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Eminent Domain for Private Gain Is Terrible and Cruel — Even When It “Works” – Article by George C. Leef

Eminent Domain for Private Gain Is Terrible and Cruel — Even When It “Works” – Article by George C. Leef

The New Renaissance HatGeorge C. Leef
August 18, 2015


Despite a “success” story, eminent domain for economic development is a bad policy

Ilya Somin’s excellent new book The Grasping Hand on the infamous case of Kelo v. New London recently drew a negative response from a professor who defends the use of eminent domain for “economic development.”

In his letter to the editor of the Wall Street Journal, Wayne State University professor John Mogk took issue with Somin’s book and with Ed Glaeser’s favorable WSJ review. Mogk claims that they did not adequately weigh what he regards as a successful use of eminent domain to promote economic growth in Poletown, Detroit.

The New London redevelopment project that cost Suzette Kelo her little pink house was, Mogk admits, a fiasco. But, he says, we shouldn’t paint all eminent domain cases with that brush. He wants to buttress the case that the public welfare can be enhanced by using eminent domain to obtain land for projects that are supposed to stimulate the economy and create jobs.

Mogk believes that the apparent success of Poletown saves the day for eminent domain enthusiasts.

Here are three reasons for believing that he is mistaken.

First, as a policy matter, we either give the green light to property seizures for any “public purpose” conceived by politicians, or we prohibit them and limit eminent domain just to seizures for a clear public use. (That’s the language in the Constitution.)

We cannot have a rule that says, “Eminent domain may be used for economic development plans, but only when it actually produces net benefits.”

No one can know ahead of time whether a plan will “work” (which is to say, produce at least some of the promised gains) or utterly fail. In Kelo, the City of New London’s grand redevelopment plan fell through completely. Where neat, modest houses once stood, you now see only rubble and weeds. Nobody knew that would be the outcome when the plan was conceived.

Consider this analogy: The law forbids warrantless searches by the police, but suppose that, in some illegal searches, important evidence of criminal activity is found. Should we conclude that the Fourth Amendment’s warrant requirement can be discarded because there are some instances where we get good results from warrantless searches?

I don’t think that conclusion follows. And neither should we allow property seizures whenever authorities want to, just because those seizures sometimes have “good results.”

Second, Professor Mogk’s Poletown example isn’t as telling as he thinks. Perhaps it is true, as he writes, that most of the inhabitants were content with their buyouts. What I don’t think anyone can deny, however, is that for some of the residents, especially elderly people, the forced relocation was extremely disruptive and painful.

Outsiders like Mogk and the bigwigs at General Motors (who wanted the land for a new Cadillac plant) may have thought that Poletown was “declining,” but to the people who called it home, living there was their best option.

The right to quietly enjoy their property was taken away from them so that others might be more prosperous — GM stockholders and UAW workers, in particular.

We have to oppose the collectivistic philosophy that says it is permissible to use coercion against some individuals as long as those in power think they might thereby create a net utilitarian gain for more politically powerful (and usually much richer) interests.

Third, all that these economic development eminent domain takings can ever do is to redistribute where economic activity takes place. It cannot create any overall gain.

Let us suppose that the GM management was correct in forecasting an increase in demand for luxury cars. (It appears that they overestimated that demand, at least for their own vehicles, since the plant never employed nearly as many workers as they had said it would.) Free market competition to satisfy that demand would have led to increased output without Detroit confiscating land for a new GM plant.

If it hadn’t been able to resort to coercion to get the land, GM would probably have found other ways of increasing Cadillac production, but even if it couldn’t have done so, other auto-makers would have built more luxury cars. Auto jobs would have been created somewhere, and car buyers would have benefited without property owners losing.

Instead of proving that eminent domain can be a good economic development tool, the Poletown example is just another illustration of Bastiat’s broken window fallacy. Demolishing Poletown to build a new auto factory brought about visible benefits for some people, but only at the expense of benefits for others that would have otherwise occurred.

