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[Nicole Garnett (guest-blogging), February 16, 2007 at 3:57pm] Trackbacks
Is More Money the Answer to the Public Use Problem?

My final post responds to the common suggestion that more money is the "answer" to the public-use problem. (Many thanks, again, to Eugene for inviting me to guest blog this week. It's been great fun!)

First, The Relationship Between Compensation And Deterrence Is Uncertain

"More compensation" proponents frequently argue that above-market compensation will deter inefficient takings. The difficulty with this argument, however, is that Takers tend to respond to political incentives rather than economic ones. And, in the economic development context, political incentives may favor overinvestment in questionable projects. For example, the fact that Takers n frequently give away property as part of an "incentive package" may suggest that the deterrent effects of increased compensation will be limited.

Proposals to limit Takers ability to spend state and federal funds on economic development takings offer a more promising way to deter inefficient projects. While Takers may well perceive that the political costs of spending someone else's money are very low, local officials spending local money are constrained by the political need to keep taxes low. They also operate underlegal constraints that disfavor an aggressive takings policy, including debt- and tax-limitations. Were local Takers forced to internalize the costs of their takings, it is reasonable to assume that eminent domain would become a much less attractive economic development tool. (One potential pitfall of this approach is that it might increase the risk of undercompensation, as many state relocation assistance laws limit protection to projects funded by state or federal funds.)

Second, Higher Compensation May Impede Political Resistance

If higher compensation levels will not deter inefficient government takings, then effective political resistance becomes all the more crucial. Yet, Takers may use high compensation levels to limit resistance. Both Kelo and Poletown illustrate this phenomenon. In Kelo, only seven property owners objected to the project, which involved the acquisition of 115 parcels. The other owners' willingness to sell may have reflected the fact that the State of Connecticut guaranteed residents and small business up to $250,000 for downpayment assistance and business reestablishment. Similarly, William Fischel has observed that in, Poletown , the City's generous compensation offers were quickly accepted by the younger residents, leaving behind a relatively small cohort of older Polish residents to fight the GM project. While Poletown was a relatively integrated community, most of the African-American residents moved voluntarily. This created the impression that the resistance was a racial issue, a fact which made it virtually impossible for local politicians in the majority-black city to oppose the project.

Third, Private Takings May Generate Unique Dignitary Harms

Undercompensation is frequently used to justify public-use review, but proponents of judicial intervention (including, admittedly, myself) tend to gloss over the precise connection between the amount of compensation and the purpose of a taking. Market-value compensation might be "unjust" because owners are systematically undercompensated when their property is taken by eminent domain. But, the question of what level of compensation is "just" applies to all eminent domain takings. When confronted with a property owner's assertion that they could accept their fate if the government had taken their land for a traditional public use, an economist might "impatiently exclaim, 'but you've lost your home in either case!'"

There are, however, a number of reasons why the size of the uncompensated increment might vary with a taking's purpose. First, "private" takings may generate collective anxieties that public ones do not. Recall, for example, Justice O'Connor's warning that, after Kelo, "[t]he specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory." Or consider the Becket Fund for Religious Liberty's warning, discussed in Ilya's recent post, that Takers might condemn churches, which do not pay property taxes, in order to transfer the property to for-profit entities, which do.

Second, the government's decision to take property from one private owner and give it to another may generate what might be called "expressive" harms. Owners may perceive the taking as an insult—tantamount to a government declaration that their property would be put to a more socially beneficial use by someone else. Indeed, some owners sound as if they were motivated to file public-use claims in part because they are so offended by the message sent by the taking.

Third, in the economic development context, an exercise of eminent domain almost always generates assembly gains that raise the value of the property. Because the fair market value determination is made before the condemnation, however, the original owner does not share in any increased of that value. The allocation of the "condemnation bonus" entirely to the private beneficiaries of takings may demoralize property owners.

Kelo moved the debate over the proper scope of the eminent domain power out of the courts and into the legislatures, where owners' dignitary interest in their property—and the collective anxieties generated by the knowledge that owners are not afforded property-rule protection from private takings—rightfully make up part of the case for substantive limits on the eminent domain power.

Viscus (mail) (www):
All of the posts by Garnett have been interesting, and this one is no exception. However, I think several ideas put forward by Garnett simply are not persuasive.

Garnett writes:

Higher Compensation May Impede Political Resistance



First, this presupposes that in a political battle, that those who oppose takings should win. If greater compensation creates more winners, and thus lessons political resistance, that seems like a good thing to me. We should maximize the losers in order to increase political resistance?

