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Big Government for Its Own Sake:

A while back, I had a post, "George Bush, liberal darling" stating that liberals should like George Bush for his vast expansion of federal spending. I received many outraged emails, and many links from outraged liberal bloggers, protesting that liberals don't like Big Government for its own sake, but rather support using the institution of government for wise, liberal ends. I accept that that these protestations were sincere. But consider the lineup in Raich and Kelo. Then consider the legal gymnastics it takes to consider local medical pot part of "interstate commerce," and to consider taking people's home and giving them to Pfizer a "public use" in the face of two hundred years of precedent that A to B transfers are illegitimate; and the fact that "liberal ends" were certainly not involved in Raich, nor in Kelo (see Justice Thomas's dissent); and consider that the liberal Justices are not exactly shy about invalidating laws when it strikes their fancy. I think a good argument can be made that the more liberal Justices on the U.S. Supreme Court do indeed support Big Government for its own sake.

Takings and Privatization:

For many years, people who generally lean pro-free-market and small-government have argued that when the government does things, it should usually do them through private entities. Don't have the government run utilities; have them be run by private companies. Don't fund solely government-run schools; even given a public commitment to government-funded education, it's better to have much (in the view of some, all) of that education be conducted by private schools. If you're going to pay for housing for the poor, do it through vouchers, not through government-run housing projects.

Moreover, you generally shouldn't burden the private organizations with common-carrier-like "you must serve everyone" requirements, at least unless they're monopolies. Better leave landlords and educators, for instance, free (or mostly free) to decide whom to let in, and on balance their economic self-interest will generally yield optimal results. (I set aside here the debates about bans on discrimination based on race, religion, sex, and so on; the common carrier model would ban all discrimination, or all discrimination found to be "unreasonable" by some government decisionmaker, and not just discrimination based on certain proscribed categories.)

My sense is that this is indeed generally a very good policy: Once you decide that the government should be funding or assisting some services, you should nonetheless prefer that they be privately provided (better yet, competitively provided), of course with some exceptions. There are costs to this approach, but they are less than the costs of inefficient government operations. "The public end may be as well or better served through an agency of private enterprise than through a department of government." Berman v. Parker, 348 U.S. 26, 33-34 (1954).

The funny thing is that, in Kelo v. City of New London, it is the (mostly liberal) majority's test that would give the government flexibility to serve public goals by taking property and selling it to private parties, when the government thinks the private parties will be better positioned to provide the public benefit. And it is the conservative dissenters' test that would give the government a strong incentive to own and operate various enterprises itself, or insist that whoever owns and operates them labor under the burdens of being a "common carrier."

Under the dissenters' view, if the City of New London wants to take property to run a shopping mall, which would presumably provide more jobs and government revenue, it's free to do so. But if it wants to take property and resell it to a private shopping mall owner, it may not. True, the latter solution isn't the pure free market: The mall owner would be getting a government benefit in the form of property taken from the original owners (albeit with compensation), just as school choice programs get a government benefit in the form of money taken from taxpayers. Still, it seems better than the City running retail stores — yet the dissenters' approach would give the City an incentive to do that, rather than lining up more efficient private businesses to do it.

Now there are certainly other arguments in the dissents' favor. Perhaps Justice Thomas is right that the original meaning of the "public use" requirement was to mandate that the property be owned by the public or by a common carrier, and that we should therefore insist on this meaning. Or perhaps Justice O'Connor is right that without some such requirement, the government would have too much power to merely take property from one person to another, with no real public benefit. Or one could argue that as between (1) no takings, (2) takings of property to be owned and operated by the government, and (3) takings of property to be owned and operated by private parties, but for a public benefit, #3 is indeed more efficient than #2, but #1 is most efficient of all — and that we therefore should allow only #2, precisely because its inefficiencies will provide a natural deterrence to takings, and push the government more often into the best position, #1. I'm certainly sympathetic to finding some constitutional limit to government power here.

Nonetheless, if we're evaluating the practical benefits of either approach, we might want to be skeptical of an approach that favors government ownership or operation of publicly useful enterprises over private (albeit government-assisted) ownership or operation.

UPDATE: I should stress, by the way, that my point isn't just that a "government ownership and operation is OK, private ownership and operation is not" rule creates perverse incentives. The question is also whether a rule that disfavors privatized but government-assisted enterprises compared to purely government-run enterprises makes sense, given that we generally think privatized enterprises are better.

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Kelo Opinions:

Setting aside who's right, I thought the majority and the two dissents were really very well-crafted -- readable and persuasive arguments in favor of the positions they were defending. The same was true of all the opinions in Raich v. Ashcroft; fine examples of legal writing.

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Kelo Discussion at SCOTUSblog:

I'm probably off substantive blogging for the rest of the day -- some stuff needs doing in my real job -- so I doubt I'll be able to comment in a timely fashion (or even read it until tomorrow), but there are a bunch of first-rate people commenting (and, I'm told, disagreeing with my post below).

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Kelo:

I've been trying all day to craft a post that could capture my astonishment--ok, outrage--towards this ruling. But I keep getting so wound up that I have to scrap it. I'll just give you a few snapshots of my false starts as Subject Lines for posts since mid-day today:

1. Government by the "Honor System": The only restraint on government violations of the Bill of Rights is the "honor system"--certainly would make it easier to conduct the war on terror and censor political criticism if those rights were also enforced by the honor system...

