Taking Property

by Don Boudreaux on February 22, 2005

in Law

I’m discouraged by the first sentence of this report from today’s Wall Street Journal Online:

Supreme Court justices expressed serious doubts Tuesday about whether the court has the authority to protect some residents in New London, Conn., who face losing their homes to the city’s ambitious program for economic revitalization.

The case, Kelo v. City of New London, involves a challenge by homeowners in New London of that city-government’s taking of their private property under the eminent-domain clause.  The city-government argues that confiscating this property, tearing down the existing structures, and building in their place a hotel, offices, and health spa – to be privately owned – is necessary to rejuvenate New London’s flagging economy.  Constitutionally, government can take property only if it is taken for a public purpose.

The city government argues that revitalizing New London – and creating a larger tax base – is a public purpose justifying an eminent-domain taking.  Scott Bullock, attorney for the Institute for Justice defending the homeowners, argues in contrast that boosting city-government finances is not a public purpose as understood by the framers of the Constitution.

I have little doubt that Bullock and the plaintiffs in this case are correct as a matter of constitutional interpretation.  But putting that issue aside – for the actual meaning of the Constitution today plays precious little role in guiding courts and other branches of government – let’s look at the city-government’s argument.

If bulldozing these existing private structures and replacing them with different privately owned structures is such a great economic boon, why would not private developers do so on their own?  Why the need to use eminent-domain power to confiscate property (and, it should be said, pay “fair” compensation to those people whose property is taken)?

Perhaps the owners of the existing property are asking prices that render new private development in that location insufficiently profitable. If so, the most plausible conclusion is that the planned new development isn’t truly economically worthwhile overall.

Of course, it might still be the case that new development in this location will generate more tax-dollars for the city even though the development is not economically justified.  The homeowners are citizens of the city, too.  Confiscating their property in order to funnel more tax dollars to the city-government’s coffers is a transfer of wealth from these unfortunate property owners to the city government and its beneficiaries.

Or, it’s possible that the development is economically justified, but the private developers would prefer to acquire the property through eminent domain rather than through market transactions.  Perhaps these developers believe that the total price they’ll have to pay for the property – in the form of rent-seeking payments forked over to the city’s politicians – is lower than they’d have to pay if they bought the property honestly.

Either way – economically justified or not – private development funded with property forcibly taken from its owners is a wealth-transfer from owners of existing property to the developers of the new property.

I predict that the Court will bless this thievery.  I hope my prediction proves to be wrong.

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