No, not every eminent domain seizure for economic development purposes is as pointless and utterly destructive as Kelo, but we still ought to stick with this rule: Government should protect property rights, not violate them. The government should do those few order-keeping functions appropriate to it and leave the allocation of resources and planning of production to people who risk their own money and cannot take what isn’t theirs.

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Arguments Against Eminent Domain and Its Use for the Benefit of Private Parties (2005) – Article by G. Stolyarov II

Arguments Against Eminent Domain and Its Use for the Benefit of Private Parties (2005) – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
July 26, 2014
Note from the Author: This essay was originally written in 2005 and published on Associated Content (subsequently, Yahoo! Voices) in 2007.  The essay earned over 8,300 page views on Associated Content/Yahoo! Voices, and I seek to preserve it as a valuable resource for readers, subsequent to the imminent closure of Yahoo! Voices. Therefore, this essay is being published directly on The Rational Argumentator for the first time.  
~ G. Stolyarov II, July 26, 2014


The power of eminent domain has had a lengthy history, first originating in the Middle Ages and becoming enshrined in British common law. It is included in the U.S. Constitution as a means of government appropriating private property if this appropriation serves a “public use.” However, under the 5th Amendment, the government is obligated to provide “just compensation” for any property thus taken, which is usually interpreted to mean that the government must pay the market value of the property to the owner from whom it is taken.

Recently, however, governments at all levels have begun to stretch these powers to encompass one private party’s land being taken for the benefit of another, especially if the other is a larger business that has the potential of bringing in greater tax revenues. This is a measure of questionable constitutionality, and even far more questionable morality. It is desirable to abolish such seizures of private land for the purposes of redistribution to other private entities, and to at least limit eminent domain powers to seizures that will only be directed toward benefiting government projects and infrastructure. That is, the power of eminent domain might still be invoked to build a public road or school, but not a shopping mall or apartment building. The arguments in favor of this restriction are overwhelming, even though it does not go as far as complete eminent domain opponents such as myself would like.

First, for somebody who values property rights, private property is an absolute, not to be contingent on “the public interest.” If the individual sees the benefits of keeping his property as outweighing those of selling it, he can either refuse to sell it or ask for more compensation. Anybody but the owner should be allowed to take the property only with the owner’s consent.

Often, current governments do not even give market value to “compensate” for seizures, but, even if they did, there are subjective values that owners associate with their property which are hard to quantify and which only the owners themselves can enumerate accurately. As the story of certain homeowners in the 2005 Supreme Court case of Kelo v. New London shows, some of them have built their dream homes out of places that were run-down when they first purchased them. And, after they had invested their lifetime’s work into those houses, the houses were condemned by the government. Surely, a coercive demand that they accept “market value” is not sufficient to compensate such a deeply personal investment.

Furthermore, “the public interest” is a collectivist notion, which ignores the fact that only individuals exist and that invoking “the public interest” in fact implies that the government should coercively back some private interests over others.

The policy of eminent domain has, recently, been used with blatantly power-hungry justifications. Business X brings in less tax money than Business Y might, so X must be demolished to give way to Y. Y is also a larger business that might create more jobs, so this justifies putting out of work those individuals who are currently employed by X. The flaw with this reasoning is that it views individuals as fungible, or substitutable for one another. It should not matter how many other individuals benefit from a government policy if it ruins the livelihood and property of even one innocent person. Individual rights are absolute.

Advocates of eminent-domain redistribution of property to private parties will attempt to state that the government can actually bring about “efficiency” through the use of eminent domain power to achieve “urban renewal.” However, economic theory from Adam Smith on has shown that the free market achieves any goal more efficiently than the government. A business that thrives because of government favors through eminent domain is not thriving because it functions better than others in market competition. As a matter of fact, that business might well not be favored by supply and demand, and has therefore not been able to acquire the land it seeks under a mode of free, voluntary market exchange. Therefore, its owners are seeking to gain what they have not earned by expropriating it from those who have earned it.

The kind of eminent domain supported by the Supreme Court in Kelo v. New London is pure legalized theft. It is time to recognize it as such.