2. Wal-Mart Celebrates: Now Wal-Mart need not lobby for huge development and tax subsidies for its new stores, it can just get the government to take the land it wants...

3. Would the Supreme Court feel the same way if Pfizer was building its new office on the Chevy Chase Country Club?...

You can probably get the drift of why I scrapped each of these as perhaps being a bit too over-the-top.

So I'll just add--temperately enough, I hope--that I thought the purpose of the Bill of Rights was to create rights that would be protected from the government, so that we wouldn't have to rely on the honor system of the government to do the right thing, but had rights that would be enforced. Why not apply the honor system to constitutional protections for speech, religion, and criminal procedure? We can't trust the government when it comes to allowing a prayer at a high-school graduation, but we can when it comes to taking an old-woman's house in which she raised her family? It would sure make the war on terror easier if the government could just arrest anyone in the name of the public good as long as it cut an undercompensatory check for the inconvenience afterwards.

The potential for abuse in this ruling is obvious, and the fact that governments cannot be trusted to do the right thing is exactly the reason why the Michigan Supreme Court reversed Poletown earlier this year. And Justice Thomas hits the nail on the head when he observes that it won't be (and historically hasn't been) the rich and powerful who are finding their homes condemned and given to corporations, Wal-Mart, or simply someone who will build a bigger house and promise to pay more property taxes (as Will Wilkinson observes, "That is, if you have something somebody richer than you wants, watch out.").

Rather than laundering it through the government, why not just skip the government as middleman and let Donald Trump take whatever he wants whenver he wants it, and just write a check for it? Then we could skip the pretense that this is anything but rent-seeking.

Forgive me for blowing off a little bit of steam...

Perspectives on Kelo: There's lots of blogging about Kelo both here and elsewhere today, so I thought I would just add three quick points:

  1. The opinions in Kelo remind me a lot of the opinions in Gonzales v. Raich. The Court has once again reaffirmed the academic common wisdom — in Raich, that the commerce clause power is virtually limitless, and in Kelo, that almost everything is a public use. Both cases involved the same type of line-drawing challenge, in which the Constitution requires a line to be drawn but it's pretty hard to draw such a line in practice. (It's difficult to distinguish interstate commerce from intrastate commerce and commerce from non-commerce, and it's difficult to distinguish public use from private use.) In both cases, the Stevens majority opinion recognized that a line existed in theory, but put it so far out of the way that it won't bother anyone.

  2. Is it just me, or does Justice O'Connor's dissent have the feel of an opinion that started out as a majority draft? This is just speculation, and perhaps idiosyncratic speculation at that, but I wonder if she had a majority at conference and lost Justice Kennedy along the way.

  3. The next time someone insists that conservatives like Justice Thomas will do anything to defend corporate interests against the powerless — and particularly against powerless racial minorities — feel free to point them to Justice Thomas's eloquent dissenting opinion in Kelo. So much for that idea.
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Kelo Topic Page:

Rounds up commentary on Kelo at The Truth Laid Bear.

"The Great Equalizer":

Pittsburgh's Mayor Tom Murphy comments on Kelo:

But [Murphy] said eminent domain was a key tool in convincing the Pittsburgh Wool Co. to make way for an expansion of H.J. Heinz Co. facilities, a move that he said, kept Heinz here and paved the way for Del Monte Foods Co.'s purchase of the facilities.

"There are 1,500 jobs here in Pittsburgh that wouldn't have been here if we had not had the ability to work with Heinz," Murphy said.

Eminent domain "is a great equalizer when you're having a conversation with people," Murphy said. "It's about having a fair conversation and not being held up by people who do not have any interest in the community, but only have an interest in putting more money in their pockets."

And Tony "The Great Equalizer" Soprano just wants to have a "fair conversation" with you about your construction project...

Institute for Justice and the Castle Coalition:

Kelo was litigated by the Institute of Justice, a first-rate libertarian public interest law firm; I think it's much to their credit that they could get even 4 votes -- the last case that squarely considered this issue, Hawaii Housing Authority v. Midkiff (1984), was unanimous, and Justice O'Connor and Chief Justice Rehnquist were on the side of the government there. I don't agree with them entirely as to Kelo, but I still very much respect their work, in this case and in others.

IJ has also been very successful fighting battles in lower courts, either under state constitutions or getting policies struck down under the "rational basis" test, the same test that now applies in the eminent domain "public use" analysis. Constitutional scholars may tell you that rational basis cases are virtually impossible to win (at least unless the courts conclude that the law improperly discriminates against some group, almost never an economically defined group). But IJ somehow manages to win them.

Finally, the IJ people are masters at using their cases to marshal public opinion. That often helps them pressure the government to change its policy even without a final decision in litigation. And it also helps them use cases, whether they win them or lose them, to build pro-economic-liberty sentiment generally; they're especially good at showing how economic liberty helps the little guy.

They're trying to do this with Kelo (and to incidentally raise money to fund their future work). Here's their new campaign:

Stop Eminent Domain Abuse

The Supreme Court put an UP FOR GRABS sign on your home. It said it’s OK to take your property and give it to a politically connected private developer because that developer might be able to produce more taxes and jobs off your land.

Fight back! Join the Castle Coalition!

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More on Kelo:

The core debate in Kelo, as I mentioned yesterday, is over whether the "public use" requirement of the Takings Clause means (1) "the taken property must be owned by the government, or sold by the government to a common carrier that has the legal obligation to serve everyone" or (2) "the taken property must be used by the government as a means of benefiting the public, even if the government benefits the public by selling the property to a private property owner."

