Source link: http://blog.mises.org/4749/new-working-paper/
New Working Paper
March 2, 2006 by Mises.org Updates
ON THE IMPOSSIBILITY OF ‘JUST COMPENSATION’ WHEN PROPERTY IS TAKEN: AN ETHICAL AND EPISTEMIC INQUIRY by John Brätland (U.S. Department of the Interior).
One is promised ‘just compensation’ if one’s property is taken. But critics charge that takings are ‘licensed theft.’ Is this charge well-founded or just dyspeptic hyperbole? By definition, just compensation renders the owner ‘whole’ when property is taken. But can a thoughtful compensation policy actually restore the owner to ‘wholeness’? If wholeness is the critical criterion, by what ethical and epistemic standards is compensation ‘just’? Clearly payment of ‘fair market value’ almost always implies an absence of assent, which means that the owner is not in any ethical sense made whole. Hence, without assent, no ethical criterion exists by which to infer ‘justice’ in a coerced transfer of property. In essence, compensation for takings cannot be ethically reconciled with justice. Nonetheless, some defenders of takings advocate prescriptive compensation strategies intended to render the owner whole. One proposed strategy involves compensation equivalent to the owner’s reservation value of his own property. But there are epistemic barriers; no such reservation value pre-exists in the owner’s mind until the act of selling. As assent is the sole ethical criterion for determining just compensation, it is also the only valid epistemic criterion; no compensation for takings can be defended on either ethical or epistemic grounds.
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Nor is compensation sufficient in most situations. There is a lot of new work that is being done in the field of mediation which is applicable (my field is mediation in domestic relations–family splits), namely through VOM (Victim-Offender Mediation) and VORP (Victim Offender Reconciliation Program). You might want to google on these subjects and look through some of the websites dedicated to the topic.
There are a number of pilot projects which have been set up in different states, as well as several private initiatives, and we just don’t know the long-term effects of such programs yet.
I don’t know whether rectification of injustice or “just compensation” is possible either, as I suspect that the paper above argues. It may well be a utopian concept which may not even be applicable to a just situation.
I certainly welcome such considerations.
Just a thought.
Just Ken
kgregglv@cox.net
http://classicalliberalism.blogspot.com/
I would agree with Mr. Bratländ’s conclusions in regard to consumption goods but not in regard to production goods. There is no objective means of estimating the subjective value of a single-family residence. In the case of retail, office, multifamily, hotel, or industrial property, however, the value of the property to the owner is primarily determined by its productive attributes. It is possible to estimate the cost of replacing the productive attributes of a property, though once again this is not the same as estimating its market value.
I also don’t agree with Mr. Reisman that a constitutional amendment would be necessary to eliminate eminent domain in the U.S. The Constitution prohibits the taking of property without just compensation. It does not permit takings. There is a difference.
This article is outstanding. It is really something to see a Washington economist putting out such an excellent libertarian paper. I am pretty certain this disclaimer holds especially true:
“The views expressed in this study are strictly those of the author and do not necessarily reflect Departmental policy.”
Someone asked me the other day what it would take for what I advocate to actually come to pass. I said, when my views are so prevalent that even individual state tax-collectors are too ashamed and embarrassed to do their jobs and when enough tax payers recognize they are justified in claiming what is rightfully theirs.
And this article highlights another indicator: when the state economists are writing libertarian articles about why the state is stealing and why it has no right to do so.
It puts a smile on my face.
But the problem is easily generalized, and either every libertarian must abandon any private justice system, or admit that a court or similar agency, or even an insurance company (in the case of a replacement value policy) can produce a legally correct value on a property.
Assume a toxic waste carrier’s driver has a heart attack, and the truck crashes into your property and spills some noxious substance all over your property such that it has negative value (since it would require clean-up).
You demand compensation (whether from your insurance company, via a tort claim, or whatever, I don’t care). If you assume you cannot produce a valuation on this claim, then any justice system is in vain. If you can produce a valuation, then it would apply to an emminent domains claim.
So which is it – either there exists or there does not exist some system which can determine a (legal, just, correct, acceptable for such purposes) value to property.
(There are justice and morality problems with any taking for public purposes, but valuation is not one of them – if it can’t be done at all we are in far worse trouble).
TZ:
I have been involved in exactly this type of scenario as an emergency responder (the only difference being that it was an attempt to drive under a low bridge, not a heart attack, which caused the accident). When this happens, the local fire company responds to the incident and dispatches their hazardous materials team (which is usually a county-level squad). The hazardous materials team cleans up the spill and bills the company that owns the truck for the cost. The responsible party does not have the option to purchase the property if the market value is less than the cost of cleanup.
The working paper does not say that it is impossible to estimate market value. It says that the value of a property to the current owner might be greater than the market value. If the value of the property to the current owner were substantially less than the market value, we could expect the owner to sell the property. I think that you’re confusing three different concepts here. What you refer to as replacement value is really replacement cost or replacement cost less physical deterioration and can be quantified. Market value is the result of the actions of market participants and can be quantified. Subjective value is the value to a particular person and cannot be quantified. The paper simply takes one step beyond these economic facts and makes the ethical contention that a property owner should not be forced to surrender their property for its market value.
But then what value is the property? I would say that there would be a theft premium that should be added when property is taken for public use, but that should be proportionate. Some things are irreplaceable although are fungible (my Mother’s wedding ring is not very fancy or unique, but if it was lost or stolen, an identical one would not replace it in sentimental value, but what would the insurance company do?).
(If I had time, I would come up with a better example than the toxic truck – but note in your actual case the government agency – the fire department – charges whatever it wants and sends the bill to whom it thinks is at fault).
I also think that there may also be confusion between different things at another point. First under what circumstances (some would say none) is there a public purpose and property must be surrendered to accomplish it. If you argue that there aren’t any, then compensation is irrelevant. If you argue that there are some cases where it might be proper, then the question is what the compensation should be. My point is simply in the latter case we already have existing systems that determine compensation, and if they work, then they can apply to emminent domain.
What would the insurance company do? They would pay out the sum which you previously agreed upon when you entered into the insurance contract. Presumably you’re happy with that value, or you would renegotiate and/or find another insurer. They don’t come along after the fact trying to invent a value that they think is “fair”.
As for your last question: if you don’t have a pre-existing agreement, there are none (and “existing systems that determine compensation” don’t work in that case, either – i.e., they can never apply to the case of eminent domain).
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