Libertarians Against Privatization?

Julian Sanchez | June 24, 2005

One thing about the argument over Kelo struck me as a little ironic in the wake of yesterday's decision: The libertarian side of the argument seems to entail that takings are permissible if the government is using the land itself to accomplish a goal, but not if it makes use of private markets to do so. In other words (on this argument) it is a public use if government condemns a strip of land to build a public highway, but not if it auctions the land to a private firm hoping to build a toll road, as many libertarians would presumably prefer. There does seem to be an interesting tension there (or, at any rate, a delicate balancing act) between the view that "public use" can't just mean any giveaway to a private company that would produce incedental public benefits, and the view that it's better for government to take advantage of the effiiciency of private markets rather than running things soup-to-nuts itself when possible. I see Eugene Volokh had the same thought, which he explores in a long and interesting post.

Comments

|6.24.05 @ 2:55PM|#

I think the key to the apparent conflict is that 'taking' for government purposes is bad, but it's no more than what one expects from the government.

Taking for private purposes creates a whole new market of influence and pull and corruption. If you want to compete successfully, it's no longer enough to be competent; it's not even enough to have good lobbyists. If your competitors are getting cheap land via government takings, you can't compete.

Every place the government touches the market in a way that favors one competitor over another, a new source of corruption, inefficiency, and statism is created.

I don't like the government taking a chunk out of my paycheck every month; I'd like it a whole lot less if they were taking that money and handing it directly over to someone else doing the same job as me, in a different company.

|6.24.05 @ 2:56PM|#

Well, as a self-identified libertarian, I would say it's not so much a tension as a compromise.

I want to see government at least limited to what it promised it would limit itself to. If I got at least that, I would be happier, but not satisfied. I still object to the use of coercive force in any transaction, and subscribe to the theory that since all value is subjective, there can be no such thing as "objective fair market value" in an eminent domain proceeding.

|6.24.05 @ 2:58PM|#

You'll find libertarians who don't support using eminent domain for public works either.

Julian Sanchez|6.24.05 @ 3:04PM|#

Phocion-
Sure, I'm referring to the constitutional argument, since whether it's a good idea or not, there's no question that some eminent domain for public use is explicitly authorized.

|6.24.05 @ 3:05PM|#

Another argument is that with this new rationale there's really no limit. I mean, there's only so many parks, schools, and highways and what not that they can build. But there's always going to be somebody interested in commercial development, or building nicer homes, or something.

With this the list of possible uses for ED goes from a finite (but, sadly, too large) list, to virtually infinite. It's a step in the wrong direction, no matter what you think of the status quo.

|6.24.05 @ 3:12PM|#

Presumably the libertarian position on your example (the toll road) would be that the private developer purchase the lots and build the toll road without benefit of government coercion. Probably not particularly likely, or realistic, although I believe there is at least one privately own toll bridge between the US and Canada.

David Woycechowsky|6.24.05 @ 3:12PM|#

Thoreau,
Yesterday, I suggested that condemnations based only on money, roll a percentage of that money into the fair value analysis -- presumably making it more expensive to condemn based solely on money. This might solve your concern, as well as leaving the economically-condemned in an even better financial position than those condemned on more traditional public benefit grounds.

|6.24.05 @ 3:12PM|#

Julian,

Epstein addressed this question at length in Takings. Do you know anyone who could persuade him to blog on this or any other issues related to Kelo?

M|6.24.05 @ 3:13PM|#

I think "roads" are easy to see as fair public use; luxury lofts are not.

Forget about libertarians for a second: I always thought eminent domain was generally understood to be fair for infrastructure-type things like roads and sewer systems and phone lines...I'd even accept a courthouse or the like.

I bet the people arguing that takings are only bad if the property is turned over to private enterprise would not actually object to such things as toll roads or private utilities. They just aren't using appropriate language to describe their objection.