Second, as Kant might say, one should not use people as means, rather than interact with them as an end. I can't see how turning someone who is perfectly happy with a situation into a malcontent who will join you in your political resistance is anything other than using that person as a means.

Garnett writes:

Because the fair market value determination is made before the condemnation, however, the original owner does not share in any increased of that value.


Why should property owner's that actively oppose an economic development project enjoy any of the increase in value from that project?? Such people have done absolutely nothing themselves to contribute to the increase in value. There does not seem to be any good reason to share it with them. If someone puts forth effort, and through those efforts creates value, I can see an argument for allowing them to share in that value. I don't see the argument for systematically allowing a certain class of individuals to share in value they do not create, and in fact, actively attempt to prevent.

Perhaps there is an argument that those who are economically disadvantaged should share in value they did not create, on humanitarian grounds. But I do not think that property owners as a class could be considered economically disadvantaged. Further, even if we did want to redistribute unearned wealth to property owners, is there any reason to think that this should burden a particular project rather than on society in general?

Those are some criticisms of here conclusion.

The one part of the conclusion I especially enjoyed had to do with unique dignitary harms. Now, if only libertarians would adopt a more expansive view of this idea, then perhaps they would be more respectable. It seems that from the libertarian perspective, just about any dignitary harm foisted on another is justified if there is consent. That is, using people and disregarding their dignity is okay if they consent. (And of course, from the libertarian perspective, economic disadvantage, intellectual inferiority that does not rise to the level of incapacity, and other factors should be ignored when evaluating the validity of consent.) But a superior ethical view would be that one does not violate another person's dignity, regardless of whether "consent" is forthcoming.

Perhaps such strong libertarian opposition to takings is motivated by extreme view that consent is practically the only thing that matters (or, alternatively, is overwhelmingly the most important factor in nearly every case). Those of us who have more expansive concerns for human dignity disagree.
2.16.2007 6:10pm
American Psikhushka (mail) (www):
Viscus-

While I agree with your points about using people as a means I object to several of your later points:

Such people have done absolutely nothing themselves to contribute to the increase in value. There does not seem to be any good reason to share it with them. If someone puts forth effort, and through those efforts creates value, I can see an argument for allowing them to share in that value. I don't see the argument for systematically allowing a certain class of individuals to share in value they do not create, and in fact, actively attempt to prevent.

This seems close to the "labor theory of value", which is highly flawed (to put it charitably). Not all value is created by labor or significant amounts of labor. There is intellectual property, intrinsic value, aesthetic value, etc. Think of a model's image or a tremendously successful song that took minutes to write. Much of the time labor is a commodity input. It would take the same amount of labor and raw materials to produce a calendar featuring a supermodel as one featuring one of my ex-girlfriends - guess which would be more valuable, even though the same amount of labor was used?

And why should a private taker benefit? After all they are just providing labor, without the necessary property (land capital)they wouldn't have a project. Labor is just as much a commodity as land, and it can be more so if the land is unique due to its location or features. Perhaps an additional deterrant to eminent domain would be capping the return a private taker can make to that of a municipal bond and paying the surplus to the takees. Something tells me private takings would take a nosedive if that were the case.

And note above the returns made from non-labor value are not "unearned" unless you want to claim that all returns from other sources of non-labor value are unearned.

That is, using people and disregarding their dignity is okay if they consent. (And of course, from the libertarian perspective, economic disadvantage, intellectual inferiority that does not rise to the level of incapacity, and other factors should be ignored when evaluating the validity of consent.)

No, libertarians are against coercion and in some cases what you mention can be coercion. But of course the big picture has to be taken into account. For example if a woman and her family tries to file false claims for consensual sex against someone they think they can extract money from (partially through violence, threats of violence, false claims of racism, etc.) but not for the consensual sex she had with her teacher ex-boyfriend the "coercion" is suspect. In fact it would be called fraud and other crimes/torts on the part of the woman and her family.

Concerns for human dignity are commendable, but not when they are used to commit crimes and torts by frauds, liars, swindlers, and criminals.
2.16.2007 8:24pm
Andy Freeman (mail):
> Why should property owner's that actively oppose an economic development project enjoy any of the increase in value from that project?? Such people have done absolutely nothing themselves to contribute to the increase in value.

The whole justification of the takings is that the economic development would not occur without their property. That makes them essential.

If their property was not essential, the project could proceed without it. "Equivalent value" property could be substituted.

