Wednesday, 20 May 2009

Eminent domain

The taking of 239 homes for the proposed new Waterview motorway in Auckland raises, again, the question of the use of eminent domain.

The standard argument for eminent domain is that the government cannot let vital projects be held hostage to private owners who might withhold their property. The idea being that a motorway or airport or some such thing would get built but for the recalcitrant homeowner who refuses to sell their family home, either because they truly attach an enormously high sentimental value to the homestead or because they are strategically holding out for an absurdly high price. Empirically you can't tell the difference. And of course if one person manages to get such a high price, in the future everyone will holdout for a similar price, making public projects near impossible to build.

In his book Skepticism and Freedom: A Modern Case for Classical Liberalism, the above case for eminent domain is made by Richard A. Epstein. An interesting response to this argument is given by Donald J. Boudreaux in his review of the book in Regulation, 27(1), Spring 2004. Boudreaux writes
While it is easy to imagine such problems [such as the recalcitrant homeowner], I doubt that they are significant enough to entrust politicians with the power to take private property, even if politicians follow Epstein’s sound advice on when to pay for whatever properties are taken. America is planted thick with housing developments on large contiguous plots of land. Private developers manage to assemble those tracts without eminent domain. The Walt Disney Company purchased 30,000 contiguous acres of land in central Florida for its amusement park and resort. That is an area twice the size of Manhattan. With skillful contracting maneuvers — for example, buying each plot of land contingent upon the successful purchase of all other plots of land necessary to build the road or airport — a government intent on serving the public should be able to do its job without powers of eminent domain.
So with a bit of foresight and sensible contracting the use of eminent domain is not needed. If only our government had the same skills as private developers.

4 comments:

jimGR said...

insightful!

thanks

Ed Snack said...

So if you utterly opposed, say, the Waterview motorway connection, and you have, say 500,000 to spare, you would be able to buy a house in the proposed path, and simply refuse under any conditions, to sell.

I suggest one difference is that governments are inevitably involved in politics where sometimes the economic drivers that make land development and the establishment of a theme park don't apply for ideological reasons. Furthermore, developers and Disney have flexibility on their location, if it wasn't Orlando, maybe 20 kilometres closer to Jacksonville would do, etc. Eminent domain should (if it must) be used where such alternatives don't exist or are prohibitively expensive.

Paul Walker said...

Ed: How many people do you know who have spent $500,000 on stopping a motorway in that manner?

If you have that amount of money to spend there are better ways to use it to stop the motorway.

The government has flexibility of location as well. After all the current problems are over the government changing its mind.

libertyscott said...

Indeed, this is the third route I've seen for this road in recent years. The problem also comes is when a route is chosen and publicly declared, then people can game play if they want to stop it - whereas if land was bought to build a road for commercial reasons, a preferable route would be found.