Natural Property Rights: A VC Preview

Property rights, public law, the police power, and the eminent domain power.

Thanks again to Eugene for letting me blog at the VC this week about my new book—Natural Property Rights, published with Cambridge University Press and available for purchase now digitally and in hardbound version, at a variety of bookstores.

Most American 1L property courses end with discussions of regulatory takings and eminent domain. I'll follow suit here.

Before I get started, though, a disclaimer. In the book I did not, and in this post I will not, make any claims about the legal meaning of any statute or constitutional clause. Natural Property Rights is a work of normative theory. It focuses on what statutes and constitutional guarantees should say, not on what any current statutes or guarantees do say.

Imagine that a local government makes it illegal to emit more than a certain level of smoke in a specific area of town. Is such a law just? Prima facie, the law interferes with factory owners' freedom to produce useful products. If residents and clean businesses have land near the factory, though, the law protects their rights to use their lots for their own uses. If the anti-smoke ordinance is an anti-pollution ordinance, in a rights-based system it is a legitimate exercise of the police power—or a genuine "regulation."

Thanks to almost a century's worth of big government, we're now used to "regulation" meaning "a law that directs private parties to behave in certain ways, to promote goals chosen by the government." In a rights-based legal system, though, "regulation" has a more precise meaning. I can't do better than VC contributor Randy Barnett did in an article about the Commerce Clause (which lets Congress "regulate" commerce among the several states): In a rights-based regime, a "regulation" is a law that "makes rights regular." People are entitled to natural rights. A legitimate regulation is a positive law. It coordinates how people behave. But it coordinates behavior specifically so that all the parties regulated all enjoy in practice the rights to which they're entitled by natural law.

Although natural law justifies government regulation, in the process it also sets principled limits on regulation. If a law does not fit one of the acceptable models for regulation, it isn't a legitimate exercise of the police power. (The law may still be a legitimate exercise of some government power—the taxing power, or the power of eminent domain—but it's not a valid exercise of the police power.)

There are three main models of regulation. My anti-pollution law is a simple example of a harm-prevention regulation. Regulations can also supply determinacy. A speed limit makes rights to travel and be safe on roads determinate. Commonwealth v. Alger, a landmark 19th-century case about the police power, upheld as a regulation a Massachusetts law that replaced vague common law shoreline boundaries with precise survey boundaries. Regulations can also secure a reciprocity of advantage; they can coordinate how a group of right-holders behave so that they all use their property more effectively than they could have without legal oversight. In the book, I illustrate with a law that lets a state agency take over oil production when the mineral rights-holders can't maximize production by their own private agreements.

Now consider another hypothetical: A government takes a private party's land. Prima facie, that taking is even more troubling than the anti-pollution ordinance. Even in a system dedicated to securing natural rights, though, a government may in some circumstances legitimately condemn property. The government should pay fair compensation, for taking something over which a private party held vested legal rights. But the government should not take the property unless the taking is for a genuine public use.

In a rights-based regime, it must seem likely that the property taken will be used by or on behalf of the entire public. The easiest public use cases occur when a government takes property to operate military bases, highways, or parks. A government may legitimately take one person's property to carry out policies securing the rights of the entire citizenry. In the takings just listed, the government is using the property taken to secure the citizenry's collective rights (respectively) to defense, travel, or the use of resources for recreation.

Another easy case covers the situation when a government condemns rights so that no one can use a resource actively—like a ban on development of vacant land. Then, the public enjoys—uses—the absence of development, to derive aesthetic benefits, conservation benefits, or more order.

Harder cases arise when government condemns land for a utility—a railroad 150 years ago, or an electric company now. Those takings are also for public uses, as long as the utility is subject to oversight (common carriage law) ensuring that it provides services to all qualified customers. Then, the utility uses the taken property on behalf of the whole public.

Those sketches of the police and eminent domain powers are consistent with individual rights. They're not consistent with how regulation or eminent domain are used today. They're not consistent with prevailing federal case law on "regulatory takings" and public use, either. Here, I'll illustrate with the constitutional doctrines.