I argued that, if one is focusing on the practical merits, requirement 1 seems to fit uneasily with a pro-private-enterprise/pro-market philosophy: In those cases where the government is trying to accomplish some goal using the eminent domain power — an inherently somewhat unlibertarian power, but one that the Constitution does reserve to the government in some measure — there are strong pro-private-enterprise/pro-market arguments in favor of letting the government do this using private businesses, rather than doing it itself or imposing a common carrier obligation. For more details, please read that post.

Let me use the same approach to consider three other arguments I've heard many people make:

1. These redevelopment takings, people say, primarily benefit private businesses, and benefit the public only indirectly. But so what? A key argument for private enterprise is that private benefits may yield public benefits — perhaps indirectly, but much more reliably than attempts to produce the public benefits through more direct government action. A plant may benefit from getting property that it otherwise couldn't get; but this benefit will also help plant employees, nearby businesses, and others. That this is something of a "trickle-down" effect doesn't keep it from being a real effect.

2. Others point out that the redevelopment plans often don't require the private enterprise to which the condemned land is sold to keep using the land for publicly beneficial reasons. If GM ends up getting the property, on the theory that it will build a plant that would provide jobs for employees, more income for local businesses, and so on, then it could turn around tomorrow and just build a private golf course for GM executives instead.

Well, it could, but is that really likely? I suspect not, in part because (for better or worse) GM as a landowner would itself be subject to the power of local authorities. If it decides to build that golf course, it might find that the zoning on the land will get changed, or even that the property will be taken back (and likely without any more compensation than what they had to pay for the land in the first place). The city may well conclude that such an informally understood possibility of sanctions is much more effective than contractual requirements that might unduly tie up the new landowner's flexibility. (For instance, if there's a contractual requirement that GM keep the plant open for 20 years, GM might either not accept it, or might end up underinvesting in the property because it knows that it has less flexibility to pull out of the property if something should go wrong.)

The city would be taking a bet that selling the property to the plant owners unencumbered (except with the inevitable possibility of retaliation if the owners go back on the understood deal) will provide more economic benefit than selling it to them with various strings attached. That may or may not be wise, but I don't see why this judgment should make the city's decision unconstitutional.

3. Still others say that economic development just isn't a permissible public use. But the reason the government has taken property to build railroads, roads, dams, and the like -- uses that are quintessentially constitutionally permitted (even if a libertarian might argue that they shouldn't be permitted) -- is economic development.

It may be that transportation channels are more likely to be much more valuable than just new plants; "creating jobs" is a great slogan, but merely creating jobs for the sake of creating jobs ends up being financially inefficient. I'm actually pretty sympathetic to this argument as a policy matter, and perhaps, since we're talking about practical arguments, it could also be used to justify a constitutional line. Still, I'm not sure that this is so; and I think the economic question is hard enough that courts ought not make the constitutional "public use" requirement to turn it.

* * *

I should stress that these are only some of the matters that should be considered, and they may well not be dispositive. One may well think that the original meaning of the "public use" requirement in 1791 (or in 1868, or throughout the 1800s if one sees those timeframes as relevant) mandates option 1, notwithstanding the practical questions. One may also make natural rights arguments in favor of adopting the least property-rights-restrictive option, when the historical evidence makes the choice between the options into a close call. And one may think that for public-choice reasons, allowing redevelopment takings that use public-private partnerships will do much more harm than good because the private entities will pressure, bribe, or dupe the government authorities into taking property too often. My goal here isn't to say that all the Kelo critics are wrong, but only to cast doubt on some particular arguments that I've heard made.

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Somin on Kelo and Original Understanding:

My colleague Ilya Somin writes at the SCOTUSblog:

Justice Thomas' dissent does an excellent job showing that the original meaning of "public use" was either actual public ownership of the condemned property or at the very least a legal right of access by the public (as in the case of takings for railroads and other common carriers). It did not mean a mere potential benefit to the public, which is why the text does not use a term such as "public purpose," which the Kelo majority uses interchangeably with "public use." Many state supreme court decisions explicitly distinguish between "public use" and "public purpose" (I can provide cites to anyone who may be interested), and the US Supreme Court should follow their lead.

The majority cites late nineteenth and early 20th century Supreme Court decisions that seem to suggest that "public use" and "public purpose" or "benefit" are synonymous. However, not only are these statements mostly mere dicta (as Thomas points out), but the decisions in question are not even about the Takings Clause at all. As my colleague David Bernstein (a leading expert on the Lochner era) has argued [on a law professors' discussion list-ed.], these cases were in fact decisions about the limits imposed on eminent domain under the Lochner-era substantive due process doctrine protecting economic liberties through the Due Process Clause of the Fourteenth Amendment. Whatever one's views on Lochner, I think it's clear that Lochner-era "substantive due process" decisions are not a reliable guide to the meaning of the Takings Clause.

"Something has gone seriously awry": In his dissent in Kelo (buried on page 14), Justice Thomas may well have written my all-time-favorite line of any constitutional opinion (perhaps, in part, because it does not seem to be written to be famous):
"Something has gone seriously awry with this Court’'s interpretation of the Constitution."
Had this quote been available at the time, I would have led with it in Restoring the Lost Constitution (which began: "Had judges done their job, this book would not need to be written.") One day, it may be added to such "greatest" lines as "The Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics."

