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Universities, Public Benefits, and Eminent Domain:

Both Columbia President Lee Bollinger and some of the commenters to my previous post defend the use of eminent domain to transfer property to universities on the ground that universities create "public benefits." While universities do provide important benefits to society, this does not justify allowing them to condemn property.

Most of the benefits provided by universities are "private goods" that are fully captured by their students and faculty. For example, going to college greatly increases a student's earning prospects, but that student will himself capture the benefits. Basic economics shows that there is no need for government subsidies for these kinds of private goods.

Universities do also provide some "public goods" - benefits to society that the university, its faculty, and its students cannot fully capture. Perhaps the most important is basic scientific research. Another might be educating underprivileged students, though this is less clearly a public good than basic research is, since most of the benefits are captured by the students themselves. However, both research and student tuition are already heavily subsidized by the government through a wide variety of programs. For extensive data, see this recent book by economist Richard Vedder. There is no reason to believe that they require the additional subsidy provided by the use of eminent domain. Even if additional public subsidy is warranted, the best way to provide it is to allocate additional funds earmarked for research or education, not allow universities to use eminent domain. Condemnation of property is rarely if ever actually useful for the purposes of advancing research or educating poor students. In general, research can be undertaken and students educated just as well on voluntarily purchased land. Education and research can be conducted in a wide variety of locations and thus are not vulnerable to the "holdout" problems usually cited as a justification for condemning property. Even if holdouts do become an issue, universities can and do use secret purchase and other market-based methods to get around them without resorting to eminent domain(see Point 2 in my earlier post on Columbia).

Obviously, students and faculty sometimes can benefit from acquiring land through condemnation. But the benefits in question (primarily esthetic and lifestyle-related) are not public goods that should be subsidized by the state. If universities wish to pursue these goals by acquiring additional land, they should do it by competing with other potential buyers in the real estate market.

Finally, a possible argument for allowing universities to use eminent domain is that they supposedly act only for the public interest. As President Bollinger puts it, "We are not a profit-making institution looking out for our own advantage," he said. "We are trying to do things that help the world more broadly." Unfortunately, this claim is at best a half-truth. Universities do sometimes "help the world more broadly," but their policies are also heavily influenced by the self-interest of faculty, administrators, and (to a lesser degree) students. Anyone familiar with academic politics knows that self-interest plays a major role. The mere fact that a university is a nonprofit entity does not prove that it acts only out of altruism. Self-interested behavior by universities is often perfectly legitimate, but it does undercut claims that universities should be allowed to use eminent domain because they do not "look out for [their] own advantage" and only "do things that help the world more broadly."

Even under a narrow definition of public use, condemnations that transfer property to public universities would be constitutional, since government ownership of land is automatically considered a "public use" under the federal Takings Clause and most state constitutions. Condemnations for private universities are much more legally problematic, and I would argue that they violate the Fifth Amendment and many state constitutions as well. But whatever its legal status, taking property for the benefit of universities is both unnecessary and unjust.

UPDATE: Another possible "public" benefit of universities is that they may improve the local economy. I did not address this in the original post because it is not a benefit specific to universities, but can be claimed for virtually any enterprise. However, to the the extent that this argument is used to justify using eminent domain to transfer property to universities, it is no different from the arguments used to justify condemning property for the benefit of private commercial developers. I criticize such claims in great detail here and here.

UPDATE #2: I was perhaps less clear than I should have been about what it means for a student to be able to "capture" the benefits of his own education. So long as the societal benefits created by it are reflected in increased income for the student, he or she can be said to capture those benefits and government subsizidation is therefore unnecessary. For example, it is certainly true that more educated workers are more productive than less educated ones and this benefits the economy. But their higher productivity is reflected in higher pay, and so they "capture" the benefits. In any event, I should emphasize that even if government subsidization of higher education is desirable to a greater extent than I contend, it does not follow that such subsidies should take the form of allowing universities to acquire property through condemnation.

Michael Lopez (mail):
What's good for the university is good for the world.
6.5.2006 7:48pm
Splunge (mail):
Most of the benefits provided by universities are "private goods" that are fully captured by their students and faculty.

You know, I'm sympathetic to your final point, but this argument seems woefully undersupported at best.

For example, going to college greatly increases a student's earning prospects, but that student will himself capture the benefits.

