July 19, 2007

Reframing Eminent Domain

By Reframing Eminent Domain

by Timothy Sandefur

David A. Dana has a new paper, "Reframing Eminent Domain: Unsupported Advocacy, Ambiguous Economics, and the Case for a New Public Use Test," posted on SSRN.com. I have only scanned it, but I see some interesting observations in his conclusions:

is there some other kind of eminent domain reform that might predictably produce desirable results? The permissive "public use" test that existed in most states before Kelo and that Kelo reaffirmed as the federal constitutional law approach does nothing to select for some development and not others based on any reasonably coherent normative criteria. As the Kelo dissenters emphasized, development for "economic development" can be almost any development that promises more tax revenue than existing land uses, and unless increases in tax revenue alone are a good proxy for a normative standard of goodness," allowing an economic development purpose to satisfy the "public use" requirement does not screen development based on any normatively defensible criteria…. [E]ven if we assume blight condemnations only reach "true" blight and such blight is indeed "bad" and thus it is good to remove it, there is nothing in the approach that allows condemnations to remove blight that does anything to select for good (however measured) development to replace the blight…. If we want eminent domain to select for good development, we should consider eminent domain reform that ties the availability of eminent domain to the characteristics of the development that will replace current land uses.

The problem with this is that the terms "good" and "bad" when referring to land use mean nothing more or less than that use of the land which is of the highest economic value on a free market. There is no standard of measuring utility that makes any sense other than what consumers are willing to subsidize by freely choosing to shop at a store, or to pay for the use of a parking lot, or what have you. Is it "good" to have a Long's Drugs on the corner of Main and Broadway? The only sensible answer to that question is to see whether it is profitable or not. Anything else is simply elevating one person's preferences (usually the preferences of some bureaucrat with big ideas) over the preferences of another person in a way that is not justified by any legitimate argument.

Economic efficiency is simply nothing more or less than the transactions that people freely enter into. As Nobel laureate James Buchanan puts it, "voluntary exchanges among persons, within a competitive constraint structure, generate efficient resource usage, which is determined only as the exchanges are made." Buchanan, "Rights, Efficiency, And Exchange: The Irrelevance of Transaction Cost” (1984) reprinted in James M. Buchanan, The Logical Foundations of Constitutional Liberty 260, 273-74 (Indianapolis: Liberty Fund, 1999). To speak of "good" development is therefore only to speak of "development of which consumers and producers freely approve on a market without being constrained by government." To speak of "good" development in any other sense—for example, to speak of "good" development undertaken by government development agencies, is senseless. Government development agencies are systematically incapable of generating "good"—i.e., efficient—economic development precisely because they use money taken from consumers without their consent (taxes) or borrowed from future generations without their consent (bonds) and use eminent domain to force landowners to give up their property (through eminent domain). The only development that comes out of government development agencies is politically successful development, which may or may not reflect the actual wishes of the consumer. But the only scientifically possible, or morally legitimate, standard of judgment for these things is the actual wishes of the consumer. Everything else is inefficient and unjust.

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