ProfessorBainbridge.com

CE Petit

Blawgger and authors' lawyer CE Petit continues his fascinating series on the legalify of fan fiction. The preceding post is also noteworthy, in that it inadvertently illustrates a problem with textual mediums - namely, that they do not convey certain social cues. Hence, CE takes seriously a comment I intended as a one-liner. Petit solves this problem on his end with a useful HTML gizmo that allows him to put fake font signals in his posts for things like sarcasm. E.g.,

<SARCASM> Personally, I blame the MSM.</SARCASM>

I've got to get myself a way of doing that with some sort of autotext.

Giving away the store

Why are the Republicans giving away the store on Social Security reform by volunteering to put rate increases on the table without getting anything in return? First, President Bush, now Senator Rick Santorum. It's not how they taught negotiation when I was in law school.

Homo Economicus

Steve Verdon has a very nice post today on the various ways in which experimental economics (a.k.a. behavioral economics) is changing the way economists think about behavior, in particular by challenging the traditional rational choice model that lies at the heart of neo-classical economics. I used some of this new learning - specifically, the sub- branch known as behavioral finance - in my article on the role of mandatory disclosure in securities law.

Slatisms

Jim Lindgren has a great post today on Slate's Bushism of the Day feature:

You would think that George W. Bush would make enough verbal gaffes that a journalist wouldn't have to try to trick his readers into thinking that Bush is more inarticulate than he is. But Slate, under the direction of Jacob Weisberg, must come up with a Bushism of the Day to feed their feature and the cash cow of calendars and other merchandise catering to Bush-loathers. Eugene [Volokh] has been insightfully covering these over the last year or so.

Accordingly, on days when Bush has made no real mistakes, Slate must squeeze quotations of context or pretend that informal, off-the-cuff speech should look on the page like edited prose.

As they say, go read the whole thing.

Reason or DU

Today's pop quiz: The following comment directed at Pope John Paul II was posted at a popular website. Was it Democratic Underground or Reason?

Senile old fool. Just die already!

Answer: Reason. As I've noted before, sometimes its very hard to tell the difference between anarcho-libertarians and the far left.

Social Security

Lawrence White responded to my post on Social Security with a number of good points, but I want to quibble with one of his arguments. He posits:

Professor Bainbridge adds:

Even proponents of private accounts concede that the transition costs will require trillions of dollars of government borrowing. Do we conservatives really want revenge on FDR and the New Deal at that price? Personally, speaking as a small government fiscal conservative kind of guy, I'd give up personal accounts if any money thereby saved was spent on deficit reduction or, better yet, an income tax rate cut.

The good professor is simply confused about the "price" of personal accounts here. As even opponents of private accounts concede, the proposed move to personal accounts, with workers who opt-in paying an appropriate price in reduced benefits, is self- financing. It will require borrowing, yes, but it will not require additional taxes or benefit cuts to repay the transitional debt. The debt will be repaid with the cash freed up by the voluntary benefit reductions for those who opt in. Conversely, giving up the Bush proposal for personal accounts will not make a single dollar available for deficit reduction or an income tax rate cut.

As I understand it, Social Security is effectively funded on a pay as you go basis in which current workers taxes are not saved but rather are used to pay benefits to current retirees (ignoring the voodoo economics of the trust fund). Accordingly, switching to private accounts will immediately reduce Social Security revenues as some current workers opt for them. As a result, the government will have to borrow now. The government will also have to pay interest on the debt starting immediately. In contrast, the offsetting reduction in benefits will not take effect for many years, when those workers who opted for private accounts finally retire. So here's my question for White: do you have hard data showing that the present discounted value of the future reduction in benefits at least equals the present discounted value of the bonds and interest paid on them? If not, what I learned about capital budgeting tells me it's a bad deal. No?

Anyway, does anybody really think that you can sell this idea to the public? The pro-private account Economist($) reports good reasons to think Social Security reform is going to be a very tough sell and, perhaps worse, that making a deal will probably require higher taxes:

Social Security reform, for now, is losing rather than gaining political momentum in Washington. Despite several presidential sales-trips to the heartland, Americans have not embraced private accounts. A Wall Street Journal/NBC poll in early February suggested that support for private accounts has fallen from 46% to 40% in recent weeks. More important, opponents of private accounts, particularly older people, care more, shout louder and vote more than younger supporters.

Republican congressmen are therefore loth to endorse pension reform unless they are sure it will pass the Senate. And so far virtually all Senate Democrats are categorically opposed to the idea. More important, it is becoming clearer that the kind of compromises necessary to prise away the necessary Democrat votes will appal conservative Republicans. ...

On February 16th, Mr Bush said that although he was implacably opposed to raising the payroll-tax rate, all other options? including raising the payroll-tax cap?were on the table.

Conservative tax-cutters were horrified. ?I, for one, am one of those that didn't come here to raise taxes,? fumed Tom DeLay, the majority leader in the House. Republican activists could not understand the logic, or the timing, of Mr Bush's concession.

I still think the best solution would be to raise the retirement age and switch the benefit calculation to price indexing. I'd gladly swap no new taxes for no private accounts.

Congrats to Smith-Madrone

Congratulations to the good folks at Smith-Madrone Winery:

Smith-Madrone Winery?s 2002 Chardonnay was awarded Best of Show-White Wine at The Hilton Head Island WineFestival Judging & Competition. More than 70 judges completed their work on February 17; there were more than 1,200 wines competing for an array of awards. The Smith-Madrone was one of 500 white wines....

It couldn't happen to a nicer bunch of people. Great folks who make great wine.

