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February 15, 2006

Eminent Domain Again

In response to our earlier colloquy over Save Toby, Lior Strahilevitz has a new post about property desctruction and eminent domain:

Suppose that a wealthy nihilist owns a Frank Lloyd Wright home and announces a completely credible intention to burn it down. Should the state be able to condemn the property and, upon paying the nihilist fair market value, transfer it to the Frank Lloyd Wright Trust, a private entity that announces (again, completely crediby) an intention to turn it into a museum?

The holding of Kelo (and earlier cases like Berman v. Parker) suggest an affirmative answer, and I believe that the state should be able to use the eminent domain authority to condemn the home from the nihilist and transfer it to the preservationist. There is a strong economic argument for liability rule protection in this hypothetical, as opposed to property rule protection. There are probably enough people (neighbors and non-neighbors) who would derive substantial "existence value" from knowing that the home survives and value the option of being able to drive by it or take a tour to outbid the nihilist in a world of no transaction costs. But high transaction costs will probably prevent those people from getting together and outbidding the nihilist for the home, even though they are the highest value users. So unless there are a large number of nihilists out there who derive "non-existence value" from the home, it would seem that using the government's eminent domain authority to preserve the home is welfare maximizing.

Now, I think Will is still going to object, which might make for an interesting discussion. Where will he go with his objection?

Now Lior is right that I do object to this use of eminent domain. But before explaining why, let me note that I don't think it would be unconstitutional for the state to pass a regulation (with compensation) forbidding the owner from burning down his Wright house. Such a law might or might not be unwise-- I have suggested that I would support historical preservation laws if they came with compensation-- but we will put it aside for now and ask about the wisdom not of merely saving the house, but whisking the house away from its wasteful owner.

Lior suggests that the reason that eminent domain would be necessary here is that transaction costs would stop Frank-Lloyd-Wright lovers from pooling their resources to support the place. Maybe so. But I wonder, if the government has the money to compensate the owner by taking his house away from him, what can't they simply buy it from him in a voluntary transaction?

Unlike in your typical plot-assembly case, there's not a lot of risk of insincere holding-out here. Any number of museums or governments or private collectors could try to buy the thing from him, so it's hard to see what would simply stop him from holding an auction if he thought that he could get a bid from a government or anybody else that was larger than his private value. (I seem to remember Lior suggesting a similar mechanism in his paper on the Right to Destroy.)

Of course, eminent domain is popular not only because it overrides transaction costs but also because it allows public desires to trump (and not-compensate) private un-marketable idiosyncrasies. Of course, this is not obviously welfare-maximizing. It seems quite possible that one person's thrill from destroying a FLW house would be "larger" than the slight dimunition in marginal existence value that would come from there being one less FLW house in existence.

Furthermore, a legal rule that allows governments to take property from "anti-social" users and give it to more social users has costs too. My belief that private ordering rather than public force ought to be the engine of distribution is based in part on a belief that the relevant government agents (local government officials, judges, juries) will sometimes err, and err in bad ways, in deciding who gets what. How would local juries know whether the utility that one person derived from destroying a house was larger than the utility that others derived from taking it from him? Given the basic incommensurability of utility functions in non-voluntary environments, it is hard to imagine why we should expect a jury to get it right more often than not.

So I argue that my rule-- a preservation plus compensation statute written in neutral terms-- trumps Lior's, and we shouldn't weep if local or national governments don't have the ability to take people's houses away from them.

Addendum: I will be the first to admit, though, that any sort of serious "public use" requirement will sometimes lead to bad and unjust outcomes. Lior mentions Midkiff but I will give him a stronger hypothetical to press-- the emancipation of slaves in the District of Columbia. When Congress contemplated passing legislation to free slaves in the District (before the Constitution was amended to forbid slavery), it was argued not only that the 5th Amendment would require slave owners to be paid compensation for their lost property, but that the public use clause would forbid such an emancipation altogether unless the government were intending to maintain ownership of such slaves. While I obviously think emancipation of the slaves was a great moral imperative, it may well have been unconstitutional at the time. Alas for our then-slavocratic constitution.

But it is unclear what even this or the other example is supposed to prove as a general matter. Any legal rule applied in our world will be both under- and over- broad, permitting uses of eminent domain that would be welfare-reducing and forbidding ones that would be welfare-increasing. So the question shouldn't be whether we can conceive of a case where it might be nice to take somebody's home from him. The questions should be 1, how the proposed eminent domain system would perform over the run of cases, and 2, what other rules are possible as alternatives.


UPDATE: And of course Lior's point about public outrage is surely spot-on. Susette Kelo is sympathetic in a way that a nihilist is not. But it is hard to see why that should much change the welfarist analysis of the legal rule.


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Credit Where Credit is Due

I returned to the DMV today and successfully registered my car, armed with a letter from the law school. They let me skip to the front of the line, and the whole thing took less than 20 minutes.


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The Unconstitutionality of the FHA, Redux

Some time ago I argued that a section of the Fair Housing Act was clearly banned under 44 Liquormart. Dave Fagundes now attempts to save the FHA, by arguing that there are rationales that justify banning the speech but leaving the underlying discrimination legal.

I will blog more about this after I re-read Liquormart, but my initial inclination is doubt. (And I will add that there is another potential tension-- to the degree that the some exceptions to the FHA are actually constitutionally compelled by intimate-association rights, that might provide added suspicion of the FHA's decision to ban all the speech and only some of the conduct.)


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The Right to Divorce

Angus Dwyer ruminates about whether the Constitution requires the state to grant a right to divorce, or even to no-fault divorce. I presume that he is not actually asking about the text of the document but about likely governmental glosses on it. If so, it seems likely to me that the Court would say that the fundamental right to marry entails the fundamental right to sever one's marriage at least some of the time, just as the fundamental right to bear and beget children has been held to entail the fundamental right to abort and not-bear them, I presume the Court would make a similar negative inference.

The exact contours of such a Court-created divorce right, I cannot anticipate. Maybe an undue burden standard?

UPDATE: A Friend of Crescat wonders whether the same logic would forbid the state from eliminating the institution of civil mariage and replacing it with civil unions. One would think not-- the right is to marry, not to have the state bless the marriage. Then again, given Griffin v. Prince Edward County, I hesitate to make predictions on this score.


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