Er, taxes? The jobs he creates when he starts his business? The effect on the urban neighborhood when he buys his fixer-upper and fixes it up? A general reduction in the cost of skilled labor (e.g. medical care) because the high capital cost of entry by qualified young individuals to the field has been lowered? Et cetera.

It's an unusual argument to aver that the benefits of education, i.e. of improving the quality of a citizen's labor, accrue almost entirely to the individual. It seems ignorant of the highly interdependent nature of the modern economy, and of the multiplying effect of capital (in this case intellectual capital) and technology.

It also would seem, if true, to vitiate the entire idea of taxpayer-funded public education. I mean, what makes K-12 education so radically different from university education that the former should be not only taxpayer-supported but compulsory, while the latter should be not only voluntary but entirely on your own dime?

I'm OK with saying a line has to be drawn somewhere just because society doesn't have infinite resources, and at some point it's merely practical for the taxpayer to reduce, eliminate, or at least becomes more selective in his subsidization of other people's education, and some society's (1800s America) draw the line between elementary school and high school, some (2000s America) between high school and college, and some (UK, Europe) after college. But it's hard to see a bright line here, a clear and obvious distinction between public support of K-12 education (including eminent domain use) and largely identical public support of higher education.

I think maybe the only bright lines easily drawn are those from a socialist point of view (education should all be at the taxpayer's expense and run by the government) or the libertarian point of view (education should be entirely private, neither subsidized nor regulated by the government). If you want to draw a clear distinction between a city condemning property to build a new elementary school and a state condemning property to build five new buildings on the state college medical school campus, I think you're going to have to work harder.
6.5.2006 8:14pm
Mark F. (mail):
Even if I do receive some personal benefit from public subsidies to education, or takings from eminent domain, the fact is that I did not approve or request these subsidies, so I have no moral or ethical obligation to pay for them, just like my next door neighbor shouldn't be able to stick me with a bill because the improvements he made to his property increased the value of mine.

The primary beneficiaries of education are always the students themselves.

Also, I would argue that the personal benefits to me would be greater under a totally privitized education system. No education taxes and better educated people.
6.5.2006 8:40pm
Reg (mail):
"Most of the benefits provided by universities are "private goods" that are fully captured by their students and faculty."

I don't think this is true. Compare the prosperity of two similarly sized cities, one with a major university and one without. Where would you rather live, Ann Arbor or Flint? Not only are universities huge employers, usually paying above market wages, but businesses flock to towns for the educated workforce. The access to graduates and professors is impossible to get without a university. I'd say a city has a very real and concrete incentive to aid the prosperity of its universities.
6.5.2006 8:41pm
Huh:
I agree with both Splunge and Reg.

One question I might add is whether the University's status as a private institution rather than a public one matters at all. Would the actual eminent domain analysis be different if we were talking about, say, City College of New York or the State University of New York?
6.5.2006 8:58pm
Dan H. Hecht (mail):
While the general question of whether education is a public good may be debatable, it remains important to ask exactly who wins and loses in this particular situation. Even if one assumed education is, on the whole, a public good, that does not make every use of ED in pursuit of an educational institution's desires per se just. We can ask the usual questions: How many additional students will receive a college education from the condemnation? It seems highly unlikely to me that a small expansion at a well-endowed school like Columbia will result in anyone going to college who otherwise wouldn't have. Who will reap benefits from the "revitalization" of the area (current tenants, who will be evicted when their land is condemned, or developers and the upper-crust Columbia community)?
6.5.2006 9:07pm
David Chesler (mail) (www):
For example, it is certainly true that more educated workers are more productive than less educated ones and this benefits the economy. But their higher productivity is reflected in higher pay, and so they "capture" the benefits.

Are you really saying there is no positive externality associated with educating the educable? If you believe this you ought not stop at eminent domain, but work to shut down the transfers that are public universities, and then start on the private universities.
6.5.2006 9:08pm
Gordo:
Private university as the benefactor of eminent domain as a "public use?" This raises interesting questions. Is a private university more like Pfizer or some other developer beneficiary as in the Kelo v. New London case, or is a private university more like a railroad or a public utility? If the former, I would say "no eminent domain," because I happen to think Kelo went too far from established precedent and was wrongly decided. If the latter, Columbia would fall into a long line of private benefactors of public eminent domain power, because of the quasi-public nature of the benefits provided. Court decisions justifying eminent domain for private entities such as railroads and utilities go back well into the 19th century.

