Just Compensation

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Two points about eminent domain and "just compensation," both obvious enough that probably a hundred other people have made them since Kelo came down, but since I don't recall having seen them:

  • The "fair market value" of the property is pretty much by definition less than the value of a piece of property to the current holder: Otherwise, they'd have already sold it. (That is, before the commencement of the development project—if someone had advance warning they might misrepresent their preference in hopes of reaping a holdout windfall, provided the premium they wanted were less than the costs of seizure to the prospective buyer.)
  • The market value is itself a function of public knowledge of a potential ED seizure. If the city planning board has had its eyes on a plot of land for a couple years, and this is common knowledge, buyers are apt to be deterred. Why go through the cost and hassle of a transaction if the property is just going to get taken back at whatever price you paid for it? You can use the market value of other comparable properties in the vicinity, but their value might well be driven up by the same phenomenon (since the supply of nearby property attractive to buyers is diminished), or by the expectation of future growth as a result of whatever the development project is. The latter, of course, is less of a concern—if your house is being seized, I figure you're pretty well entitled to a premium.

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  1. I’ve suggested before that ED victims should get FIVE times the fair market value, as compensation for the hassle of moving and misery of being forced to leave. And, with any luck, if ED becomes that expensive then maybe it will be used less often.

  2. Of course, I also believe ED should only be invoked in cases of true public purpose–roads, military bases and the like. None of this “higher tax revenue” garbage.

    And New London wasn’t such a bad little city, anyway–Connecticut is a damned expensive state, and the non-millionaires need to live SOMEWHERE. I almost took an apartment near the Fort Trumbull area when I first moved here, because it was one of the few places a relatively poor grad student could afford to live.

  3. The bottom line is that there’s no way to tell the real market value of a property until you sell it. Any realtor will tell you that. And even then you’ve only determined what it was worth to that specific buyer.

  4. Forgive what will probably be a triple post, but what about defining “just compensation” as “replacement cost?” Specifically, the Fort Trumbull holdouts should at least get enough money to purchase another house with a water view. Which will be a hell of a lot of money in Connecticut. And I still say they should get five times that amount.

  5. Is there any way to quickly, efficiently and ‘accidentally’ make one’s property a superfund site? Take the pittance you are given for the privelege of having your property stolen, then as you leave say, “oops, did I forget to mention that I had substance X in the basement?”

    It’s not the same thing as actually, you know, keeping your property, but it could be a good f you as a going away gift.

  6. The seller should probably get a comparably-sized home in a location of the seller’s choice.

    And in the case of the elderly or infirm, an independent assistant should be hired to help with house shopping.

    And relocation costs should be covered.

    If it was up to me, the sellers would receive equal square footage in Manhattan, which they could sell immediately for a nice profit.

  7. Chthus-
    I was just thinking that if *I* were Wilhelmina Dery, I’d’ve done exactly such a thing. Granted,she’d probably get life in prison for that, but–not to be crass, here–she’s 87 years old.

  8. The best way to make a superfund sight would be dry-cleaning fluid. It sinks straight into the ground and is extremely expensive to clean. Much better than gasoline.

  9. I second the paying of multiples of market value. One of ways Kelo will screw the middle-class / poor is how it removes the option of selling when you feel its appropriate. For instance where I live in DC you could have bought a 100 year old row house for about 200K 4 years ago. Two years ago the same house went for $400K. Now its close to $600K. The little old lady we bought our house from did well. She didn’t sell during the first push of gentrification; instead she held out and doubled her selling price. Considering that she lived through 20+ years of the neighborhood being (to put it nicely) crap she deserved every penny she got. Now, with Kelo its going to be much easier for the DC gov’t (which isn’t known for ever playing nice) and developers to basically tell anyone living on the fringe of gentrification “hey, thanks for living here for the last 20 years during the lean years… here’s some cash now go away” and then reap all of the rewards of the skyrocketing land value. That is patently unfair.