To help that along, T-Shirts and mugs should now be forthcoming.


I am enabling comments for your favorite ONE SENTENCE lines from judicial opinions.

Update: IMHO The Kozinski quote posted in the comments by Will Baude is awesome. The quote from Justice Thomas remains my favorite, however, perhaps because it is of such general utility.

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Sen. Cornyn (R-TX) Proposes Limits on Eminent Domain:

Sen. Cornyn is introducing a federal bill (S. 1313, "The Protection of Homes, Small Businesses, and Private Property Act of 2005") that would bar "economic development" takings:

(a) . . . The power of eminent domain shall be available only for public use.

(b) . . . In this Act, the term "public use" shall not be construed to include economic development.

(c) . . . This act shall apply to (1) all exercises of eminent domain power by the Federal Government; and (2) all exercises of eminent domain power by State and local government through the use of Federal funds.

As I read this, the bill would only apply when states and local governments use federal funds to pay for the taken property (since that's the only time the "eminent domain power" is "exercise[d]" "through the use of Federal funds"); it wouldn't matter whether they use federal funds for the rest of the development project. I suspect that this means the effect on state and local takings will be modest, though perhaps the symbolic impact might be more substantial.

Here's Sen. Cornyn's floor statement and his press release.

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Thomas Kelo Dissent T-Shirts & Mugs: Lisa Binder has arranged with CafePress to sell t-shirts and mugs with Justice Thomas's soon-to-be famous line from his dissenting opinion in Kelo:
"Something has gone seriously awry with this Court’'s interpretation of the Constitution."
Order yours here while they are hot.

If your taste runs more towards Justice O'Connor, a quotation from her Kelo dissent is available here.

Update: All profits go to Lisa.

A Taking for an Excellent Public Purpose: This is from a press release from Freestar Media (an entity I know nothing about):
Weare, New Hampshire (PRWEB) Could a hotel be built on the land owned by Supreme Court Justice David H. Souter? A new ruling by the Supreme Court which was supported by Justice Souter himself itself might allow it. A private developer is seeking to use this very law to build a hotel on Souter's land.

Justice Souter's vote in the "Kelo vs. City of New London" decision allows city governments to take land from one private owner and give it to another if the government will generate greater tax revenue or other economic benefits when the land is developed by the new owner.

On Monday June 27, Logan Darrow Clements, faxed a request to Chip Meany the code enforcement officer of the Towne of Weare, New Hampshire seeking to start the application process to build a hotel [on] the present location of Mr. Souter's home.

Clements, CEO of Freestar Media, LLC, points out that the City of Weare will certainly gain greater tax revenue and economic benefits with a hotel on [this property] than allowing Mr. Souter to own the land.

The proposed development, called "The Lost Liberty Hotel" will feature the "Just Desserts Café" and include a museum, open to the public, featuring a permanent exhibit on the loss of freedom in America. Instead of a Gideon's Bible each guest will receive a free copy of Ayn Rand's novel "Atlas Shrugged."

Clements indicated that the hotel must be built on this particular piece of land because it is a unique site being the home of someone largely responsible for destroying property rights for all Americans.

"This is not a prank" said Clements, "The Towne of Weare has five people on the Board of Selectmen. If three of them vote to use the power of eminent domain to take this land from Mr. Souter we can begin our hotel development."

Clements' plan is to raise investment capital from wealthy pro-liberty investors and draw up architectural plans. These plans would then be used to raise investment capital for the project. Clements hopes that regular customers of the hotel might include supporters of the Institute For Justice and participants in the Free State Project among others.
You can read the developer's (possibly tongue-in-cheek) fax to the Town of Ware here . Perhaps this taking can also be justified as part of a "comprehensive plan" to restore the meaning of the Takings Clause. (Hat tip to Matt Rustler.)

Update: I had posted this link facetiously but see that some commentors, both pro and con, are taking it more seriously. Retaliating against a judge for the good faith exercise of his duty is not only a bad idea, it violates the holding of Kelo itself, for the intent would be to take from A to give to B, in this case to punish A. I had considered deleting this post altogether--and perhaps this would still be a good idea--but, since other blogs had linked to it, decided instead to add this postscript.

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Let's Have a Bit of Perspective Here:

Dave Hoffman (PrawfsBlawg) suggests that trying to get Justice Souter's home condemned is "the same as if a mugger went to Justice Scalia on the street and asked for his wallet, on the ground that the Justice has, through his jurisprudence, eroded the protection against seizure on the thoroughfare."

Uh, no. It's actually the same as if someone asked the City Council wherever Scalia lives to impose a special surtax on Scalia's property. Asking the government for something — even something that may ultimately prove unconstitutional — is rather different from a mugging, no? (Perhaps radical libertarians might conclude that the government's actually taking the property would be identical to a mugging, but the mere request, especially one that is nearly certain to be rejected, surely wouldn't qualify.)

Nor is it sound, I think, to say that "Obviously, the takings claim itself is frivolous, given Kelo's intent language" (I assume this means the claim asking that the property be taken), though the error here I think is much less clear than the one I just discussed. Under Kelo, it does seem that the government couldn't seize Souter's property just because it doesn't like his policies. But Kelo speaks to the intentions of the government, not of those who are doing the development.