One difference between a private university and a utility is that the utility is a quasi-public, common carrier, regulated monopoly, invoking a strong aroma of The Commerce Clause in its traditional garb (before the New Deal justices expanded it to its current outer limits).

If Kelo had been decided rightly, which is to say the Connecticut Supreme Court should have been overturned on the narrow grounds of taking "a step too far," (thus not overturning decisions such as Midkiff and Berman), then the Columbia case would be quite interesting. Alas, the Court didn't.

And since that noted "pragmatist," Justice O'Connor, was in the Kelo dissent, Justice Alito will not make a difference on this one.
6.5.2006 9:09pm
Ilya Somin:
Are you really saying there is no positive externality associated with educating the educable? If you believe this you ought not stop at eminent domain, but work to shut down the transfers that are public universities, and then start on the private universities.

I am saying there are relatively few positive externalities associated with higher education (primary and secondary education is a different case) and that these few are more than accounted for by massive public subsidies for tuition and academic research. Finally, I am saying that, regardless of what the optimal level of government support for higher education is, eminent domain is a very poor way of providing it. Direct subsidies to students are far preferable.
6.5.2006 9:15pm
Paddy O. (mail):
It seems to me there should be a distinction made between the benefit a university in total provides and the benefit the specific usage of the property in question would provide. What is the public benefit from the specific property that would be gained by eminent domain? My guess is it is entirely negligible.

If this property was not taken Columbia University would still function, would still provide jobs in the community and educated folks for all the world's benefit.

We're arguing over the benefits of the existence of Columbia University when that is entirely not at issue whatsoever.

It seems the arguments being made are all or nothing, as if this property was being taken for the initial creation of a world class university. Does not the matter of mere expansion as opposed to initial creation make a difference in how the law should be applied?
6.5.2006 9:17pm
Tennessean (mail):
As an aside, I've yet to see a very compelling case for all but the most central exercises of eminent domain. The oft-relied upon "hold-out" argument even seems shabby to me. There are two things at issue in the hold-out argument which immediately jump out.

First, a hold-out might demand a tremendous fraction of the purchaser's expected benefit. So long as this does not derail the project (consider the final or only hold-out), why not? If the project is worth $10,000,000 to Columbia, everyone still benefits if Columbia only nets $1 of that, and permitting these hold-outs might force Columbia to really consider other viable alternatives.

The second problem is that multiple hold-outs might prevent a mutually beneficial deal from coming to fruition. But consider this alternative -- eminent domain does not force the sale, but it forces the considered property owners to submit to a collective representative for a sales price.

Can you imagine the price of the total property if that group went on the open market? No way Columbia pays near that much (which is, I'm sure, one reason why they want to get the property with eminent domain).
6.5.2006 9:35pm
Richard Aubrey (mail):
Reg. I'd rather live in Flushing, thanks. Ann Arbor has far too many of the kind of people who like to live in Ann Arbor.

This move also provides a public bad. That is, a man's property is his own only until somebody comes along with a reason to take it, and some way of getting a private good to some individuals in the appropriate offices.

Suppose we went along with this sort of thing on the condition that all government officials involved in the decision had to submit forensic financial statements at random intervals for the rest of their lives? Think that might slow it down a bit?
6.5.2006 9:59pm
Gordo:
Perhaps Columbia should take a page from Professor Sumin's patron, the late great Jane Jacobs, and try buying indidvual properties within the Manhattanville neighborhood, converting them to university uses, and then becoming a energizing and revitalizating (perhaps even gentrifying) part of an existing community. Instead of taking the Robert Moses, "bulldoze it down, create a sterile one-dimensional environment, and make sure all of the politicians and their cronies get their baksheesh" approach.
6.5.2006 10:06pm
Reg (mail):
I should have read more carefully. I think Prof. Somin is correct in saying:

"[economic benefit] is not a benefit specific to universities, but can be claimed for virtually any enterprise. . . . it is no different from the arguments used to justify condemning property for the benefit of private commercial enterprises."

This is one of my problems with the arguments against Kelo. Often, the public benefit will be the same whether property is kept and used by the government for a public use, or sold by the government to a private entity for its use, the government believing private use will be to the public's benefit. For example, if property is condemned and sold to a university to be a university arboretum, or kept by the local government as a city park, the benefit is likely to be the same. I don't see why who the ultimate owner is should matter, so long as the purpose of the condemnation is to benefit the public. Such a distinction can easily be made meaningless by retaining public ownership and agreeing to a long term lease. (for example Indiana recently leased out its toll road for 75 years.)