  10. What’s a just compensation for a rape victim? “Fair market” value for a session with a sex-worker?

  11. Well, if your house is sitting on a busy intersection, are you being compensated for it’s value as a residentially zoned site, or are they giving you a commercially valuated price?

    An argument can be made that you shouldn’t derive the benefits of the project, since without said project your property wouldn’t inflate.

    However, if you were able to rezone the property on your own, you could concievably develop it yourself, realizing the appreciation yourself.

    The approval or denial of a rezoning sometimes is done without clear standards (depending on locality), which introduces an arbitrary nature to the proceedings. If you own commercially zoned property under a master plan, a developer might decide it is too pricey, so he could try to rezone some cheaper agricultural land, depending on how much clout he has.

  12. When the state called eminent domain on our little fraternity house to expand the school they brought us these fancy apraisals comparing it to land near by worth 1.5 million. Then offered us 700,000, we didn’t have the funds or “image” to take it to court and win. Also the home owners should collect all the increased tax revenue that there lost home generates. Otherwise it’s still profitable to steal.

  13. Costs *should* at least be “replacement” and incidental costs, and not FMV, as it would only be just to put someone in the same position as before. A house is a residence not a share of stock, it has vital use value.

    I am not sure of the actual law here.

  14. Suppose you live in a heavily armed society in which many ordinary citizens outgun the police and some rich and powerful private citizens have their own private police. Now suppose some heavily armed private mob appropriates your house. Whom do you call?

  15. Whom do you call?

    Adnan Khashoggi?

  16. “Fair market value” basically equals whatever the government says your soon to be former property is worth. Of course, the real fair market value of your property was the price at which you would sell it, free from duress.

  17. Happy Jack:

    Balfasz vagy!

  18. PS- that’s not very nice. Is the correct answer Victor Bout?

  19. Happy Jack:

    Interesting that you have no comment on an accurate description of your libertarian wet dream.

  20. Uff da!

  21. PS- suppose you live in a society where police (politicians) protect your (unarmed + poor) interests. Say a really rich guy has his own private police (lobbyists,campaign cash). He appropriates your home. Whom do you call?

    I suppose you could vote the rascals out, but you would have to discard the conviction that the poor have no voice.

  22. I should also add that you could call Godzilla (McCain-Feingold), but I think Rodan (lawyers) is waiting in the wings.

  23. Say you plop a stadium in an area, and nearby business development succeeds. So nearby lots go up in value. If you had owned a lot in the ED area, you would have gotten a fraction of the money you would get for a lot on the edge. How random and arbitrary is that? If, as a result of an ED action, you hold out and get a higher price for your lot, doesn’t the increase in value of your land count as economic growth (it would to the bean counters in the gov’t)? If, as an original ED-area owner, you held out for the price that the surrounding area reaches, you would be name-called and derided- “greedy”, “opportunistic”, “obstructionist.” I’ve seen this happen. What I always want to ask the developer is, what exactly is the difference between someone who is “opportunistic” and a “wise investor”?

    When I see someone getting yelled at in the media for wanting 2 million dollars for their last-lot-needed, I think to myself, well, if it is the last lot needed to complete a project, its fair market value is certainly a hell of a lot more than it was before the project was announced. And why that person should be rewarded any less than someone who’s family’s farm happens to be in the path of suburban growth is beyond me.

  24. Suppose you live in a heavily armed society in which many ordinary citizens outgun the police and some rich and powerful private citizens have their own private police. Now suppose some heavily armed private mob appropriates your house. Whom do you call?

    In my “libertarian wet dream,” an anarcho-capitalist one, all police forces are private police forces. In this case, I call the private security force to which I am subscribed and let them know that another private security force took my house.

    They attempt to negotiate a peaceful solution. Does the other security force, or the principal who hired them, have a claim to my house that most people would be inclined to respect?

    Note that because there is no goverment police force, both security companies start out as equals with regard to their legitimacy and the moral or other support they can expect from the rest of society at large. Neither security force can lay claim to any moral high ground just because it represents a government that other people are used to obeying.

