Eminently Wrong.

Written by pete

Topics: Uncategorized

em·i·nent (m-nnt) adj. Towering or standing out above others; prominent: an eminent peak.
do·main (d-mn) n. A territory over which rule or control is exercised.

“The true foundation of republican government is the equal right of every citizen in his person and property and in their management.” –Thomas Jefferson to Samuel Kercheval, 1816.

The only eminent thing about the Supreme Court’s activities last week is how prominently wrong their decision on Eminent Domain was for this country. They have made a particularly distinguished mistake. An outstanding travesty of justice. Indeed, they’ve hurt us more than the last ten policy mistakes combined.

In case you missed the story, the town of New London has condemned the property of several homeowners in a well maintained, middle class neighborhood in order to clear the way for a private redevelopment consisting of townhomes, condominiums, and offices. After lengthy negotiations, the owners refused to sell their homes and businesses to the developer, and that developer had the government invoke eminent domain. This is one of the first examples of the government taking from one private party, and giving to another private party for a development project.

My good friend, talented author, master story-teller, and fellow thinker had a few things to say about the recent Supreme Court Decision on Eminent Domain. I must say, I agree with Steph, as you can see in my comment to her journal entry.

Countries that accumulate economic wealth generally have several distinct characteristics. There are several characteristics that I consider the most important:

  1. An economic systems that rewards and promotes competence and performance
  2. A government that establishes a set of rules that are fair, knowable, and generally not corrupt.
  3. A suitable climate and geography to facilitate trade.
  4. Access to education and other mechanisms for skills improvement
  5. Protection of private property rights, both real property and intellectual property

These aren’t just my crazy ideas. The National Center for Policy Analysis agrees, along with Bernhard Heitger of the Kiel Institute for World Economics. Classical economists like Adam Smith and Keynes didn’t just think property rights were an important element of an economic policy, but rather an assumed pre-requisite. That is, without property rights, you don’t have a functional capitalist economy. You have something else.

Peter Boettke, of the Viginia Institute, says in this article that there are four important reasons for private property rights:

  • Recognized private property rights provide the legal certainty necessary for individuals to commit resources to ventures. The threat of confiscation, by either private individuals or public officials, undermines confidence in market activity and limits investment possibilities.
  • Clear property rights tend to make decision makers pay close attention to resource use and the discounted value of the future employment of scarce resources. Absent private property rights, economic actors will tend to be short-sighted in their decision making and not conserve resources over time.
  • Property rights are the basis of exchange and the extension of ownership to capital goods provides the basis for the development of financial markets that are essential for economic growth and development.
  • Secure private property rights, as indicated in the above quote by Thomas Jefferson, is the basis for limited and civilized government. The elimination of arbitrary confiscation and the establishment of regular taxation at announced rates enables merchants to calculate the present value of investment decisions and pass judgment on alternative allocations of capital.

The thinkers mostly agree, which is a rare occurence, that private property is a central pillar of capitalism. It is also a crucial element of The American Dream. In this case, do the needs of the many really outweigh the needs of the few? Or, perhaps more appropriately, are we really concerned with the needs of the many here? Or with the needs of the rich?

No matter what the rationalization, it seems to me that taking someone’s only valuable asset, while paying an unfair market rate (because the property is “blighted”), then giving it to a developer who will probably make 30 or 40 times the price paid from the project is an ethical travesty. It doesn’t matter that it’s legal. It’s unethical no matter how you slice it. That’s probably why the “moral values” crew is speaking up against it.

In the liberal state of Maryland, The Rouse Company was forced to build Columbia, MD around the properties of holdout families that refused to sell their land. Columbia, MD did just fine, and the holdout families either coexist peacefully or have cashed out at better market rates. And The Rouse Company still got rich beyond belief.

The Supreme Court, however, has handed developers a shortcut. Why would any big developer even try to negotiate a fair price with a landowner now? If I want to build 100 houses on your grandmother’s farm, why wouldn’t I just try to get my County Executive to condemn your family farm and cut out the pain of negotiating with you?

Don’t worry. You’ll get fair market value.