the government to utilize their power of eminent domain. That way they are less likely to use that power indiscriminately.

Sorry posner. I didn't mean to change the subject but my school taxes arrived yesterday and I needed to rant!


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