Developers' intentions are often not public-regarding; even if they aren't political retaliation, they're often simply private gain, which is perfectly fine. If the developer here persuaded the city that the taking would indeed be economically beneficial ("Clements, CEO of Freestar Media, LLC, points out that the City of Weare will certainly gain greater tax revenue and economic benefits with a hotel on 34 Cilley Hill Road than allowing Mr. Souter to own the land"), and the city was genuinely motivated by this public benefit, the developer's motives would, I think, be irrelevant. [UPDATE: There might also be non-Takings-Clause related constitutional objections, for instance based on the theory that certain kinds of state retaliation against federal officeholders for exercising their federal responsibilities violate federalism principles, but these would be far from "obvious" winners, partly because as best I can tell they would rest on largely novel theories.]

Of course, the request to the City Council does seem frivolous in the sense that it's extremely unlikely to be granted. (Among many other factors, surely it seems extremely unlikely that a small town would treat its most successful citizen this way; and few small towns would want the bad publicity that would come of what most people would see as a petty form of retaliation.) Yet this just further shows that despite the "this is not a prank" language in the press release, the petition is surely meant as a political statement, not as the first step in what is intended to be an actual real estate development.

So the petition to the city council, I think, is no crime (as Prof. Hoffman at first suggests it might be, though he concludes, seemingly with some regret, that it's not). If it's simply a request for legislative or executive action, it's just the exercise of Freestar Media's free speech and petition clause rights. If it triggers an adjudicative or quasi-adjudicative process, and it's frivolous in the legal sense (which as I argue above is far from clear) then it might lead to sanctions or civil litigation, simply as a form of frivolous litigation. But my tentative sense from the press release is that it's simply a request to a government body to do something that it has absolutely no interest in doing.

I agree with Randy that we shouldn't seriously want government agencies to retaliate against government officials by seizing their property. But I don't think there's any serious risk of this, and I suspect that many people who liked the press release did so because it makes a humorous political point of the "imagine him hoist by his own petard" variety, not because they actually endorse detonating any petards under Souter or his property. And analogies to muggings strike me as quite misplaced.

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Kelo and Regulatory Takings:

A post by Mark Tushnet on a lawprofs' discussion list led me to wonder how the Kelo dissents' theory would deal with regulatory takings.

Two background items: First, under the Takings Clause, there are two kinds of takings, (1) "physical takings" in which the title to the property is actually taken, and (2) "regulatory takings," in which the owner keeps the formal title but loses the right to use the property in certain ways, the right to exclude people, the right to sell the property, the right to leave it in a will, or what have you. Generally speaking it takes a lot of interference with the owner's rights to make regulation qualify as a "regulatory taking" (at least outside the special context of regulations that require landowners to let people onto their property, which are on the way to being physical takings, and which I will set aside for purposes of this post). Still, the Court has held that, for instance, banning virtually all development on a parcel, and thus rendering its value nearly nil, would qualify as a taking even if the owner still owns the parcel. See Lucas v. South Carolina Coastal Council (1992).

Conservatives are generally bigger fans of the regulatory takings doctrine than are liberals; Lucas, for instance, was written by Scalia, and joined by Rehnquist, O'Connor, Kennedy, and Thomas; libertarians tend to like it, too. Some liberals believe that regulatory takings should almost never be found, or even that the doctrine shouldn't exist, and that no regulation short of taking of title (or possibly interference with the right to exclude) should be considered a "taking."

Second, the debate in Kelo can be seen as pitting two different interpretations of "public use" in "nor shall private property be taken for public use, without just compensation": (1) "Public use" means "continuous public ownership or access," for instance if the government keeps the property or sells it to a common carrier (and access simply means the ability to go on the property, as for instance when the government takes land and sells it to a private railroad, but the railroad is required to let the public ride). (2) "Public use" means "public benefit," which may be derived by the government's selling it to a private developer whose development will (the government thinks) help the public.

So here's the question: Which reading of "public use" is most consistent with the generally conservative-libertarian notion that regulation can become a "regulatory taking"? When regulations deny you all right to use your land, for instance, and you claim that the government has "taken your property" -- in the sense of taken your right to exploit the property, which is part of your proprty rights -- "for public use," which meaning of "public use" would you be using?

It seems to me that the answer is not "public ownership or access." The government, after all, isn't taking the property so that the public can own it or access it. Nor is it taking it so that some private third parties can own it or access it. The only person who owns it or can access it is still you. Under the "continuous ownership or access" model, the regulation is neither a taking for public use nor a taking for private use. It sounds like it's not a taking at all, and you're thus entitled to no compensation.

But the "public benefit" model fits regulatory takings well. If the government stops you from developing your parcel in order to serve public environmental or esthetic goals, then it's taking your right to exploit the property in order to provide a public benefit, and thus you're entitled to compensation. Lucas in fact took this very view: Such regulations should be seen as takings because they "carry with them a heightened risk that private property is being pressed into some form of public service" (emphasis added).

So it seems to me that if the regulatory takings theory is sound, and regulations that make land nearly worthless should be treated as similar to physical takings, "public use" in the Takings Clause needs to be read as "public benefit." The question then becomes: Is it proper to read "public use" as "public benefit" for one kind of takings, and "continuous public ownership or access" for another?

Perhaps the answer is yes: Maybe the regulatory takings theory isn't really a textual interpretation of the Takings Clause, but rather a necessary backstop developed in order to avoid end-runs around the Clause; since its role is functional rather than textual, then some of the textual limitations on the Clause may be dispensed with. Or perhaps the answer is that the critics of regulatory takings doctrine (mostly liberal, I think) are right, and regulation should never be seen as a taking (again, perhaps unless it interferes with the right to exclude the public), even if it strips the owner of nearly all the value of his land.

