|Domain of the Eminent
by Glen Tenney
is important to have a sounder distinction between democracy and thievery than simply
here is no principle of morality that is more fundamental to our society than the prohibition against theft. At least in principle, theft is strictly prohibited by both the laws and the customs of all civilized societies.
In the United States we have even gone further than recognizing and incorporating into law the notion that theft is wrong. Not unlike other nations, in an acknowledgment of the value of individual freedom, we have taken steps in recognizing that people have a right to use their property in whatever ways they desireunless they infringe upon the rights of others to do likewise. This principle, usually attributed to philosophers such as John Locke, has been and continues to be the primary social ethic upon which civil societies rest.
Consider an example where Smith owns a red Ferrari that he parks in his driveway on a regular basis. Jones may desire the Ferrari, but is not entitled to it unless Smith agrees to sell it or rent it to Jones. But Smiths property right doesnt stop there. Most of us would agree that even if all of the other citizens of his town voted, through a legitimate political process, to take Smiths car and give it to Jones, this would still not be justifiable without the permission of Smith. Such action would amount to theft just as surely as if Jones had hot-wired the car and drove it away.
This sense of justicethe notion that even huge democratic majorities cannot justifiably take the justly acquired property of othersis even incorporated into the Constitution as the Fifth Amendment. The Founding Fathers, knowing that a democratic process was subject to abuse if not properly restrained, wrote the amendment in an attempt to protect individual property owners against those abuses that are inherent in the idea of democratic governance. According to the Fifth Amendment, under normal circumstances property rights trump other concernsincluding the democratically established desires of otherswhen it comes to the law. Furthermore, if we are serious about the prospects of a society that has a semblance of equity and justice, then this is as it should be. Any society that held otherwise would be at least suspect in a moral sense and impractical in a functional sense.
The normal (and legitimate) way of acquiring land or any other property in our societyshort of acquiring it as a giftis to offer money in exchange. This system works well because either or both of the parties can opt to forego the exchange if the terms are not to the liking of each. Each gets what he or she wants in exchange for what he or she values less (usually money). Over time this system tends to create wealth in society as goods are channeled to those that value them the most, given the varied circumstances and values of each individual in society. This system of exchange is voluntary, it simultaneously makes both parties better off, and it seems to adhere to our sense of justice and fair play.Another Way
ut alas, in some respects reality does not always conform very closely to this widely held sense of justice. There is another method of acquiring property that has become popular the last few decades. Its not really legitimate, but it continues nevertheless. Its morally repugnant, but that does not stop it either. This second approach to property acquisition entails the use of local eminent domain statutes as a tool in reducing the purchase price to the buyer. Like the voluntary exchange system noted above, this system works very well alsoat least for the buyers. Under the auspices of eminent domain, confiscation of private property has become a politically popular approach for the redistribution of wealth in many cities. The political reclassification of private property to meet the needs of politically powerful and well-connected parties has been successful in demonstrating the sad reality that in many cases the principle of private property rights does not really hold a candle to the concept of "public purpose."
"Urban renewal" programs began in 1949, in an attempt to realize the lofty sounding goal of, in property rights specialist James Bovards words, "a decent home and a suitable living environment for every American family." These programs had a rough go the first few years. In those days courts, more often than not, recognized the important role that secure property rights play in both a vibrant economy and a just society.
But those were the good old days. In a devastating case in 1954, the Supreme Court overturned one of these rights-based district court rulings that had struck down a Washington, D.C., land seizure program the year before. Bovard has described the ruling of the Supreme Court in this case as one that "effectively gave government officials unlimited power to confiscate and redistribute land." Bovards statement is scary if it is even partly true. Justice William Douglas, speaking for the court on this case, declared:
Reading Justice Douglas opinion, one wonders how he could have come up with a statement that does more to justify the arbitrary and politically motivated actions of local governments with respect to the confiscation of private property. If we live according to the implications of this landmark case, then city councils and state legislatures everywhere are free to control private property within their boundaries without hesitation, as long as their purpose can be construed as working toward such noble goals as aesthetics, spaciousness and balance. And in Nevada
ut hold onto your wallets, Nevadans! Recent happenings in the Silver State have continued the pattern set by the Washington, D.C. case in 1954. While I am not here going to specifically detail any of the major abuses of eminent domain laws, a homework assignment along those lines is in order. Heres the assignment: Go to the website for the Las Vegas Review-Journal and do a search on "eminent domain." I hope you have several free afternoons, because you will find no less than 250 articles just for 1997 and 1998. If the assignment is done right, you will find that the abuses are legion and that the dollar amounts involved are not small change. While I leave the specifics of each case to the regular news reporters, I would like to concentrate my thoughts on one important commonality associated with these land grabs. Then I will conclude with what I see as the fundamental problem with eminent domain.