Anyway, you can accept the notion of takings being a fair and useful tool for local governments trying to build infrastructure w/o liking this decision. I mean, condos? New retail business? Just doesn't sound like a fair definition of "public use" - even though a privately-run toll road might.

|6.24.05 @ 3:15PM|#

The argument is irrelevant to Kelo, since the development is not a road, wastewater treatment plant, etc. They're building freaking condos (and other stuff)! So some justice can be served, would someone please bulldoze the home of the five treasonous "justices" responsible for this heinous ruling.

M|6.24.05 @ 3:17PM|#

Grummum, the Chesapeake Bay Bridge was privately built and privately run with no tax money. Or so they say.

|6.24.05 @ 3:18PM|#

Jeez, three people post before I can get mine finished. I swear I didn't mean to be (too) redundant!

|6.24.05 @ 3:25PM|#

Ode to a Supreme Court Ruling

If you think it's your land, well it's not
As you'll learn when removed from your lot
It's for the public good
Says a Developer-Hood
With designs on what you have got

|6.24.05 @ 3:28PM|#

Here's my take: Taking for "public" (government) use is bad, but taking in order to get more taxes from cronies is worse.

It would be best of all to abolish eminent domain altogether; but in the meantime, we can at least insist that the government follow the limiting rules it orginally set up for itself in the first place.

|6.24.05 @ 3:39PM|#

As a child I always had the fifth amendment wrong. I didn't think of eminent domain. I thought it ment that a criminal could be fined or have property taken to make restitution until proven guilty through due process. Too bad I was wrong back in third grade when we first read the constitution, we could sure use an interpretation like that now.

|6.24.05 @ 3:46PM|#

I always thought eminent domain was generally understood to be fair for infrastructure-type things like roads and sewer systems and phone lines...I'd even accept a courthouse or the like.

Note that eminent domain long preceded the advent of modern water/sewer systems and electric/telephone lines. Business development projects like markets and harbors are the most traditional reasons for eminent domain takings.

|6.24.05 @ 3:55PM|#

I consider selling government property to private interests "privatizing," but not government-forced transfer of property between private interests.

|6.24.05 @ 3:57PM|#

I'm guessing that the issue being raised is that libertarians should naturally prefer that property taken by the government ends up in private hands rather than the public's, so therefore the taking in KELO is preferable to the government taking your land to build a courthouse, rather than the other way 'round.

On the other hand, for the government to get involved in moving property between private parties severely distorts markets. If WalMart wants your house, it now knows it can just go through the government to get it, where only "just compensation" is required. KELO will encourage private developers and businesses to utilize the government rather than the market to obtain real estate, and this will depress real estate value. My guess is that the overall private losses incurred thereby would greatly exceed private losses from takings for purely public use, as the government doesn't have as large an appetite for real estate.

|6.24.05 @ 4:14PM|#

It is a two step process. First you gotta get the government back into the Constitutionally dictated limits. Then we can have the debate about how to amend to Constitution to acheive a free society.

|6.24.05 @ 4:40PM|#

I think Julian keyed in on it when he said that he is addressing the constitutional argument. The constitution as written does in fact prefer takings for public use.

As for whether takings for public use only is more or less libertarian, I can only argue that government redistribution to private parties is a distinctly unlibertarian concept, and one extremely likely to result in favors passing between the wealthy and the municipality. It is almost like saying that the right of home ownership means two different things to the wealthy and the poor, even in theory. The wealthy are being given a legal right that the poor do not have.

|6.24.05 @ 5:04PM|#

The opinions in Kelo discuss the forced sale of land or rights-of-way in order that private railroads could be built. These were justified on the basis of the railroads being "common carriers", so that "public use" would be met by the public being able to use the line to travel or ship goods. The same theory was used to justify the placement of power transmission lines, irrigation ditches, etc. Something built for the use of just one actor wouldn't meet that standard.


But let's not forget that a man like James J. Hill built the Great Northern line without access to the subsidies and free land that the Union Pacific and the Central Pacific got, and without eminent domain backing him up.

Kevin

|6.24.05 @ 5:05PM|#

I agree with many of the sentiments expressed since my post in this thread.