Or perhaps there's some other explanation still. But it seems to me that if one does support the regulatory takings doctrine as part of the broader takings doctrine, and one thinks that it should be read consistently with the text of the clause -- which is to say that the text of the clause should be read consistently for regulatory takings and possessory takings -- then it seems to me that the Kelo majority's "public benefit" model is stronger than the dissents' "continuous public ownership or access" model.

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Jonathan Adler on Takings,

in National Review Online.

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The Economics of Kelo:

The basic economic problem of eminent domain is the trade-off between strategic holdouts on one hand and sincere subjective value on the other. The nature of a "property" right is that it gives a holdout power to anyone who holds it--I don't have to sell you my car or my autographed picture of Franco Harris's Immaculate Reception. And you can't have the government take them, even if you promise to pay compensation, but can acquire them only if I consent to what you give me in exchange. In so doing, we protect my subjective value in the good--i.e., the value that I put on Franco (especially because my wife gave me the picture as a Tenth Anniversay gift) is much higher than the market value of my Franco picture. So, in order to protect my subjective value, I am given a property right which permits to refuse to sell it--even for "fair market value." I have a holdout power, but it is not a problem, because we assume that the reason I refuse to sell is because I place a higher value on Franco than the market price.

This "holdout" power potentially becomes a problem in a case such as Kelo, where the buyer needs to assemble several pieces of land to build a building. Any individual may decide to hold out to try to extract a larger share of the surplus associated with the higher economic value from the transaction.

The problem is that in theory, in any given situation when someone refuses to sell we can't tell whether it is because of strategic holdout or subjective value. If we knew this, then we could get rid of market transactions in general, and move to a system of central planning where the planning czar just assigned various goods to their highest valued user. But that obviously won't work. But there are better, and worse, ways of dealing with this problem. The overall facts of Kelo illustrate one of the worse ways of dealing with it, and why we need to have a real "public use" doctrine that doesn't permit taking from A to give to B.

Suppose I make you an offer for the "fair market value" of your house and you refuse. So I go to the City Council and tell them that I will make an enforceable promise to pay one dollar more in taxes than you pay on your house if they would just condemn it and give it to me. And if they evicted you, they wouldn't pay your moving expenses or disruption expenses associated with finding a new place to live. Now imagine you grew up in the house, lived there for sixty years, raised your kids there and hoped to die there.

Under those facts, would your unwillingness to accept my offer evidence that you are just being a strategic holdout? Certainly it seems plausible in that situation that the refusal of you to sell to me is efficient, in that you have high subjective value. So if I get the house and only have to pay fair market value through an eminent domaian proceeding, that result is economically inefficient because the property is not held by the highest-valued user. But in addition, we know that the strategic holdout threat isn't meaningful here. Why? Because at the time I refuse to sell, I have no strategic holdout power--if I don't sell, you can go down the street and buy another house. So we can infer from my behavior that my refusal to sell is the result of subjective value, not strategic holdout.

And all of this analysis excludes that the wealth loss here is not just the possibility of an efficiency loss by ignoring subjective value and the undercompensation problem (the so-called "Harberger Triangle" dead-weight loss), but also the Tullock Box of the rent-seeking expenses you and I both burn up trying to effect this political transfer rather than a voluntary market transfer (the real costs of rent-seeking, of course). When we replace a positive-sum voluntary market exchange with a political exchange, both parties have an incentive to "lawyer-up" and engage in various rent-seeking expenditures to try to get the result they desire. So this is the primary reason why the "public use" requirement is (or should be) a gatekeeper to make sure that I am not taking your house just because I want to end-run a consensual market exchange that I might find inconvenient or too expensive. None of the other restrictions on takings perform this function of properly channeling private transactions through the market where they belong, and where subjective value can be protected (and thus efficiency can be protected as well). Moreover, this is a threat that is unique to the private takings situation in Kelo, because with respect to a traditional public purpose taking, the undercompensation problem remains, but the strategic temptation to end-run the market to try to get the property for less than the seller's subjective value will not, because governement actors don't benefit as directly as Pfizer does.

Second, focusing on the holdout problem in the Kelo context is to focus on the wrong issue. The scenario here is different from when a government wants to build a school or post office, traditional public use purposes. Schools and post offices have to go in a particular geographic area (that's why they are being built), and thus strategic bargaining may be plausible because it is similar to a bilateral monopoly situation. The small group of landowners in the relevant area can act strategically and try to extract a high price for its sale.

In Kelo, however, there is no obvious holdout power because Pfizer could put its building in any city in America. So its not like a neighborhood school, road, or post office. In Kelo, the holdout power is created artificially by the city's desire to give Pfizer a sweetheart deal to bring it to town.

So ex ante, there is no viable holdout power in this situation because there are an infinite number of close substitute sites for the building. The building is going to be built somewhere, the only question is what city--New London, Hartford, Bridgeport, Boston, New York, Chicago, etc. The artificial scarcity that says the building has to be built in New London was created by the city's other subsidies to attract Pfizer to town (the obscenely low rent, etc.).