    Note also that there is a powerful incentive to find a peaceful solution, because violence is expensive. Besides, a man could get killed. Governments can keep an extended war going because they spend other people’s money, and their is practically no limit to what they can seize from their subjects. Subjects of a goverment at war are conditioned to make sacrifices in ways that the customers of private security companies wouldn’t put up with.

    If the rogue security agency holds out because it’s patron is super-rich and paying a lot of moeny for them to stand firm, then your security agency can appeal to others for help. Few people want to see a rogue armed band running around unchecked. As for the rich principal, most people will be wary of working for a dishonorable, untrustworthy thief, no matter how rich he is.

    Nor will many people want to freely enter into other transactions with such. Resistance to the rich thief and his armed rogues need not take the form of combat. People might refuse to sell them food, or ammunition, or other goods. I’m sure someone will eventually break ranks and sell, but unless they’re stupid, they’ll jack up their prices to a premium, since the rich thief has so few other options. This reduces the thief’s available resources.

    Or the rich thief could try to take what he needs by force, but that will just stretch his resources even further.

    No matter how rich the thief is, and how powerful his force, he’ll eventually find himself outnumbered, outgunned, and stretched too thin. He’ll withdraw, and pay damages too, or no one else with a brain will have future dealings with him. He can only command the obedience or coercion he has bought and paid for.

    A politician assumes he has the right –heck, the duty — to coerce, and get paid for it too. The thing is, almost everyone else in his society assumes so too. That habit of thought is what separates the politician from ordinary types of thief. In the situation above, the thief enjoys no such special advantage.

  25. Stevo – fucking brilliant commentary! Normally you just make me laugh out loud, or giggle, or whathaveyou, but this post is most excellent.

  26. Stevo:

    The scenario you describe could sound remotely plausible only to a fellow cultist. You’re probably luckier that you’ll ever know because without the subsidies of the modern state, your genetic line would have died out some time ago. There is nothing inherently wrong with patheic losers parroting the simple-minded doctrines of a silly political cult as long as they stay away from explosives, so enjoy.

  27. The scenario you describe could sound remotely plausible only to a fellow cultist.

    Or an Iraqi. Or an Afghani.

  28. “Stevo:

    The scenario you describe could sound remotely plausible only to a fellow cultist. You’re probably luckier that you’ll ever know because without the subsidies of the modern state, your genetic line would have died out some time ago. There is nothing inherently wrong with patheic losers parroting the simple-minded doctrines of a silly political cult as long as they stay away from explosives, so enjoy.”

    Translation – you have thoroughly trashed me, and I have no way of responding other than resorting to an ad hominem. I will now slink off like the lowly troll I am…

  29. Troll – A purveyor of heresy who upsets the delicate state of self-satisfied euforia achieved by ideological conformists and true believers.

  30. In adding to chthus’s thoughts above (superfund site), if you’ve lived on the land long enough, there’s bound to be something on that land that could pique the interest of the local university’s archeology department. Particularly if you bury some old arrowheads or a rusted old flintlock in the backyard. Why, we’ve been living on a Native American cultural site for all these years!

    Let the development bastards wind their way through that federal bureacratic hell for a few years.

  31. “Fair market value” basically equals whatever the government says your soon to be former property is worth. Of course, the real fair market value of your property was the price at which you would sell it, free from duress. – Matt

    No, the definintion of fair market value is the most probable price the property will generate in an open market, with informed parties, and no party acting in duress. The price you would sell/buy it for is the investment value, which is not necessarily the same as fair market value.

    In ED, if the owner fights the takeover, both sides can hire their own appraisers and a judge/jury will decide which is correct.

    Of course, you can argue that a statist judge will generally side with the state, but typically the decided value is somewhere between the 2 sides’ appraisals. And, you have to have the funds to actually mount a defense, which many victims do not.

    JSF

  32. Don:

    I’ll bet a few years trecking through the federal bureaucracy would be a paradise compared to an hour or two wandering around the twisted pathways of your overheated brain.

  33. Of course, you can argue that a statist judge will generally side with the state, but typically the decided value is somewhere between the 2 sides’ appraisals. And, you have to have the funds to actually mount a defense, which many victims do not.

