Economics 286W
Honors Seminar
Spring 2004
Wednesdays, 2-4
Koons Hall 311
R. N. Langlois
322 Monteith X63472
Office hours MW 9-12 and 1-2 or by appointment
Assignment 2
On February 25, Tom Miceli will speak to us about “public versus private use of eminent domain.”
The Fifth Amendment of the US. Constitution says: “nor shall private property be taken for public use, without just compensation.” This clause (the eminent domain clause) gives the government the power to take private property without the owner’s consent for a court-determined amount of compensation. This stands in contrast to normal market transactions, where the owner’s consent is required. The usual justification for granting the government this power is to overcome the holdout problem, which is a form of monopoly. The “public use” requirement of the clause seemingly limits the power of eminent domain to use for public projects like highways, but courts have occasionally granted it to private parties like railroad builders and, more controversially, to businesses seeking to expand their plants or developers engaged in urban renewal.
From an economic perspective, what is the proper scope for the takings power? Should it only be used by the government for the provision of public goods, or should it be granted to private parties under certain circumstances? Is there any reason to think that holdout problems are more likely to plague public projects as compared to private projects?
Here are two readings that may help you answer the questions.
· Lloyd Cohen, “Holdouts and Free Riders,” Journal of Legal Studies 20: 351- 361 (June 1991).
· Thomas J. Miceli, The Economic Approach to Law, Stanford University Press, 2004, pp. 215-219.
Due: February 25.
(Remember that there is no class meeting February 18)