So if one is truly concerned about the holdout power problem, then the correct solution is to require the city to eliminate the artificial scarcity that "requires" the building to be built in New London rather than some other city, the same way that a new school would have to be built in New London. If we allow both the subsidies and the Taking for the benefit of the private party, we are allowing the distribution tail of what city the Pfizer headquarters will be built to wag the efficiency dog of whether the homeowner is holding out versus having subjective value. Instead, we want to have the parties bargain ex ante before they finally select the city--i.e., choose the city and the plot of land at the same time--not bargain ex post after the city is selected. Forcing an ex ante bargain when there are still many substitutes for the proposed site would eliminate the holdout problem and allow us to determine the extent of parties' subjective value, because the negotiations would be conducted against the backdrop of a competitive market, rather than a bilateral monopoly. The bilateral monopoly is thrust upon the city in the road or post office scenario; it is freely-chosen in the Kelo situation.

Instead, the ruling in Kelo enables the worst possible economic outcome--it permits cities to create artificial scarcity just to get a larger piece of a stable-sized pie (getting Pfizer to New London rather than Hartford), while then permitting cities on the back end to take land from private landowners who may or may not be losing subjective value and being undercompensated in the process.

And the incentive effect of Kelo is obvious--it now enables corporations to extract both subsidies and takings as the price for locating in city A rather than city B.

To further understand the second point, recall the Alaska Packers case from first-year Contracts (any of my former Contracts students out there reading this?). In that case, the shipowner and the crew bargained for wages while on the dock in San Francisco, then when the crew got to Alaska they demanded to renegotiate. The renegotiation may have been either sincere or strategic, its not clear. What we do know, however, was that the crew's bluff was real, because the captain could not turn the boat back around and cruise back to San Francisco to get a new crew without losing the seasonal catch. The Court refused to enforce the modified contract.

This is the correct answer, even though we can't tell for sure whether the subsequent renegotiation demand was sincere or strategic. The reason it is correct is because we want to make the fishermen and the shipowner in Alaska Packers have the right incentives to strike their bargain while they are all still on the dock in San Francisco. At that time there are still close market substitutes, not when they are on the boat to Alaska and it is now a bilateral monopoly situation. So we want to have a rule that enforce the first deal, not the second.

Same analysis applies here--the private taking only comes about because of the contrived artificial scarcity created by the ridiculous government subsidies to lure Pfizer to New London rather than some other city. There is no efficiency gain from providing public goods (as with a road, school, or post office). So rather than rewarding the city for creating an artificial scarcity, which then makes it vulnerable to a hold-out power, it would make more sense to deny them the right to condemn ex post, thereby encouraging more efficient arms'-length bargaining ex ante.

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Even Bernie Sanders Doesn't Like Kelo:

Even Congress's "lone self-described socialist, Rep. Bernard Sanders of Vermont" doesn't like Kelo:

I disagree with the Supreme Court's decision in Kelo v. New London," Mr. Sanders said. "I believe that the result of this decision will be that working families and poor people will see their property turned over to corporate interests and wealthy developers."

Rep. Maxine Waters, "California Democrat and member of the Congressional Black Caucus, said she is 'outraged' by the decision. 'It's the most un-American thing that can be done.'"

And when is the last time those two agreed with Tom DeLay?

"The Supreme Court voted last week to undo private property rights and to empower governments to kick people out of their homes and give them to someone else because they feel like it," said House Majority Leader Tom DeLay, Texas Republican. "No court that denies property rights will long respect and recognize other basic human rights."

The Washington Post describes the legislation, co-sponsored by conservative James Sensenbrenner and liberal John Conyers in its story, curiously titled "House Votes To Undercut High Court On Property"

The House measure, which passed 231 to 189, would deny federal funds to any city or state project that used eminent domain to force people to sell their property to make way for a profit-making project such as a hotel or mall. Historically, eminent domain has been used mainly for public purposes such as highways or airports.

The measure, an amendment to an appropriations bill, would apply to funds administered by the departments of Transportation, Treasury, and Housing and Urban Development. House Majority Leader Tom DeLay (R-Tex.) and Majority Whip Roy Blunt (R-Mo.) said they will push for a more inclusive measure that would apply to all federal funds.

A fact sheet said under the bill the locality or state would "lose any federal funds that would contribute in any way to the project the property would be taken for."

Nancy Pelosi, by contrast, agrees with the decision and opposes the legislation:

House Minority Leader Nancy Pelosi, California Democrat, said she "would oppose any legislation that says that we would withhold funds for the enforcement of any decision of the Supreme Court, no matter how opposed I am to that decision." She then added: "And I'm not saying that I'm opposed to this decision." Arguing that Congress has no business interfering with the ruling unless it wants to amend the Constitution, Mrs. Pelosi said: "This is almost as if God has spoken."

So how about a constitutional amendment that makes it clear as to the limits of the emininent domain power along these lines--"nor shall private property be taken for public use without just compensation."

What amendment do we need--change the type font to italicize the words "public use"?

[In light of the Supreme Court's recent religion cases, the irony inherent in Congresswoman Pelosi's characterization of the Supreme Court's ruling in Kelo as "almost as if God has spoken" is just too easy, so I'll just let the readers supply their own ironic commentary on that one.]

Update:

An even curiouser headline of the same debate from the New York Times:

Republican Lawmakers Fire Back at Judiciary

Stepping up their assault on the federal judiciary, Congressional Republicans announced efforts on Thursday directed at overturning two recent Supreme Court decisions, one that allowed government to claim private property for economic development and another that stripped Kentucky courthouses of the Ten Commandments.

In contrast to the headline, the story notes in paragraph 6:

Illustrating the broad discontent in the House over the court ruling on property rights, House members voted 365 to 33 late Thursday night in support of a resolution expressing "grave disapproval" at the court decision.

