The Economics of Eminent Domain: Private Property, Public Use, and Just Compensation (Foundations and Trends in Microeconomics)

The Fifth Amendment of the U.S. Constitution reads "nor shall private property be taken for public use, without just compensation". Often referred to as the eminent domain or takings clause, economists have made significant contributions to the understanding of both the proper scope of takings and when compensation should be paid. The Economics of Eminent Domain: Private Property, Public Use, and Just Compensation presents an overview of the economics of eminent domain. Beginning with a brief review of the relevant case law for both physical acquisitions and for regulatory takings, the authors survey the economics literature examining eminent domain. The next section considers the economic justification for eminent domain, focusing on the public use requirement and the land assembly problem. It then examines the just compensation requirement, focusing primarily on its distributional implications. The authors survey the literature on the impact of compensation on the incentives of landowners to invest in property subject to a taking or regulatory risk and of the government to exercise its taking or regulatory powers. Throughout The Economics of Eminent Domain, the authors use a simple modeling framework that can be adapted to address various issues discussed in the literature allowing examination using a common paradigm. Introduction......Page 12 Physical Acquisitions......Page 16 Regulatory Takings......Page 19 Public Goods and the Free Rider Problem......Page 22 Land Assembly and the Holdout Problem......Page 23 The Means-Ends Distinction and Public Use......Page 26 Just Compensation......Page 30 The Basic Model......Page 36 Endogenous Probability of a Taking......Page 38 Constitutional Choice Models......Page 45 The Timing of Development......Page 51 Risk Aversion and Compensation......Page 52 Michelman's Approach to Takings......Page 53 Conclusion......Page 58 Appendix......Page 60 Acknowledgments......Page 62 References......Page 64 Offprint. Foundations and trends in microeconomics (Online). Vol. 3, no. 4 (2007).