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Books and Culture

Gerald J. Russello
Takings Issue
Richard Epstein calls for a return to sanity in property law.
20 March 2009

Richard Epstein, Supreme Neglect: How to Revive Constitutional Protection for Private Property (Oxford University Press, 208 pp., $19.95)

Longtime Seattle resident Edith Macefield refused to sell her house to developers, even when their offer for it reached $1 million. Thus, she lived amid the noise and debris of construction as the development went up on either side of her modest home. No one could quite figure out why she wouldn’t sell, other than simple old-fashioned American stubbornness and pride in her neighborhood.

Macefield was fortunate that the building projects she resisted were wholly private. Had they not been, the courts might have forced her to give up her home in the name of “public use.” In a 2005 case, Kelo v. City of New London, the U.S. Supreme Court ruled that the state could uproot homeowners completely in the name of private economic development. Following the decision, advocates across the political spectrum began to focus on the Constitution’s textually clear guarantee of property rights. Those on the left decried businesses’ corroding the political process to get property on the cheap; those on the right condemned judicial activism run amok.

Kelo, however, is only the latest and most egregious manifestation of the Court’s changed understanding of the Constitution’s “takings clause,” which by now has been so mangled that it stands in opposition to traditional common law and basic economics. In his new book, Supreme Neglect, Richard Epstein offers a nuanced account of the development of private property and how, contra generations of progressive argument, it accommodates both free markets and community values.

Epstein, a professor at the University of Chicago Law School (and a visiting scholar at the Manhattan Institute), is a longtime intellectual leader in the movement to strengthen property rights. His groundbreaking 1985 book, Takings, refounded a defense of property rights on libertarian theory and Anglo-American legal practice. In Supreme Neglect, Epstein condenses his earlier arguments and carefully examines each part of the takings clause, which reads in full, “nor shall private property be taken for public use, without just compensation.” But what does this language mean? Courts have generally accepted that physically taking someone’s property requires compensation, but how can we know when the compensation is just? And what constitutes “public use”?

Most controversial, perhaps, are so-called “regulatory takings.” If the government doesn’t physically take your property, but passes regulations that diminish your right to use it as you see fit, should the government have to pay you just compensation for that partial infringement? Courts have answered “no,” so long as “some viable economic use” of the property remains. This interpretation, needless to say, has invited widespread regulation without consideration of the economic or personal costs to affected property owners.

In graceful, clear prose, Epstein demolishes the arguments in favor of noncompensable regulatory takings. He begins with a comprehensive summary of the common law of property, from its first formal articulations in the West in Roman law. Developed over centuries, the law of property efficiently disposes of rights and offers methods for adjudicating differing claims. Indeed, every free society has developed similar rules for the acquisition, use, and disposition of property.

Notwithstanding more extreme libertarian views, the state, Epstein argues, has a role in a property-rights regime—for example, in establishing a standard mode of recording property rights and conveyances. Further, the common law of nuisance and the provisions for police establish guidelines for the use of state power to control for spillover effects from one person’s property to that of another. But the basic premise of government action here, Epstein explains, is that the state guarantees property rights but does not create them: “The state is not an arbitrary institution imposed from above that may, with the stroke of a pen, adopt whatever conceptions of liberty and property it chooses. Rather, the object of the state is to preserve as much of the basic system of liberty and property as is consistent with the maintenance of peace and social order.”

Epstein articulates general principles for state action that mirror, as much as possible, the private law of property. First is his anticircumvention principle: government should not skirt literal constitutional language. In addition, he sets out a principle of justification that “allows the government to explain why actions that are prima facie wrong are in fact proper.” The government may restrict nuisance and other harmful activities without paying just compensation if it can explain its actions; circumstances and cases will vary from time to time and across societies. Finally, his principle of nondiscrimination requires that everyone who would receive a benefit from a taking must bear some proportionate share of the burden.

Epstein’s general principles make a strong argument for limited government: “The more limited the scope of government, the more likely it is that the nondiscrimination principles will be able to function to prevent factional strife, for interpersonal conflicts are less likely to surface about the need to preserve law and order than they are, for example, on the proper form of education.” The takings clause, as originally conceived by the framers, reflects this structure.

But the courts have largely ignored this intellectual framework. Instead, in regulatory takings (by far the largest and most contentious category), they have focused on whether any use remains after property is taken, leaving the owner without compensation, just or otherwise. As Epstein notes, “just compensation” need not mean simply “market price.” Property has additional value (what economic literature terms “use value”) to its owners that would be reflected in a fair market transaction had the owners decided to sell the property freely. To take this into account, Epstein proposes adding a “bonus” over the market value in order to “better reflect the cost of [the state’s] actions and thus help curb excessive condemnations.”

Epstein treats similarly the notion of “public use,” which has been expanded without any legal limitation. He proposes a compromise, rooted in the realities of land use and the importance of making compensation justly match the scope of the taking. The law should allow “the taking only when the loss in subjective value is small and the locational necessities are great”—that is, when the land has a calculable market value and the proposed project cannot be executed elsewhere. But Epstein would reject most currently acceptable takings for urban renewal or similar projects, just as he rejects the notion of government planning generally.

Our current property-rights legal regime places an emphasis on political intrigue and infighting, rather than a fair assessment of the costs and benefits of government action. As Epstein shows time and again, instead of fairly applying standard common-law principles to property rights, the current system promotes political lobbying and factionalism and favors certain groups over others. In the current economic climate, we will likely only see more Kelos, as governments try to boost local economies by taking what is not theirs for uses not in any conceivable way “public.” Supreme Neglect is a clarion call to pursue a wiser and more just course.

Gerald J. Russello is editor of The University Bookman.

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