Sad to say, federal "regulatory takings" law protects property too little. The doctrine doesn't protect undeveloped property or the right to put developed property to uses different from its current uses. And the doctrine is far too deferential to laws that purport to regulate property.

Take what happened in Penn Central Transportation Co. v. New York. New York City designated the Grand Central Terminal a historical landmark, and after it did so it denied the company that owned the Terminal permission to build an addition over it. The Supreme Court said that the landmarking ordinance and the permit denial were not takings but police regulations. But those acts denied the Penn Central company freedom to use Grand Central productively—as a hub for business in commercial offices. The Court said that Penn Central's primary, expected use of the lot was to run a railroad station. But why shouldn't a proprietor be free to use its property as it likes?

New York could justly have limit Penn Central's uses if it had really been "policing" those uses. But the city didn't have a principled basis to say its landmarking policies policed rights. Penn Central would not have threatened the safety of its neighbors, and it would not have made any of its neighbors' lots unusable, if it had built a reasonably-safe addition on the Grand Central Terminal. And, New York didn't offer Penn Central compensation that secured to it a reciprocity of advantage for having extinguished air servitudes over the Terminal.

In substance, then, New York's policy should have been classified as an inverse condemnation, a backdoor taking. New York extinguished use rights. It didn't extinguish those rights in the course of a rights-based police regulation. The landmarking policy wasn't necessarily unjust in all possible applications. It could have been justified as an exercise of the eminent domain power. In substance, New York took air servitudes, and it did so for public use because post-landmarking the entire city citizenry got public uses from preservation of the Terminal's historic character. But New York should still have paid Penn Central for taking air servitudes.

Contemporary public use doctrine protects property even less than current regulatory takings doctrine does. Public use doctrine makes it far too easy for local governments to condemn private property and transfer it to another private party. The main culprits here are Berman v. Parker (1954) and Kelo v. New London (2005). Berman holds that a government has a "public use" to take property if it redistributes private property to get rid of "blight"; Kelo, that a government has such a public use if it redistributes to promote local economic growth.

In a rights-based legal system, disputes like the ones in Berman and Kelo raise two separate possibilities. First, the condemnation might be legitimate exercises of the eminent domain power. But that possibility is easy to rule out. When private developers or real estate companies get land post-condemnation, there is no public use in the sense explained above.

In a rights-based legal system, though, another possibility needs to be considered: the condemnations might instead be legitimate exercises of the police power. (I study this possibility not only in the book but also in a forthcoming article.) Governments often "redistribute" mineral rights by reassigning them from the rights-holders to the energy companies that extract oil or gas. At common law and in equity, governments condemn and redistribute private rights when they partition tenancies in common, assign all of the property to one party, and order that the new absolute owner pay the ousted cotenants money. Most controversially, in the nineteenth century, mill acts authorized state officials to condemn riparian rights and transfer them to dam builders.

When laws like those are drafted carefully, they can justly authorize the condemnation and redistribution of private property. Such laws are not exercises of eminent domain and are instead police regulations, on the ground that they secure average reciprocities of advantage to the ousted owners. But the schemes challenged in Berman and Kelo didn't come anywhere close to satisfying the standards for reciprocities of advantage.

Which is to say, current federal constitutional law doesn't come close to protecting property as much as a natural right should be protected. Maybe state legislatures will reconsider, and amend, state enabling acts on zoning and eminent domain. Maybe federal judges (the ones who aren't originalists and are instead functionalists) will reconsider Penn Central, Berman, and Kelo, and make contemporary case doctrine more respectful of property. Or, maybe the American people will convince Congress to add another amendment to the Constitution, one that reconciles property rights to government's legitimate police and eminent domain powers.

Probably not. But I can at least hope that they might happen. And before any of them happen, officials and citizens need a guide to property rights and government power, justly reconciled. Which is what I tried to provide in Natural Property Rights.

Thanks again to Eugene and all VC readers for your attention this week. What a wonderful community of lawyers, scholars, and readers!