Does restricting "eminent domain" -- the power of government to seize private property -- harm economic growth? A new report from the Institute for Justice looks at the evidence and concludes the answer is no.From the standard economic perspective of efficiency and market failure, the important question is whether there are reasons to believe that parcels of land (especially those that would be taken by the power of eminent domain) will otherwise come to be devoted to something other than their most highly valued uses. In general, I can see no reason to conclude that they will. But, if you do conclude that parcels of land will not come to be devoted to their most highly valued uses, then the important question in all of this is whether there are reasons to believe that the government officials who wield the power to take land from some to give it to others are sufficiently knowing to successfully take land that is not being efficiently utilized and then give it to the person who will put the parcel to the most highly valued use. I'm sure this is very unlikely, and if it happens it would only happen by accident. I conclude that allowing government the power of eminent domain for so-called "economic development" results in significant government failure with respect to an efficient allocation of resources. Therefore, I'm not surprised that restricting government's power of eminent domain with respect to so-called "economic development policy" wasn't found by the research to diminish economic growth.
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This result isn't surprising. Developers love eminent domain because it's easier to snap up land when government forces owners to sell -- no unpleasant dickering over price, etc. Local politicians likewise believe they are best positioned to pick winners and losers and to shape the future of their cities.
But private development went along very nicely for two centuries before politicians began seizing one person's property for the benefit of another private citizen. Sometimes the marketplace adapted in amusing ways, as when major building projects were forced to go up around, or even on top of, older buildings. But in the absence of the coercive state, buildings still got built.
The most grandly conceived plans are also often those most likely to fail. If a project cannot proceed without government interference, it is reasonable to ask whether it is worth putting the hamfist of government on the scales at all. As the Institute for Justice's report notes, Baltimore's much-touted Inner Harbor redevelopment remains dependent on government handouts. At the same time, private redevelopments without eminent domain, such as in Anaheim's A-Town, are thriving.
Now, from the perspective of the words we find written into our Constitution this analysis of eminent domain and efficiency (market failure) would seem to be of little relevance:
. . . nor shall private property be taken for public use without just compensation.It seems clear to me, but unfortunately not to the Supreme Court, that taking privately owned parcels of land in order that the parcels may be owned by a different private owner is unconstitutional, since after all, the property is not being taken to be put to some public use such as a public highway, or a public park, or a public school. So, if the Supreme Court would stick to the words written in the Constitution (as it was ratified), the issue considered by this research would be of little policy interest. As it is, the research shows that assumptions made by the majority in the Kelo opinion are incorrect, and that the government officials who support such public actions in the name of "economic development" are very likely to fail to accomplish their stated goals. All the while, government's power is being used to take what is supposed to be private property in communities all across our country.