Greater fairness could be acheived by greater policing of whether the public actually does benefit, and whether compensation is just. The public usually doesn't benefit when property is taken and given to another owner, who puts it to the same or similar use, which suggests the motivation wasn't the public's benefit.
6.5.2006 10:20pm
mh:
I propose that when even Ilya agrees that a project would provide "public goods" -- including more basic scientific research, educating underprivileged students, and even helping the world more broadly (well, that last is only half-true) -- then this is probably enough of a judgment call that it shouldn't be unconstitutional.

Judges are smart people. But it sounds like, in order to apply the Fifth Amendment, they're supposed to tally up the tax benefits the university already gets, factor in the benefits of a consolidated development, weigh the other tactics Columbia could have used (which are now obviously inapplicable), consider how much of Columbia's students' education gets translated back into wages, etc. -- all of which leaves a lot of room for differences of opinion. How could the Constitution require that?

You could obviously have a a blanket rule against this kind of transfer to private parties. But to make that blanket rule plausible in this case, Ilya has to rely on a whole lot of utterly non-obvious (but possibly true!) claims about the balance of payments between Columbia and society at large.
6.6.2006 1:00am
krishv:
I think another objection would be that contrary to Mr Bollinger's claim, private universities like Columbia are in reality profit making corporations. So, justifying eminent domain on grounds of "helping the world broadly" is like skating on thin ice.
6.6.2006 1:26am
Splunge (mail):
I am saying there are relatively few positive externalities associated with higher education (primary and secondary education is a different case) and that these few are more than accounted for by massive public subsidies for tuition and academic research.

I think not. Higher education since the Second World War in the US is the major source of the basic research that produces our technology, perhaps because the work is by definition economically risky to the point of folly, and can only be done because graduate students will accept (very) sub-market wages in exchange for a degree, and because research groups need not turn any kind of profit nor even seriously account for the money they spend.

American higher education has, as an essential by-product, produced the technology that has raised American standards of living in the last 60 years to spectacular historical levels. I would be hard pressed to think of any general public investment that has paid off as well as post WW2 American university-based research. Certainly not anything as mundane as Interstate highways or government buildings, for which "eminent domain" has been used a-plenty.

I'm perfectly willing to admit that eminent domain is not an appropriate way for the public to support higher education, for any number of technical reasons. In fact, had I sat at Madison's shoulder, I'd have advised a Constitutional ban on eminent domain for any purpose whatsoever -- I mean, of what enduring real value is private ownership if the majority can void it at a whim, provided that the whim be executed only after solemn consideration and the drafting of an erudite ten-thousand word essay on The Greater Good? Feh.

However, the argument that higher education is less worthy of the use of eminent domain a priori, because it notionally generates fewer public goods than highways, courthouses or public elementary schools, I find unpersuasive on its face. To be sure, I'm maybe willing to conceded that law schools may not contribute, on balance, positively to the public welfare. But the University of Illinois graduate school of engineering? UCSF's Medical School? Berkeley's College of Chemistry? Good grief, no. I'd say these public investments have returned more benefit to the Republic, per dollar, than the construction of every public edifice in Washington D.C. from the time of Jefferson on down to yesterday morning.
6.6.2006 2:15am
Perseus:
To give his argument more intellectual gravitas, President Bollinger should have cited Publius' egregiously overoptimistic claim that those of us in "the learned professions...truly form no distinct interest in society."

On the other hand, as a non-profit organization, Columbia University is no different from IKEA.
6.6.2006 3:46am
Justin (mail):
Since the question of "public use" seems to have boiled down to policy judgments deriving from different political, rather than jurisprudential, theories, it appears that the political arenas - the State Legislature (Albany), in this case - and not the Constitution, seem to be the best forum for determining whether eminent domain is being abused by the City of New York (Columbia has no personal ED authority).

As such, it appears Kelo was decided correctly, and that it applies to this case, as well.
6.6.2006 10:11am
David Chesler (mail) (www):
What Splunge said, both ways (Universities good, eminent domain bad.)

Princeton, AFAIK, is not expanding, but there is pressure everywhere on the Northeast Corridor to turn farms into residential or industrial uses. (And farms also have positive [and negative] externalities -- all else being equal I hope that farms, which are a form of open space and a piece of history, continue to exist in the northeast.) Long preamble, I knew a man in greater Princeton who owned a farm. (He rented out the land for ag. research, and he rented out the former chicken coops to students who used them as garages.) He used to say "I wouldn't sell this land for a million dollars; I wouldn't buy another for a dollar." Go figure FMV on that!

