Tuesday, August 16, 2005


Of course I can bore you with all the travesties these adecisions have caused but that's for another day(or at least later on this post)... But this should cheer you up: News June 24, 2005 Bush May Condemn and Seize Supreme Court

by Scott Ott

"In the spirit of the new government takeover of American homes and businesses," said President George Bush, "We may have to seize the moment to condemn some aging, faded and blighted elements of the Supreme Court. Then we can replace them with something that will serve public purposes."

The first point I want to make is "Sometimes the best rulings are defined by the range of people who are disappointed in it. By that standard, this is is a home run." This mostly applies to the Legislature where compromises lead to no one being happy but for the Judicial Branch where a yes or no can lead to everyone being unhappy (and still rightly so) except for the minority that won the case.

The first thing I would like to bring up is other voices on this subject (Besides my friend Karl). From the environmentalist (Most that I visit had no post.):

Montgomery County Green Party :No One's Property Is Safe (& that includes nature preserves)

The Seattle Times: Taking a wrecking ball to property rights. Where: "The issue has united people from both ends of the political spectrum, from the libertarian Institute of Justice to former Green Party candidate Ralph Nader. Nader, in his recent book on corporate welfare, deplored the business-political backrubbing exercise that makes a habit of condemning low-income property for the convenience of corporations. That it is done for the sake of community development is often a canard, he adds."

From Free Market Environmentalists The Commons (Markets Protecting the Environment) Posts: Landowners Lose!

They also have this: The Ideal Communist City.

And lastly from the Economists:

Tech Central Station in They Can't Take That Away From Me... Unless They Can: "Unfortunately, the requirement to pay fair market value is a grossly inadequate safeguard on government power for two reasons. First, it fails to take into account the subjective valuations placed on the New London property by people whose families have lived on the land, in at least one case, for a 100 years. In other words, the government now will be able to seize land at a price considerably below the reservation price of the owners."

Links to Economist in Despotism by stealth: "Otherwise, argues Scott Bullock, Mrs Kelo's lawyer, you end up destroying private property rights altogether. For if the sole yardstick is economic benefit, any house can be replaced at any time by a business or shop (because they usually produce more tax revenues). Moreover, if city governments can seize private property by claiming a public benefit which they themselves determine, where do they stop? If they decide it is in the public interest to encourage locally-owned shops, what would prevent them compulsorily closing megastores, or vice versa? This is central planning."

And TCS links to Slate in Condemn-Nation This land was your land, but now it's my land:

"And O'Connor offers this concrete example: What if there's a Motel 6 but the city thinks a Ritz-Carlton will generate more taxes? Is that OK?

Yes, says Horton.

"So you can always take from A and give to B if B pays more taxes?" asks Scalia.

"If they are significantly more taxes," says Horton"

And there is some support to come from a small group of Progressives. The American Prospect in NOTHING WRONG WITH KELO: "But the New London government didn't give the land to private developers to do with it as they please, with a vague hope that the profits would redound on the community; they shifted control to a development agency commissioned by the city to carry out a government-approved plan."

And links to TPM Café and Ezra Klein in Takings and the Public Interest: "[t]he disposition of this case therefore turns on the question whether the City's development plan serves a 'public purpose.' Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field."

And now for something completely different:

reason hit and run in Flying Dragons of Fury vs. Warlords of the Forbidden City: For the second time, peasants have turned back an attack by goons trying to clear them out to make room for a state-owned power plant.

The farmers fight back against the attackers with wooden poles and pitchforks. At one point, they knock down one of the assailants and club him repeatedly as he lies motionless on the ground. The four-minute videotape abruptly ends when the farmer with the digital video camera is forced to flee from the assailants. He reportedly suffered a broken arm in the battle.

Of the six slain farmers, most reportedly died from bullet or stab wounds. One of the attackers also died, the Beijing News reported.

Now that we have had some more voices into this converstation let me explain why in economics it is bad. One of the basic posits of economics is free trade (no coercive  elements) makes both parties better off. As long as there is common ground where reserve prices (lowest price for seller and highest for buyer) overlap then a trade will occur. In this case the holdouts reserve price (if there was one) was above the reserve price of buyers. This is where the buyers failed to allow non-economic factors to enter into negotiations. I have not studied enough on the holdout problem to come up with the best solution, but just because it was difficult to negotiate a settlement with holdout does not mean that eminent domain use was neccesary.

I will be refering to state ruling since I did not have a chance to read Supreme Court Decision at FindLaw:http://laws.findlaw.com/us/000/04-108.html.

A more refined and narrow definition of "public use" is the concept of public goods. The Economist asks some questions on this:"This sounds technical, but it involves fundamental issues. When may the government overrule private property rights for the sake of the public good ? What constitutes "the public good" in such a case? Does it make any difference whether that good is delivered by a public or a private entity?" This wording is better IMO than the judges using "public purpose" or "public benefit".

As in: "Economic growth and its encouragement, especially in distressed municipalities is a valid public use because it obviously confers a benefit to all members of the public." In which I say NO! Those that lost their homes lost utility. No? Is trickle down theory going to be used here to justify takings? It would be hard pressed to show that all members of society benefited from these takings. If free trade with well defined property rights had occurred I would say yes.