    In Florida the State pays all legal costs, win or lose. Juries are notoriously sympathetic to property owners so unless it is wildly over the mark the highest appraisal will be awarded. I’m aware that other states do not have this policy, so obviously in some places people can argue that there compensation is inadequate.

    Almost all taking for highways are now contested, to the point where Right of Way acquizition has become the most expensive item in highway projects. The instruction for engineers is to design within existing Right of Way at all costs.

    Jennifer, the arguments against ED on economic grounds don’t work. Depending on the state the offer will more than compensate the owner since it will usually cover relocation costs and other damages.

    The problem arises when it comes up against “I like it here and I don’t want to sell at any price.”

    I’m really awfully unsentimental (I’d probably take the money and run) but I can see the strength of that. How exactly can they compensate an 87-year-old women for the loss of the only home she has ever lived in? Where is Susette Kelo going to find a house just like the one she now owns in Fort Trumbull?

    No, I’m not defending ED just saying that it is not just about “the money”.

  34. Aren’t all judges statist by definition? I mean, the Supreme Court is a state institution. How could a Supreme Court justice be non-statist?

  35. Lowdog and quasibill — thank you.

    The scenario you describe could sound remotely plausible only to a fellow cultist.

    Or an Iraqi. Or an Afghani.

    Or a medieval Icelander. Or an ancient Celt. Or some in Somalia (potentially to become the Hong Kong of Africa if outsiders don’t impose a state on it).

    Proud Statist: Yup, you’ve run rings ’round me logically! Don’t let the penguin intercourse you on the way out.

  36. Aren’t all judges statist by definition? I mean, the Supreme Court is a state institution. How could a Supreme Court justice be non-statist?

    In absolute terms, all government judges are statists, but in relative terms, some are more or less statist than others. Like, Ron Paul is a libertarian, but as a member of Congress, he is a statist official. But compared to most other members of Congress, he’s not much of a statist.

  37. Gee, I don’t see how you can be more of a statist than being a member of Congress. Ron Paul accepts his salary and medical benefits, doesn’t he?

  38. Stevo,

    What do you think your chances of surviving in Medieval Iceland would be? In the Middle Ages, your gene line was lurking at the edge of the pool waiting for the welfare state to evolve so it would have a chance. You ungrateful prick.

  39. Proud Statist

    Why do you make personal attacks? Libertarianism is perfectly logical. If everybody is free and has a gun, nobody will bother anybody else because nobody will sell ammunition to a person who bothers people or they would make the ammunition very expensive so that the person would have to work so hard to make the money to buy it that he (or she) wouldn’t have any time left to bother people and if he (or she) still did, then somebody would just shoot him (or her)because libertarians believe in self-defense, even though in this case it would be people defending other people who were being bothered by people like you who manage to bother people even though you know they’re free and have guns, but that isn’t really very likely because even people who like to bother other people don’t like to get shot.

  40. Proud Statist:

    My chances of surviving in Medieval Iceland would be just about zilch. I am very nearsighted, corrected with contact lenses. I have clumsily broken a number of bones that would have been crippling, if not fatal, in an earlier age. I would probably be a terrible hunter, and I hate gardening.

    However, today I am not only alive but comfortable thanks to a number of technological advances, the overwhelming majority of which were created under circumstances of private innovation and fee exchange, not because a government ordered them to be invented.

    While I have consumed relatively little of what most people would consider “welfare services,” it’s true that our modern American state provides a lot of state-channeled subsidies to the middle class. It’s nearly certain that many taxpayers who make less money than I do are neverthelesss helping to subsidize my standard of living.

    And for this I am in fact grateful. So keep on paying taxes and cheerleading for the welfare state. Thank you very much.

    Sucker.

    Miriam:

    As I already said, it’s a matter of absolute vs. relative. Plenty of Congresscreatures do lots more statist things than simply accept their salary and medical benefits.

  41. “fee exchange” should be “free exchange” by which I mean market transactions.