It does not note this particular item from the Washington Post story, which I forgot to include in my original post:

Sen. John Cornyn (R-Tex.) introduced a similar measure and immediately drew a Democratic co-sponsor, Sen. Bill Nelson (Fla.), as well as Sen. Rick Santorum (R-Pa.), who is number three in his party's leadership. The House bill is sponsored by Judiciary Committee Chairman F. James Sensenbrenner Jr. (R-Wis.). Its Democratic co-sponsors include Reps. John Conyers Jr. (Mich.), Maxine Waters (Calif.) and Peter A. DeFazio (Ore.).

And yet the New York Times summary of all of this bipartisan activity is "Republican Lawmakers Fire Back at Judiciary" and that Republicans are "Stepping up their assault on the federal judiciary"?

At the least the Post headline, while implying editorial disapproval of Congress, wasn't as heavy-handed as the Times in turning it into a partisan attack (in fact, to reinforce the implicit message, the only picture in the on-line version of the Times article pictures only Republican lawmakers).

And some wonder why I don't generally read that Times any more? For more reasons, see here.

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Pfizer and Kelo:

Roy Poses has an interesting post on the Health Care Renewal blog, where he looks at some of of the interrelationships between the parties and some of the financial details in the case.

[In my "Economics of Kelo" post, I simplified the actual relationship between Pfizer and the City of New London and the New London Development Corporation in order to try to get to the larger question of the role of "public use" in the case. I don't think it changes the analysis of the basic constitutional question and what the Court decided, which is why I used "Pfizer" as a shorthand reference to the private parties in the case in my post. Those looking for a more detailed summary of the facts can find it in Dr. Poses's post.]

"Court Ruling Leaves Poor at Greatest Risk":

The Real Estate Section in today's Washington Post has an informative article by Kenneth R. Harney on the likely winners and losers from Kelo, "Court Ruling Leaves Poor at Greatest Risk":

Where does that leave you if your local government sees potential for a higher and better use for your home and land? What if you, like the New London homeowners, don't want to give up your home no matter what you're offered?

In brief: The court's decision leaves you in a weaker position, at least under federal law, than you might imagine. The majority of justices on the current court appear to be saying that "public purposes" may be discernible in a wide variety of private projects. If, for example, your city's political leaders decided that all the houses on your street would produce higher tax revenue as a regional shopping center, they are now in a stronger position to seize your house under the court's Kelo doctrine.

As a practical matter, who's really at greater risk of such seizures? Surely not homeowners in the wealthier parts of town, who have the ears of, if not control of, the local political establishment.

Dana Berliner, a lawyer for the Institute for Justice, the libertarian public interest law firm that represented the New London homeowners, says certain categories of homeowners are at heightened risk. Based on her research on more than 10,000 of what she terms "abusive" eminent domain seizures across the country, the high-risk homeowners are:

· Residents of older neighborhoods in locations that make them attractive for a supposedly "higher and better use" -- for example, near a waterfront or in a low-density area adjacent to higher-density commercial areas.

· Working-class and middle-income areas in general.

· Neighborhoods with high concentrations of lower-income minority residents.

This being the Real Estate Section of the paper, the article also provides some practical advice for what homeowners can try to do to prevent having their homes seized and given to politically-influential developers.

Government Responses to Kelo:

In the Mark Steyn column noted earlier he cites the fact that Arnold, Missouri is using the eminent domain power to take 30 homes, 14 businesses, and the local VFW to put in a Lowe's and a strip mall.

More details on that project here. In addition to using the government's eminent domain power to assist the development, the city has also provided $21 million in tax incentives:

Overland-based THF Realty wants Arnold to use eminent domain, if needed, to take over about 45 homes and business to make way for a new strip mall on 38 acres southwest of Interstate 55 and Highway 141. Critics have denounced the $55 million project as corporate welfare, because the developer wants $21 million in tax-increment financing.

IJ is keeping tabs on the latest post-Kelo developments around the country.

Steyn also mentions the Newark project, which is also mentioned on IJ's site:

Newark officials want to raze 14 downtown acres in the Mulberry Street area to build 2,000 upscale condo units and retail space. The Municipal Council voted against the plan in 2003, but then reversed its decision eight months later following re-election campaigns in which developers donated thousands of dollars. Officials told the Associated Press that the Mulberry Street project could have been killed if the U.S. Supreme Court had sided with the homeowners in Kelo.

Epstein on Kelo:

In case you missed it, Richard Epstein comments on Kelo (not to ruin the suspense or anything, but he doesn't like it).

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Legislative Responses to Kelo:

Donald Lambro reports on legislative responses to Kelo in Washington and around the country:

Fueled by mounting grass-roots anger over the high court's 5-4 decision last month in the Kelo v. New London eminent-domain case, several state legislatures are expected to act on some kind of statutory ban before year's end and more are expected to take action next year.

Legislation in the House and Senate already has drawn surprisingly strong support across the political spectrum -- from House Majority Leader Tom DeLay of Texas on the right to Michigan Rep. John Conyers Jr., the ranking Democrat on the House Judiciary Committee, on the left.

According to the article, several states have already introduced bills prohibiting transfers of property to private commercial interests.

The American Legislative Exchange Council (ALEC) is also drafting a model bill for the states that would declare that "the power of eminent domain shall be available only for public use," such as the development of roads and other public facilities.

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