Why shouldn't they share in the value of the development that their property makes possible? If you think that their price is too high, you're free to chose other partners.
2.16.2007 9:49pm
Viscus (mail) (www):
Andy Freeman,

Because property ownership is not equivalent to a contribution. God (or nature) is the one that made the property, not the current owner. So if you want to count the property itself as a contribution, then maybe we should give credit to God (or nature).

Mere passive ownership of property is not equivalent to contribution.
2.16.2007 11:02pm
Viscus (mail) (www):
Psikhushka,

First of all, I disagree that value is "earned" through mere passive existence. Only that which is cultivated through effort is earned. Whether we should allow individuals to keep that which they merely possess but have not earned, like their good looks or their inborn talents is an entirely seperate question from whether or not we should, as a matter of public policy, actively reward the mere passive possession of such traits. I do not believe in rewarding mere passive possession of unearned attributes. Perhaps a supermodel is better looking than your girlfriend. But, it does not follow that in a passive state of being that she is more deserving than your girlfriend. Only when people actively apply themselves can they be said to have "earned" something.

Mere passive ownership of property does not deserve to be rewarded. Neither does mere passive possession of looks or passive possession of talents.

By the way, intellectual property is not rewarded for the passive possession of talent. Only after one actively creates something are they rewarded any intellectual property rights in their creation.

I think the labor theory of value is on firm ground. I think John Locke had is right in the Second Treatise of Government when he said the following:


Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men: for this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others.


It really is only by labor that one earns a superior right to anything created by God.
2.16.2007 11:20pm
Viscus (mail) (www):
Andy asks the following, concerning passive landowners who would like to extort the profits from the enterpretenuership of others:


Why shouldn't they share in the value of the development that their property makes possible?


Because they are in no way responsible for creating the value in question. If they created the land, then this would be a legitimate question. But they did not create it. The land was here before they were born, and the land will be here when they die.
2.16.2007 11:25pm
Viscus (mail) (www):
Psikhushka,

"libertarians are against coercion"

I don't think this is true in fact, though libertarians claim it is true in theory.

Does a libertarian think that it is okay to charge someone who is about to die of thirst a million dollars for a glass of water?

Most actually think that this form of coercion is acceptable, and that in fact we should use the power of the state to coerce the person who was dying of thirst into paying if they later resist paying on their "contract." It is not that most libertarians are against coercion. They only insist that it can only rightly occur after it is consented to in the past. And they do not consider the extremely coercive conditions that are often part and parcel of the past "consent" when considering the validity of coercing an unwilling person based on their past consent.

Actually, it is not coercion that is really the focus of libertarians. They actually are fine with coercion. In practice. The thing is, they just don't call it coercion if certain conditions are met. Your alternative to buying a glass of water might be medically serious dehydration, but that isn't considered a bar on allowing a bad actor to exploit your situation.

Libertarians simply have an obsession with consent. That is all or nearly all that matters. So, if someone consents, you can nearly do whatever you like with or to them. Unless you lack capacity, if you consent to something, too bad. Further, capacity is narrowly construed to ignore differences in intelligence, emotional well-being, past abuse, emotionally manipulative behavior over a period of time, etc.

Consent is a very poor substitute for human dignity.

Which is why libertarian conceptions of human dignity should not be taken seriously.
2.16.2007 11:45pm
American Psikhushka (mail) (www):
Viscus-

First of all, I disagree that value is "earned" through mere passive existence. Only that which is cultivated through effort is earned.

Incorrect. Labor needs capital to produce the most value. Labor does have value, but it is a commodity for the most part.

By your logic a lot of the third world countries should be wealthy due to their large populations.(lots of available labor) But they're not. Why? Because there is little capital to invest there. (Note a system to protect property rights is also necessary for capital investment and wealth creation.)

Whether we should allow individuals to keep that which they merely possess but have not earned, like their good looks or their inborn talents is an entirely seperate question from whether or not we should, as a matter of public policy, actively reward the mere passive possession of such traits.

No, people own their bodies and their talents, and they are none of "society's" business. What about people that are strong and have a lot of energy? Should we limit their labor or mess with their endocrine systems so they work at the average level?

Self-ownership is the cornerstone of human rights and property rights. Attempts to infringe on that generally progress towards slavery. And it is still slavery if "ownership" is claimed by the collective or "society".

Perhaps a supermodel is better looking than your girlfriend. But, it does not follow that in a passive state of being that she is more deserving than your girlfriend. Only when people actively apply themselves can they be said to have "earned" something.