And, FWIW, I grew up in a house Robert Moses built, with many of my neighbors coming from neighborhoods he had destroyed. (Personally I'd come there from the bit of Washington Heights just north of what until recently was known as Columbia Presbyterian Hospital.)

I'm not terribly sympathetic to Columbia's attempt to grab land. Universities are supposed to take the long view. (Dean Henry Rosovsky supposedly told an undergraduate "You're here for four years; I'm here for life; Harvard is here forever.) Going fact-specific, the many of the areas north and east of Columbia has been blighted for decades (and Cathedral Parkway, with its southern exposures over Central Park, ought to have been a speculators dream) -- that is when Columbia should have been buying up land for future use.)
6.6.2006 12:32pm
David Chesler (mail) (www):
What Splunge said, both ways (Universities good, eminent domain bad.)

Princeton, AFAIK, is not expanding, but there is pressure everywhere on the Northeast Corridor to turn farms into residential or industrial uses. (And farms also have positive [and negative] externalities -- all else being equal I hope that farms, which are a form of open space and a piece of history, continue to exist in the northeast.) Long preamble, I knew a man in greater Princeton who owned a farm. (He rented out the land for ag. research, and he rented out the former chicken coops to students who used them as garages.) He used to say "I wouldn't sell this land for a million dollars; I wouldn't buy another for a dollar." Go figure FMV on that!

And, FWIW, I grew up in a house Robert Moses built, with many of my neighbors coming from neighborhoods he had destroyed. (Personally I'd come there from the bit of Washington Heights just north of what until recently was known as Columbia Presbyterian Hospital.)

I'm not terribly sympathetic to Columbia's attempt to grab land. Universities are supposed to take the long view. (Dean Henry Rosovsky supposedly told an undergraduate "You're here for four years; I'm here for life; Harvard is here forever.) Going fact-specific, the many of the areas north and east of Columbia has been blighted for decades (and Cathedral Parkway, with its southern exposures over Central Park, ought to have been a speculators dream) -- that is when Columbia should have been buying up land for future use.)
6.6.2006 12:32pm
frankcross (mail):
Just for the economic record, workers do not capture the social benefits of education. For example, while they get higher pay, this is set by supply and demand and, just as with product purchases, there is a consumer surplus that the employer gains. And to the extent that they create valuable knowledge, it has it's own externality benefits. Of course, this is true of lots of things that the government needn't subsidize.
6.6.2006 1:01pm
David Chesler (mail) (www):
there is a consumer surplus that the employer gains

Of course there is the opportunity cost that the employer who would have employed this over-educated worker as a ditch digger no longer gets as that employer's consumer-of-labor surplus. (I guess that the consumer-of-labor surplus scales with the income, so that the employer of educated workers profits more from each worker than does the employer of less-educated workers.) There are second-order opportunity costs as different workers displace other workers, and there are varying returns as more people get college degrees. And something happens when we shift from educating the best and brightest at CUNY and educating the richest and WASPest at the Ivies to the current model.

Still, as Emil Faber told us, "Knowledge is Good".
6.6.2006 1:43pm
dick thompson (mail):
The problem I see with a lot of the arguments is that as a society we need not only Ann Arbors but also Flints, unless you think the residents of Ann Arbor would work in the kind of industy that Flint has. Can you really imagine your latte drinking compadres of Ann Arbor lining up to work on an assembly line in an auto factory?

Since most of the people commenting here are well educated (supposedly - at least degreed which is not the same thing at all) the natural inclination would be to support the cultural improvements of the universities. Unfortunately your cultural improvements do not resonate well with most of the country. How then do you allow for the inclusion of all cultural artifacts to exist and how do you handle the displacement of people who have lived in an area for generations when their land is taken to build a shopper's paradise for the upscale, Starbucks buying, boutiques of the rich and famous. Don't the displaced people also have rights?

In the case of Kelo, the purpose of the displacement was to get Pfizer to build their facility there. Pfizer has already done so. Now they decide that since they have a Pfizer, then they might just as well go forth with a bunch of upscale establishments to take money from the Pfizer workers and the hell with the residents of the city who have llived there for generations. Is that the point you support in eminent domain? If so, then I really have to disagree with your whole POV here.
6.6.2006 10:23pm