- "Just Compensation" in Eminent Domain

We have a saying in the financial markets, “Nothing is worth any more or less than exactly what someone else is willing to pay you for it.” What this means, is that the price that someone sets for something is totally irrelevant to its value. It’s actual value is not what it’s being sold for, but what someone is willing to buy it for, and that may be more or less than the current “selling price”. And of course, the opposite is true as well; nothing can be bought for any less than someone is willing to sell it for.

When government steps in and uses force to try to change that, the results are usually catastrophic. Either they make the price less than it would be which causes shortages, or they make the price higher than it would be causing a glut. The Carter Era gas lines were caused in this way, and so was the total collapse of the Soviet economic system. So we’ve come quickly to that essential piece of knowledge for understanding how the world works: “Price fixing cannot be done effectively by government under any circumstances.” It’s as simple as that.

So you may be asking yourself “What (apart from the obvious) does this have to do with the price of tea in China?” Well it illustrates my biggest problem with the “Eminent Domain” issue.

“Eminent domain” is a big problem across all of America, and a particularly big problem in places as corrupt as New Jersey. This is because the recent Supreme Court decision “Kelo vs. New London”, has given local governments the authority to evict people from their homes and give the property to private developers for pretty much any reason at all. There is some mumbo jumbo about increasing the tax base etc, but certainly nothing that would restrain a politician in New Jersey, and in point of fact, it can all be faked together quickly by pretty much anyone.

Naturally, since I believe that private property is one of the basic underpinnings required for a free society, I have a problem with that. But my problem isn’t with the Supreme Court decision itself. The SCOTUS took a look, and determined that the constitution doesn’t say anything about the uses that government can put property to, just as it doesn’t say anything about cloning or the Internet. It’s a straightforward question with a straightforward answer and that answer is “It doesn’t say”. But here is what the constitution does say about the issue:

5th amendment of the US constitution

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

That last part seems pretty clear to me, and it gets right to the core of the problem. The problem is not that we’ve allowed government to take our property because we clearly have. And the problem is not that we haven’t limited the uses the government can put that property to once it’s been taken, because we clearly haven’t. The problem is that we’ve allowed government to take our property at the price they see fit, without paying the “just compensation” that can be only be determined by offering to buy it on the open market.

Tell me the truth, if I show up at your door tomorrow, and tell you that the hedge fund I work for wants to buy your house for 25 million dollars, will you sell it to me? No? How about if the price is 250 million? Even if you’re still saying no, there most certainly is a price at which almost everything you own is for sale. That price may be because of the object’s inherent value as a commodity or it may be because you have some emotional attachment, but the truth is, that’s irrelevant. It’s private property, and you have the right to exclude others from using it, for any reason you see fit, emotional or otherwise.

And the value that you place on it will certainly rise and fall over time, depending on your priorities. When your daughter is trying to put together the money to pay for college, you suddenly aren’t as attached to that 67 teardrop corvette you’ve kept on blocks in your garage since the Stone Age. Even something like the jewelry passed down through your family that you swore they would have to cut your hand off to get from you, can be had at a much more reasonable price when you have to pay for your wife’s chemotherapy.

The point is, we call it “private” because it’s the private citizen that gets to set the price for sale based upon their individual priorities. If the buyer can’t meet the seller’s price, they have few ways to compel them to lower it, and they certainly are not allowed to use force like the government does.

When the government uses eminent domain to dispossess a person, they look at the value of other similar pieces of property in the area and determine their “buying price” from that, but that isn’t “just compensation” that’s price fixing. That process ignores the seller’s right to limit use based on his or her own priorities. In effect, it sets the non-intrinsic value of the property to zero, and that is profoundly unjust.

A better solution is to require all property holders to list as a public record, a selling price for every piece of real estate they own. It can be determined entirely by them, and can be as unreasonable a price as they see fit. The government can then buy at those prices or not, just like any other purchaser. If they are trying to come by a contiguous piece of property for a new school or something and can’t get it in the place they would like right away, they can either raise the price they are willing to pay, or they can try something more creative. Some sellers might be persuaded by an offer of a similar home on the next block (which can be had at a more reasonable price) plus a cash premium for the inconvenience. Others might be persuaded by a tax exemption, or other deferred compensation. Or the government might be forced to wait to implement their plans or find a way to solve their problem without dispossessing private citizens.

No matter how, forcing government to use the open market for determining price will address the issue without violating the law of the land.

If you are among the liberals reading this, (or if you are in government and don’t like the idea of being treated like everyone else) you are probably saying “WE CAN’T DO THAT!!!!! THEN GOVERNMENT WILL NEVER BE ABLE TO DO ANYTHING!!!”

And to that I say … “Exactly.”