No, when we are talking about economic value the market decides value. Most likely only friends and family would buy a calendar featuring one of my ex-girlfriends. One featuring a model would sell many more, that's why publishers print them. People aren't going to pay $50.00 to hear me play the kazoo, but they will pay a similar amount to hear talented, well known musicians. Again, its like someone that is strong or has a lot of energy - one is entitled to legally exploit the value of their body, ideas, attributes, etc. however they wish. The market decides value, the market decides who is "deserving".

Mere passive ownership of property does not deserve to be rewarded. Neither does mere passive possession of looks or passive possession of talents.

Wrong. In the case of personal attributes people own their bodies and attributes and can employ them however they choose.(legal employment) This includes labor but also includes intellectual property, performance, exhibition, etc.

In the case of capital investment, people have a right to profit from their passive ownership of capital when they invest it. They are putting it at risk and forgoing their use of it for enjoyment, so they have a right to be rewarded for that. This also benefits society because it helps to employ labor.(see above)

By the way, intellectual property is not rewarded for the passive possession of talent. Only after one actively creates something are they rewarded any intellectual property rights in their creation.

No, one doesn't have to create something to be rewarded for it. There are people that only sell information, ideas, opinions, and expertise. Consultants, designers, doctors, professors, psychologists, etc...

I think the labor theory of value is on firm ground. I think John Locke had is right in the Second Treatise of Government when he said the following....It really is only by labor that one earns a superior right to anything created by God.

No, the labor theory of value is highly flawed. I could labor day and night at catching cockroaches and putting them in ornate cages, but few people are going to buy them for pets. People would subjectively value the fruit of my labor - cockroaches in nice cages - and determine that they were not worth buying. Hence my labor had no value.
2.17.2007 2:43am
American Psikhushka (mail) (www):
Viscus-

As a side note Locke did state some important concepts in the Second Treatise, but did not go into some of the other things that are needed to describe the process of value and wealth creation.
2.17.2007 2:48am
American Psikhushka (mail) (www):
Viscus-

Because they are in no way responsible for creating the value in question. If they created the land, then this would be a legitimate question. But they did not create it. The land was here before they were born, and the land will be here when they die.

No, they invested their capital - the fruits of their labor and value creation - to buy the land. Therefore they own it. Since they own it they have a right to use it, sell it, or refuse to sell it. Since they put their capital at risk, they have a right to be rewarded for appreciation in its value.
2.17.2007 2:54am
American Psikhushka (mail) (www):
Viscus-

Does a libertarian think that it is okay to charge someone who is about to die of thirst a million dollars for a glass of water?

I don't and I think most others would not as well.

Most actually think that this form of coercion is acceptable, and that in fact we should use the power of the state to coerce the person who was dying of thirst into paying if they later resist paying on their "contract." It is not that most libertarians are against coercion. They only insist that it can only rightly occur after it is consented to in the past. And they do not consider the extremely coercive conditions that are often part and parcel of the past "consent" when considering the validity of coercing an unwilling person based on their past consent.

I think you're setting up a lot of strawmen here to suit your beliefs and agenda. Do you have examples of what you describe?

Your alternative to buying a glass of water might be medically serious dehydration, but that isn't considered a bar on allowing a bad actor to exploit your situation.

I stated that I for one and I believe most other libertarians wouldn't agree with the million dollar glass of water thing. More strawmen.

Unless you lack capacity, if you consent to something, too bad. Further, capacity is narrowly construed to ignore differences in intelligence, emotional well-being, past abuse, emotionally manipulative behavior over a period of time, etc.

No, libertarians tend to have reasonable beliefs about consent. I don't know what your agenda is here, but it certainly doesn't include accurately describing the beliefs and views of libertarians.

Consent is a very poor substitute for human dignity....
Which is why libertarian conceptions of human dignity should not be taken seriously.


Let me guess - your conception of human dignity should be taken seriously. Well, let's hear it - what's you're conception of human dignity?
2.17.2007 3:13am
ambrose (mail):
Holmes once said the life of the law is not logic. Meaning, I assume, that abstract reasoning from first principles sometimes to the wrong conclusion. The ownership of real property is merely a bundle of rights as defined by our laws. Condemnation is only one of those laws. It recognizes that on occasion the community need for the property is greater that the wishes of the individual. Fairness dictates that the community should compensate the individual for the property taken. If the community and the individual cannot agree on the compensation, then compensation must be determined by should be determined by a third party usually the courts. The rest is just an argument about how much is fair. Condemnation proceedings are just a formal way of determining fairness. The first question should be when is the community need great enough to use condemnation. I have problems with taking private property to transfer it to another for purely economic use or to lease it for another for private use. That is, the community need is not great enough to justify the taking. The present rules are not sufficient to define what is the public use necessary to justify a taking. The SC, wisely, left this to the legislatures.
2.17.2007 9:33am
Anonagain:

The thing is, they just don't call it coercion if certain conditions are met. Your alternative to buying a glass of water might be medically serious dehydration, but that isn't considered a bar on allowing a bad actor to exploit your situation.