To elaborate on my post, what is public spending as a fraction of GDP? I don't recall the precise number, but it's certainly less than 50%. If land can only be taken for public use, the amount of public spending sort of sets a limit on just how much land can be taken (they can only use so much).

If land can be taken for public or private use, well, the public and private sectors combined constitute 100% of the economy. (Well, leaving aside the black market, but they have their own methods for taking things.) So now anybody can take land from somebody else with less money. It's a potential free-for-all.

We can agree to disagree over whether there's a moral difference between taking for public use or taking for private use. But as a practical matter, this throws the doors wide open, and that's clearly no good.

|6.24.05 @ 6:03PM|#

Really scary thought for the day:

Here in California we have a law (Proposition 13) that forbids any increase in valuation of real estate, upon which property taxes are based, until the property is transferred to another owner. Until then, the taxes can only go up at 1% per year.

What will happen when the local governments realize they can condemn your house (the one you've lived in for 30 years, is now worth $500K, but on which you're only paying $1,000 per year in property tax) and simply "flip" it to another private owner, thereby increasing their property tax take by 600%?

Hey, after all, increasing tax revenue on that property is now a bona fide "public use"; the Supremes say it's so.

|6.24.05 @ 6:13PM|#

Hey, I just realized something: Quartering soldiers in your home would be a public use. I know there's an amendment against it, but that's the 3rd amendment, and the 5th amendment comes after it and so takes priority.

So, here's how they could boost military recruitment: Any new recruit can have the home of his choice. He just points to a house and the government takes it from the owner under ED.

|6.24.05 @ 8:13PM|#

So, here's how they could boost military recruitment: Any new recruit can have the home of his choice. He just points to a house and the government takes it from the owner under ED.

Heck, if you kick the occupants out first, it's not even "quartering"!

|6.24.05 @ 8:53PM|#

Relating to my posts in yesterday's long thread, the Constitution does authorize taking for public use. I'm not keen on that, from my classical anarchist individualist perspective. However, I must accept that those words are in the contract under which the USA and I trade. I get extra bent when the words in the contract are unilaterally reinterpreted.

Mills and railroads, as joe brought up yesterday, produced results I like. I don't think the decisions which allowed those results are aligned with the framers' intent. The primary beneficiaries were not the public-at-large, but the mill or rail owners. Some good, maybe even much good, was brought to the public, but in localized and discretionary instances.

To keep with the framers, the government would only act to benefit the public-at-large. The gov't may choose to hire private contractors rather than create its own firm, if the profit to the contractors was pre-defined and the total cost was less than the cost of gov't doing it internally.

If it was determined that a communication network (railroad) was necessary for defense (to protect the States, severally), the network could be built by private firms, operated by private firms, but owned and used only by the public-at-large (the USA). To build a network for purposes other than defense, say commerce, is not the proper province of the Federal government.

|6.24.05 @ 11:14PM|#

Julian,

I think that libertarians generally prefer that failed or inefficient existing public programs be replaced with private versions of the same. I don't know that the same can be said for parcels of public land.

For example, I could see libertarians arguing that the parks dept. should be replaced by Zippy's Lawn Care because Zippy can do a better job for a lower cost. I can't see libertarians demanding that the city sell the park to developers for a cash infusion (one they'll almost assuredly piss away).

My take is that it is as wrong to forcibly take assets from poor person A to further enrich wealthy person B, as it is to forcibly take wealth from B to support A. My position doesn't change because B promises later fringe benefits to the larger community.

|6.24.05 @ 11:21PM|#

To elaborate on my post, what is public spending as a fraction of GDP? I don't recall the precise number, but it's certainly less than 50%. If land can only be taken for public use, the amount of public spending sort of sets a limit on just how much land can be taken (they can only use so much).

Goverment spending is 18.9% of GDP.

Table 1.1.10: http://www.bea.gov/bea/dn/dpga.pdf

The Wine Commonsewer|6.24.05 @ 11:27PM|#

libertarians believe that at the very least the government should be constrained by the constitution

|6.25.05 @ 3:30AM|#

I wish I'd had the wits earlier to just post three illuminating sentences:

Redistributing property from government hands to private hands = privatization.