This leads to my point that the individuals that had their property taken were not compensated in a "just" way. As noted earlier if holdouts do not present an offer that the seller can agree to then the seller should seek alternative ways to solve "their" problem. In economics we care little about where the development will occur, as long as it is in the most efficient location available. If there is no location that can suit the "plan" then the plan should not be done. Just as if the interest rate rises will mean less projects will be undertaken since less plans will create economic profits.

Show me the money!

These "plans" according to opinion: "Funds need not be on hand, nor do plans and specifications need to be prepared for a condemnor to determine the necessity of a taking; in fact, it is the duty of public official to look to the future and plan for the future." Which was used to justify advanced taking of parkland. This leads to fallow ground used in the most inefficient use of resources. Some of the lots in question were not even included into the master plan (with no formal site plan) and were to be used for future plans to be decided later in either "park support" or "marina support". The owners gave alternatives to this parking lot option which was rejected for being inconvenient and difficult. The proposed plans only need to be "reasonable assurances" of future public use.

Let me spell this out in a scenario: Kmart sees the lots next to it (track homes or fallow or small business) and decides it will make a "plan" to create a Big K. Now as long as they can prove projected public benefit with a proposed plan they can start to develop it. Since no real money is used to get the land and no development is actually going to take place...They just wanted to prevent Walmart from coming in next door.

In this plan Pfizer (the purpose of the development) did not insist on the taking of all the houses. Their 3 demands with no monetary compesation other that promises were: wastewater facility upgraded, state park restored and significant local investment. These demand could have been accomplished without taking all lots and Pfizer only tangentially benefited from development of parcels and office space.

Many have stated on both sides this will lead to whatever creates the most value of the land. But the courts have allowed public use to include parks and other uses that benefit the public at large. For in this case, the Italian Dramatic Club's house was spared to "placate important political interests". This violated the 14th amendment for equal protection according to plaintiffs. It is unlikely that the could justify on economic terms so they refered to the proposed "plan" to say it was in the spirit of community. I wonder if this was a house of KKK or Black Panthers or Minutemen or any group out of graces with the local community would stay?

Let me go back to The American Prospect's point that a "development agency commissioned by the city to carry out a government-approved plan" would be alright. This I think actually makes it worse in the sense of one more level of bureaucracy and allows the developers to more easily back out of the project if something changes to not make the project economically feasible. If the latter happens then the commission can "then appoint a new development agency". Which is no guarantee the project would go forward then. The end result would be no homes and no development!

Since the local government already has the police state to persuade you to move, I don't think takings should be used unless absolutely necessary. In Santa Barbara they recently condemned some ocean bluff houses. Some owners stated they were safe on pylons that would support the structures even if all the sand underneath washed away. But now the properties are worthless without the houses being livable. And of course it so happened the city council wants to put a park in that area. Coincidence??? Is this a taking?

And now back to the courts that want to get into every decision based on its merits without regard to the Constitution  as in: "The sole dependence must be on the presumed wisdom of the sovereign authority, supervised, and in the cases of gross error or extreme wrong, controlled by the dispassionate judgement of the courts." And the State also said about the plaintiffs: "bears the heavy burden of proving unconstitutionality beyond a reasonble doubt. The burden of proving unconstitutional is especially heavy when, as at the juncture, a statute is challenged as being unconstitutional on its face."

P.S. (3-07-06): Maybe it's time to take a Mulligan on the Kelo decision.
Very funny use of the takings to convert a private golf course to a public one. And of course as I mentioned earlier the only criteria is increases in the tax base.

But this decision should have been settled by Coarse Theorem. The people that wanted to pay to have it converted would pay the owners to do so. And somewhere along the many possible solutions would be a Pareto Optimum point that would increase the utility (profits) of all parties concerned.

PS (6-20-07): From Audrey

I've been out to the Kelo house because my sister lives in that town. This is the house that was being seized because it was a "blight" or some such thing:


What a lot of people didn't realize if they didn't live in that area was that New London's done this a number of times. A few of the people forced out of their homes had lived in other houses in town, and they were evicted by the city from those homes, and so they moved to the new ones, and then were evicted from those houses as well.

In one of the earlier rounds they were displaced supposedly for some big development project, but then that was *surprise* canceled after they were evicted. This is what one of the earlier seized neighborhoods looks like now:


Other examples of trying to exterminate the poor, as well as people of color from New London include engaging in harassment campaigns by bringing in cops from other cites, voting to completely eliminate the Social Services department, shutting down shelters run by volunteers, and so forth. The details on each of those are ugly.

The kelo house was being seized so they could develop the waterfront to attract clients for Pfizer Corporation.

One of the people pushing the project was the head of the New London Development Commission, Claire Gaudiani, who writes "Anything that's working in our great nation is working because somebody left skin on the sidewalk."

She carefully uses passive voice there, avoiding the question of how that skin got left on the sidewalk.

Her husband, David Burnett, is a Pfizer executive.


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