You may not like that the definition of "coercion" includes the threat of force, but it's obvious that libertarians aren't using your sense of the word. You'd like to call any choice that's made against the backdrop of far worse alternatives "coerced." Well, good for you. The libertarian position doesn't become inconsistent if you redefine a term mid-debate.

And it hardly bears mentioning, but: what one is "okay with" in the sense of thinking it shouldn't be outlawed, and what one morally condones can, indeed, differ.
2.17.2007 1:34pm
American Psikhushka (mail) (www):
Anonagain-

You may not like that the definition of "coercion" includes the threat of force, but it's obvious that libertarians aren't using your sense of the word.

Who said that? Every libertarian that I have encountered, including myself, includes the threat of force in the definition of coercion.

And note that there are various laws - civil and criminal - governing the "million dollar glass of water" scenario. I don't hear of many libertarians calling for the repeal or change of those laws.
2.18.2007 1:50am
American Psikhushka (mail) (www):
ambrose-

Holmes once said the life of the law is not logic.

I'm just glad eminent domain and the like only apply to real property, and that people are protected by the Constitution, civil, and criminal law. Who knows what atrocities governments and "communities" would try to commit if they claimed they could violate people's rights using eminent domain principles.
2.18.2007 1:54am
TDPerkins (mail):
I was writing this uncomfortably long post to respond to viscus, but on reading down I discover his views were handled already, and efficiently.

Thank you, Psikushka.

Yours, TDP, ml, msl, &pfpp
2.18.2007 12:41pm
ambrose (mail):
Psikushka, you are inconsistent. You favor Consitutions, civil and criminal law. You claim that eminent domain principles should not apply in areas other than real property, but they do and you apparently accept them. That is you accept restrictions on your behavior for the protection of an organized government. You pay taxes. This is the taking of personal property for the benefit of the government without compensation. If you transport drugs in your car, the government can seize it without compensation. The laws of a government define what it means to own real property. The law of eminent domain is for the protection of rights the land owner. It is a procedure for compensating the owner of land if the community determines it is necessary to use that land for the benefit of the community.
2.18.2007 10:16pm
American Psikhushka (mail) (www):
ambrose-

You claim that eminent domain principles should not apply in areas other than real property, but they do and you apparently accept them.

What property does eminent domain apply to other than real property?

And I stated that eminent domain does not apply to people and their parts because people cannot be owned - that is called slavery and is forbidden by the Constitution, various state and federal laws, and international law. Same thing for people's body parts - if you touch me that is assault at minimum, not a "taking", regardless of whether or not you are part of the government.

That is you accept restrictions on your behavior for the protection of an organized government. You pay taxes.

Legal restrictions on behavior. Slavery is illegal. So is assault, battery, and any other crime against a person.

This is the taking of personal property for the benefit of the government without compensation. If you transport drugs in your car, the government can seize it without compensation.

In that case I would be found guilty of a crime through due process. That isn't eminent domain. Eminent domain would be taking my car just because the local bureaucrats wanted to, claiming it was good for the "community" somehow.

The laws of a government define what it means to own real property. The law of eminent domain is for the protection of rights the land owner.

Right - and eminent domain applies only to real estate - land, buildings, etc. It doesn't apply to people, because people can't be "owned" because that is called slavery, which is illegal.

It is a procedure for compensating the owner of land if the community determines it is necessary to use that land for the benefit of the community.

And it doesn't apply to people. If a "community" was claiming to own or control people they would have much bigger problems than eminent domain, because they would have massive civil and criminal liability for slavery, assault, human trafficking, etc.
2.19.2007 7:45am
Andy Freeman (mail):
> Because they are in no way responsible for creating the value in question.

Which value? They paid, with their labor, for the property that enables the creation of the post-seizure value. Said labor also compensated folks who were responsible for its pre-seizure value.

And, we're almost never talking about seizing land to give someone a drink. We're talking about seizing land to let someone build a shopping mall.

Note that it is almost always possible for the project to be built elsewhere, so we're actually talking about coercing them for the convenience of others.
2.20.2007 1:08am