Importantly, we ought to recognize that these cases often involve cities taking ownership of property from one private party and transferring ownership to another private party. Presumably the original intent of the concept of eminent domain was to prevent owners of property from holding out for inordinately high prices when the property was needed for particular "public" purposespurposes that would in principle benefit the community as a whole. But increasingly the concept of eminent domain has been used as a wealth-transfer mechanismoften a disguised form of welfare for the rich. Under the guise of redevelopment, the politically powerful are able to increase their wealth at the expense of those with less clout. Redevelopment has transformed the goal of "a decent home and a suitable living environment for every American family" into corporate welfare of the worst kind.Simulation of the Market
ow does this happen? Why do policies in the public arena so often have consequences that seem to be antithetical to the spirit of their original design?
The answer lies in the widespread (but na´ve) tendency of people to think that government can be used as an adequate means of addressing the specific economic problems of society. The myth that we can vote ourselves into prosperity without any adverse secondary consequences is both pervasive in practice and highly perverse morally. It is pervasive in the sense that people everywhere, contrary to what economic theory and experience teach, believe it can be done; and it is morally perverse because political action of all kinds necessarily takes place outside the realm of voluntary human behavior. Unlike behavior in the context of the market which benefits both parties in an economic exchange, political action can only benefit one group or individual at the expense of another.
Lets look at how this political manipulation of private property rights might take place. Imagine that the owners of a major gaming establishment spot a property that they would like to use as a parking lot for their successful business. Knowing that the property would be expensive to purchase, the casino operators approach city officials with the idea that the property be included in a "redevelopment district" and reclassified as "blighted" in some way. From this point, the success of the casino operator shifts from the realm of the market to the realm of politics. Rather than being concerned with paying the owners of the property an amount that is agreed upon by both parties, the casino operator is dealing with the problem of convincing appraisers, judges, juries or voters that it is in the "public interest" to condemn the property and allow it to be used as a parking lot for the casino.
We might note that the acquisition of property through the political approach flies in the face of an important economic principle in addition to being morally repugnant. Economic reasoning establishes very strongly and very early the important idea that economic preferences differ from one person to another, and that what economists call "interpersonal utility comparisons" are not valid. This means that one person is not able to know how much another person values something without that person demonstrating his or her preference through market action. An important implication of this principle is that it is impossible for the "public interest" or "fair value" of any property to be determined by any judge, jury, independent appraiser or voter. It is not that judges, juries and appraisers have no appropriate place in society. On the contrary, judges and juries are important for resolving disputes over matters of various forms of aggression against private property, and appraisers are important in assisting buyers, sellers, lenders and others with their economic decisions. But the whole concept of secure property rights suggests that the ultimate decision regarding the use of property must reside in the owner who bears the consequences of his decisions.
In short, asking judges and juries to make decisions pertaining to the value of property that belongs to other people is a slap in the face to the principle of property rights as we know them in this country; furthermore, such an approach to the rules by which a society lives requires that courts do what is impossibleread the minds and feel the feelings of other people.
At this point, some readers who are less grounded in property rights principles might object, and say that judges and juries in practice are charged with the responsibility of making the world a better place to live for everyone rather than with the task of placing a value on property belonging to other people. In response I would just say that anyone thinking along these lines has really come to the crux of the problem. In my view, the duty of the court in a free society is to resolve disputes over property rights rather than attempting to make the world a better place to live. Attempting the latter only opens the door for political manipulation of what we value most. Ironically, of course, experience and reason teach us that in reality a court that focuses on fixing the world in an abstract sense rather than on resolving disputes over property rights ends up being successful in neither because society loses confidence in the system.
Sometimes the term "market value" is used loosely under the assumption that the value of something can be objectively determined outside of the market process where actual buyers and sellers interact in a voluntary way in determining market prices. Attempting to use the political process to determine selling prices demonstrates a gross contempt for economic reasoning and constitutes a gross violation of moral principles imbedded in property rights as well. Quite simply, it is a sham. Judges, juries, appraisers and voters are not able to make rational decisions regarding the values of other peoples property because they are not capable of feeling the costs nor the benefits from the point of view of an actual market participant who is held responsible for the results of his or her actions. Whats more, and this is obvious to many political observers, they have little incentive to discover these costs and benefits. As the socialist nations finally discovered after many years of trying, the market process cant be "simulated" very well by non-market institutions. The major players in the market processowners who bear the costs and reap the benefits of their own decisionsare not present in the political realm of life.
Ultimately the problem associated with the abuse of eminent domain statutes can be attributed to our moving important decisions relating to the proper use of resources from the economic realm of life to the political realm which is not well suited for dealing with such matters.NJ Glen Tenney, a professor at Great Basin College in Elko, is an NPRI research fellow.