Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Friday, June 24, 2005

Are Transaction Costs THIS High?
The U.S. Supremes Blow It

In a very anti-market, anti-property rights decision, the U.S. Supremes have ruled that a city may use eminent domain to claim people's property for use by private developers.

It was a decision fraught with huge implications for a country with many areas, particularly the rapidly growing urban and suburban areas, facing countervailing pressures of development and property ownership rights.

The 5-4 ruling represented a defeat for some Connecticut residents whose homes are slated for destruction to make room for an office complex. They argued that cities have no right to take their land except for projects with a clear public use, such as roads or schools, or to revitalize blighted areas.

As a result, cities have wide power to bulldoze residences for projects such as shopping malls and hotel complexes to generate tax revenue.

Since when did it become so difficult for developers to buy options? Since when did it become so costly to negotiate land amalgamations? I know there are potential hold-out problems, but the cost of them will likely prove to be far less than the costs of this decision, which gives developers massive incentives to try to buy off local politicians. And I don't really see how this decision is consistent with the U.S. Constitution.

As Tyler Cowen says, "This is just awful." Phil Miller calls it "A Sad Day, Indeed." Cafe Hayek calls it "lamentable," with this analogy:

the Supreme Court (well, five of its members) ruled that local governments can seize property from private citizen A and give it to private citizen B if it, the government – the gaggle of force-specialists – declares publicly a belief that such seizures will create jobs and increase the amount of money the force-specialists will succeed in forcibly extracting from non-force-specialists.
Suppose that a majority of this very same group of nine black-robed worthies were to declare that I, a private citizen, can poke a gun in my neighbor’s nose and demand that he sell his house to me so that I can give or sell it to someone else. The only condition demanded of this ‘court’ is that I proclaim with as much sincerity as I can muster that my seizure of this house will ‘improve the neighborhood’ and generate more income for me -- more income that I promise, cross-my-heart-and-hope-to-die, to spend wisely on further efforts to improve the neighborhood.

Would you – would anyone – respect such a ruling of this ‘court’?
Update: Check out Julian Sanchez on the decision. Also see Eugene Volokh for a different perspective. And Kip Esquire has two interesting pieces here and here.
Tom Luongo, in an excellent piece, calls it "Viagra for City Government". I note that he misspelled "gubmnt".

Now, more than ever, it is clear just how much the U.S. needs Posner or Easterbrook on the Supreme bench.
Who Links Here