The endowment effect, or offer/ask disparity, has been observed in experimental economics. The idea is that a person requires a significantly larger value to compensate for giving up something in her possession than she would be willing to pay to gain the same thing. If this observed behavior is applied to the question of the appropriate value to compensate for a taking by the power of eminent domain, the idea would be that we should presume the market value would reflect the lower value of "offer" and not the higher value of "ask" that is required to get a person to give up something they already own.
I think there are two key points that Fischel argues on this issue. (1) He notes that ". . . a thorough account of forced transfers of property has to take account of both sides of the ledger." (p. 192) He suggests we don't want to look just at the person who is compensated because the money for compensation comes from taxpayers. Looking at "both sides of the ledger" suggests that overcompensation for the taking implies unjustified takings from the taxpayers. (2) He looks to history to suggest that in deciding on the constitutional wording of the power of eminent domain, the offer/ask disparity was recognized and considered and the constitutional choice was for just compensation to be defined as market value.
Taking up the second point first, I'm not persuaded by his suggestion and analysis. He does two things in this regard. First he looks at the Bill of Rights to the U.S. Constitution. Here are a few of his observations:
"The framers . . . .said little about why they implicitly accepted market value. . . " (194)
"My modest aim in this section is to point out that the framers and ratifiers were in an ideal position to see all sides of the taking issue. . . ." (194)
"But they were also in a position to realize that the burdens of overcompensation would be borne by themselves. . . ." (194)
"The federal just compensation clause was adopted by people who were in a position to consciously choose higher or lower compensation. But that is less persuasive than evidence that they actually considered other arrangements." (195)
I agree that his discussion of implicit acceptance and of ideal positions to choose between the offer/ask alternatives is simply not very persuasive. Here I also note that the Takings Clause uses the phrase "just compensation," and as such perhaps we should consider the normative grounds for determining justice when something owned by someone is taken from them by force. This refers to the first point noted above, and I take this issue up below.
The second approach he takes is to examine the debates about eminent domain with respect to state constitutions. He explains that there were state constitutional conventions that worried about excess compensation, and therefore that in state conventions people did weigh both sides of the ledger. I'm not persuaded with this because state constitutions, generally, do not require super majority votes. This is the author's point when he notes that state constitutions are more democratically determined.
I like to think that a document is not a constitution unless ratification of the document requires some form of a super majority vote. It is the requirement of a super majority vote that I suggest places those voting into a "constitutional setting." The requirement of a super majority vote to ratify a constitution means that it is much more likely that what becomes part of the document is truly in "the public interest," and much less likely that the constitution is framed in ways that are to the benefit of special interests (or factions in the language of James Madison). The debates in conventions with respect to state constitutions would not fall within a constitutional setting unless a super majority vote to approve was required. Thus, I am not persuaded by a discussion of the issue at hand from the perspective of state constitutional debates.
Now let's turn to his first point. It seems to me that noting in some experimental economics settings that there is an offer/ask disparity has little relevance to the question of "just compensation" required by our constitution. I seems that a sound way to define "just compensation" in the context of taking private property would be to debate the issue in a true constitutional setting. Imagine a situation in which a proposed position on compensation for government forcefully taking private property had to garner 3/4 of all votes to be approved. How likely is it that the approved definition would rely on the idea that there could be overcompensation because the taxpayers might have to pay a larger amount of money?
In some ways I suppose this suggestion would seem reasonable. After all, money is taken from taxpayers, which seems much like the property taking that is this cause of this discussion. On the other hand, we all clearly know who owns the property which gets taken. We know that by definition because we all consider it to be private property which is taken for public use (according the the Takings Clause). And we know who is taking the private property. It is the government which is acting, presumably, on behalf of the public and therefore on behalf of the taxpayers. It is the government, acting on behalf of the rest of the taxpayers and the rest of the community, which is taking something that belongs to the person who is forcibly having property removed from her possession. It seems to me the question of just comes to mind not because taxpayers may have to pay more taxes, but rather because it is the taxpayers who are being allowed to forcibly take property owned by another. Using force in this way seems by definition unjust, and therefore, I think justice does not require one to balance the ledger with respect to taxpayers. I think it unlikely that balancing the ledger would garner a super majority vote of support in a true constitutional setting.
Yet, there might be an analysis by which I would find much greater sympathy for the taxpayers when "just compensation" is required because government takes what is privately owned by others in the community. We might argue that both the individual from which the property is taken, as well as all the taxpayers who have money taken from them for taxes to pay compensation, are treated unjustly. Here we might choose to say that the government's taking of private property is really not on behalf of the taxpayers and on behalf of the rest of the community. We might choose to say that the politicians and government officials are taking the property of others, and they are then paying the constitutionally required compensation by taking still more property (via income or sales taxes perhaps) from others in the community. After all, the politicians and government officials are making choices and they are not being required to pay just compensation out of their own pockets. In this case, I would like to look at both sides of the ledger that Fischel points to, but I would draw a different conclusion. My conclusion would be that if we are concerned for the taxpayer as well as the person who has her property forcibly taken from her, then we should simply not give government the power of eminent domain. No taking of private property would seem just, whether compensated or not, if this normative view of the situation makes sense.
Does this normative view make sense? I think this view makes a great deal of sense when private property is taken and transferred to other private property owners. In cases such as those of the Kelo opinion, it seems that government takes land from some, gives it to others, and then pays for the constitutional requirements of "just compensation" by taking from still others. Such situations seem far distant from any thought of the just of use government's coercive power.
And, here, finally, we are looking directly at the constitutional language written into the Takings Clause. If private property is taken for public use, then indeed, the politicians and government officials are acting on behalf of the rest of the community. We know this because the taken property becomes a road or a park which can and will be utilized by all members of the community. But, even in this case, the question of the just use of force to take property from others seems to call for a much different discussion than what follows from noting an experimental disparity in offer/ask.
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