Freakanomics: “Just Compensation” Can Lead to More Government Takings. Huh?

Ian Ayres writes at the Freakanomics Blog:

What really interests me about Bankman’s idea is that requiring the government to pay for its takings might lead to more takings. This is very different from the way we usually think about the impact of compensation:

“A central idea behind the Constitution’s Takings Clause is to reduce government’s inclination to take too much. A government that is forced to compensate for the exercise of its eminent domain power is less likely to engage in value-reducing land grabs.”

But requiring compensation might increase the willingness of government to take. As Barry and I wrote:

“The big hope is to end the stranglehold that anti-IRS forces have on compliance efforts. . . . Absent compensation, Congress has vetoed efficient audit programs–setting the audit rates far below their optimal level. Here’s a rare case where forcing the government to pay for something is likely to increase its demand.”

The government, in deciding whether to take, is in some ways on both sides of the market, acting as both a buyer and a seller. The normal intuition that the just compensation requirement will dampen government’s demand to take conceives of the government as a buyer. But in a representative government, the amount of takings will be partly determined by the willingness of representatives to sell at a particular price. When the selling price is zero — as with current tax audits, government as representatives of sellers may choose to sell very little. (This possibility was to my knowledge first seen in Bruce A. Ackerman’s classic Private Property and the Constitution.)

Having just finished reading Super Freakanomics, I take all conclusions from freakanomics with a grain of salt.  If the Constitution did not provide for just compensation for takings, would bureaucrats be less willing to take? I don’t know. For many takings for economic development, the actual just compensation price is trivial compared to the expected benefits the future owner will bring. From that perspective, I’m not sure how much legislators would really even care about the compensation amount. But curious.

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Posted in Olech, Eminent Domain. Comments Off on Freakanomics: “Just Compensation” Can Lead to More Government Takings. Huh?
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