Redistributing property from private hands to government hands = not privatization.

Using government power to redistribute property from private hands to different private hands = not privatization either.

Jadagul|6.25.05 @ 4:57AM|#

I suppose, Stevo, that the question is, if

1)Government selling business/property to private owner>Government managing business/property itself, and

2)Government siezing property=Government siezing property, then why doesn't it follow that

3)Government siezing property and selling it to a private owner>Government siezing property and managing it itself, which would imply

4)Use of eminent domain to sieze property for another private owner>Use of eminent domain to sieze property for the government?

That makes sense as far as it goes (It may be better that the government is allowing a private corporation to develop the condos rather than doing it itself), but arguably misses a step: the type of property siezed and the use to which it's put is generally different in the two cases. I think that those who believe ED is reasonable sometimes, but needs to be much more limited, don't think the difference is the government ownership, but the type of use to which the property is put. There's a difference between "public use" and "public ownership," and that may be what Professor Volokh is getting at.

|6.25.05 @ 5:54AM|#

Jadagul,
My best guess is that part of the arguement goes that by offering seizure as a means to an a=end for private hands creates an incentive to lobby for siezure rather than for honest trade.

(all voluntary action)>(use of eminent domain for government use)*(incentive for seizure)>(use of eminent domain for private use)*(incentive to lobby for seizure)

|6.25.05 @ 3:20PM|#

Julian,
I feel the "public use" referred to in the Constitution was limited to either direct public use or government function. In the Kelo case the taking is for neither purpose. Unfortunately my feelings don't make it so.

In the case of the toll road, if ED is to be used to take land for a road, I would prefer that road be a private toll road. We assume, of course, that ED was the last option and not the first, as it is now. The reason for my preference is as follows;
1) the existance of the road is a certainty,
2) the original land owners were given first right of refusal to form an appropriate business, for decision making purposes, to operate the road themselves or lease it to a regular road operator.
Only then it is better to have an independent private road operator maintain the road and continue to pay taxes on/ lease the road property rather than the road become a burden on the community. I further assume that said independent private operator would be chosen through a competitive market.

Notice there must first be a need for the road, or any qualifying construct, in a particular location. Condos can be put anywhere, a harbor cannot, shopping center - anywhere, firestation - not so much. This does not prelcude the firestation from being a private operation, merely that some locations are better suited. For me, the Kelo case fails the "needs" test even though such a test is not specifically stated anywhere.

Taking another step, "blight" is an equally bogus excuse since it basically allows for "taking" by accident. Kinda like Trump in Alantic City.

|6.25.05 @ 8:00PM|#

Eddy,

The redevelopment of the Fort Trumball neighborhood cannot occur anywhere else.

|6.25.05 @ 8:52PM|#

...although that argument would suggest that the takings would only be justified if the goal was to "fix" Fort Trumbell itself, rather than to find a spot for the condos and hotels they wanted - ie, a blight taking, not an economic development taking.

|6.26.05 @ 3:43PM|#

Forget it. The future belongs to China anyway. Libertarianism will show up only in scholatly monographs on the political sects of late capitalism.

Kevin Carson|6.26.05 @ 10:07PM|#

Julian,

That's certainly the kind of "privatization" the "libertarians" at the Adam Smith Institute would favor, anyway: nominally private, politically-connected corporations, acting within a favorable framework of rules set by the state.

But in making the comparison, you at least help to strip the aura of sanctity from the "public" purposes that e.d. was traditionally used for. Highway and airport pork, and "publicly"-owned industrial parks, are just as much corporate welfare to local business and the real estate industry as is the practice at issue in Kelo.

|6.27.05 @ 12:19PM|#

Captian Awesome: My [analysis of your argument is] that by offering seizure as a means to an [end] for private hands creates an incentive to lobby for siezure rather than for honest trade.

Yes. It's not privatizing property so much as governmentizing the market.