  42. Stevo:

    Try scientology. It’s just as simple-minded but more imaginative, and it probably has more adherents.

  43. I’m a scientologist and a libertarian. There’s no contradiction.Scientology is free enterprise. I know because I pay for some of their stuff.The only thing that should be free is people, and when all people are free to do whatever they want, then even though people won’t necessarily be equal, it will be in the interests of people with more to help people with less so they can buy stuff from the people with more who will have more only because they provide a product or a service to everybody, even people with less, who won’t want to steal anynmore because they will know that they’re free to make money and even if they’re not smart enough, they can always do something productive because the free market will umnleash all this creativity and everybody will make it somehow, but we won’t need the state to tell them how.

  44. How can one “congresscreature” do less statist things than another when both are doing the most statist thing in the world–participating in a big statist institution?

  45. Miriam:

    I think we’re talking about working from within. A libertarian can work to make government not work. Enough of that, and maybe the government will grow weak and fall. Even non-libertarian Republicans seem to be trying to destroy government. Bush’s war in Iraq may bankrupt the government.

  46. I have a question. How would we fund the military without taxes?

  47. Have Bake Sales?

  48. Hey, I saw something about having a bake sale so the Air Farce could buy a bomber or something on a bumper sticker one time. I didn’t get the point then either.

  49. I have a question. How would we fund the military without taxes?

    That is wrapped up with the questions of, With little or no government, do we need a military in the first place? (I think we would, for definse of a wide area under massed attack by an external enemy.) What would we use it for? How big would it need to be?

    These and the funding question are discussed here. Good overview.

    Anarcho-capitalist David D. Friedman also tackles this issue in his book The Machinery of Freedom in the chapter “National Defense: The Hard Problem” which is unfortunately not available on the WWW.

    But Friedman discusses one of the trickiest issues of funding large-scale military defense without government, the free-rider/public good problem here (scroll down to the heading “Public Goods”).

    I can’t vouch for this article from anti-state.com, because I haven’t read, and the guys at anti-state aren’t always the most rigorous thinkers, but I skimmed it and it might have good ideas.

    Finally, I respect the thinking of Bill Bunn, whom I used to know from another forum, and you can find his thoughts on various aspects of anarcho-capitalism here. Pretty thorough. (There’s even a little quote from Yours Truly at the end.)

    Happy reading!

  50. Miriam: How can one “congresscreature” do less statist things than another when both are doing the most statist thing in the world–participating in a big statist institution?

    The answer is the same one I gave twice already. I’ll rephrase it one more time.

    “Participating” in a statist institution is not “the most statist thing in the world.” “Participating” leaves room to do some things that are more statist and some things that are less statist. Working to repeal laws, or pass laws that permit more liberty, is less statist than trying to pass laws that create further restrictions on liberty, for example.

  51. Is there any way we can get a higher quality of troll around here?

    I used to hang out in another forum, now defunct, and we had a daily troll named HonestAbe&1865, and he was MAGNIFICENT. He was infuriating, and highly insulting, but also smart and provocative enough that it was quite impossible to avoid engaging him. He also had a very distinct and memorable writing style. He had passion. And he aparently had unlimited free time. He was the trollismo of trolls.

    Eventually I found a way to get his goat, and that was great fun too. But the guy really was terrific at what he did.

    I knew HonestAbe&1865. HonestAbe&1865 was a trollish adversary of mine. And you (yes, you know who you are) are no HonestAbe&1865.

    Abd not you, either.

    PS: See you on Tuesday!

  52. Stevo

    Couldn’t you summarize some of the stuff on funding the military without taxes? It seems to be a problem because nuclear stuff is really expensive and the Chinese peobably aren’t going to give their stuff up. Also, top generals have to be paid a lot, otherise they might become a threat because they have a lot of power. I mean, there have been a lot of military coups in places like latin America. I just can’t see how it will work.

  53. Troll – A purveyor of heresy who upsets the delicate state of self-satisfied euforia

    Geeze, I also went to public schools, and I learned to spell.

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