The Economist Disses Europe

The Economist($) pans Europe's reaction to President Bush (although they also eventually get in a dig at the latter):

As George Bush toured Europe emphasising, in speech after speech, that the central principle of his foreign policy is the effort to spread liberty and democracy, Europeans queued up to mutter about how many American allies are unfree and undemocratic, and how contradictory it is to use guns and tanks as prime tools in that cause. Far better, they said, to be a ?moral power? like the European Union, spreading freedom through softer and subtler means of influence and engagement?means like, as Mr Bush heard to his horror, lifting the EU's embargo on arms sales to China, in return for precisely nothing from that communist regime on human rights, or democracy, or on its sabre- rattling over Taiwan. Oh, except more trade, including more arms sales.

Exactly.

More on Wal-Mart: Employee Involvement

My post on the conservative case against Wal-Mart generated a lot of email and blog responses, several of which I plan to discuss in the next couple of days. One of the most interesting came from Max Sawicky, who makes a number of good points. I want to particularly note his invocation of employee involvement in corporate decision making:

The most interesting point in the post goes to the democratic implications of easy entry of markets by small, entrepreneurial firms. Such entry is thwarted by the dominance of Walmart-scale retail firms. The left can be a bit scrambled on this count. The left has a thing about business, while the right has a thing about labor. The left can talk about the merits of industrial democracy -- workers having more say in how their workplaces are run, the merits of flexible assignment of tasks in a workplace, flexible arrangements in work schedules, and representation on boards of directors. These are all of course privileges of working for yourself, the logical escape from wage slavery.

Max thus seemingly raises the interesting question of whether industrial democracy is a substitute good for individual ownership of a small business. I would argue that it is not - or, perhaps more precisely, that it in practice employee involvement has not proven to be a useful substitute for ownership of one's own business.

I did a lot of work on this issue in the late 1990s, producing a number of articles on the topic. In Privately Ordered Participatory Management: An Organizational Failures Analysis, for example, I argued (quoting from the abstract):

American industrial enterprises long organized their production processes in rigid hierarchies in which production-level employees had little discretion or decision making authority. Recently, however, many firms have adopted participatory management programs purporting to give workers a substantially greater degree of input into corporate decisions. Quality circles, self-directed work teams, and employee representation on the board of directors are probably the best-known examples of this phenomenon.

These forms of workplace organization have garnered considerable attention from labor lawyers and economists, but relatively little from corporate law academics. This is unfortunate, both because the tools routinely used by corporate law academics have considerable application to the problem and because employee participation is ultimately a question of corporate governance.

According to conventional academic wisdom, perceptions of procedural justice are important to corporate efficiency. Employee voice promotes a sense of justice, increasing trust and commitment within the enterprise and thus productivity. Workers having a voice in decisions view their tasks as being part of a collaborative effort, rather than as just a job. In turn, this leads to enhanced job satisfaction, which, along with the more flexible work rules often associated with work teams, results in a greater intensity of effort from the firms workers and thus leads to a more efficient firm.

Although this view of participatory management has become nearly hegemonic, the academic literature nevertheless remains somewhat vague when it comes to explaining just why employee involvement should have these beneficial results. In contrast, my article presents a clear explanation of why some firms find employee involvement enhances productivity and, perhaps even more important, why it fails to do so in some firms. Despite the democratic rhetoric of employee involvement, participatory management in fact has done little to disturb the basic hierarchical structure of large corporations. Instead, it is simply an adaptive response to three significant problems created by the tendency in large firms towards excessive levels of hierarchy. First, large branching hierarchies themselves create informational inefficiencies. Second, informational asymmetries persist even under efficient hierarchical structures. Finally, excessive hierarchy impedes effective monitoring of employees. Participatory management facilitates the flow of information from the production level to senior management by creating a mechanism for by-passing mid-level managers, while also bringing to bear a variety of new pressures designed to deter shirking.

In other words, I view employee involvement - at least as actually used in US corporations - as not an escape from what Max calls "wage slavery," but rather a top-down phenomenon intended to redress certain problems associated with the growth of bureaucratic hierarchies within US corporations. In my article Employee Involvement in Workplace Governance Post-Collective Bargaining, I elaborated the analysis, using transactional economics to argue that employees are better served by traditional collective bargaining than by the various forms of industrial democracy. Finally, in my article Corporate Decisionmaking and the Moral Rights of Employees: Participatory Management and Natural Law, I rejected arguments that employees have a moral right to participate in corporate decision making (as contrasted to a moral right to act collectively through unions).

The Conservative Case Against Wal-Mart

Hugh Hewitt praises a tough-minded speech by Wal-Mart's CEO and inveighs against Wal-Mart's critics:

Resistance to WalMart opening new stores always amazes me. Really. Good jobs at good wages, many of them entry-level jobs with training and advancement possibilities. Excellent advantages for consumers, benefits for employees, and neighborhood redevelopment.

But the media loves to hate the giant retailer, and local small businesses always put up a predictable cry. When WalMart is blocked, you never hear about the folks who didn't get jobs or the insurance plans that don't get enrollees. The small stores are happy, but the next time an objection is raised, I'd love to see a report on the wages and benefits paid to employees of such mom and pop operations. There will be some exceptions, but the average worker who is not an owner would be better off at the WalMart.

I respect Hugh a lot, but on this one I think there's a plausible counter-argument to be made; indeed, that one can make a plausible conservative case against Wal-Mart.

First, the data show that entry of a Wal-Mart store into a community has only a very small positive impact on county-level employment. According to a study by Missouri economist Emek Basker, "in the first year after entry, retail employment in the county increases by approximately 100 jobs; this figure declines by half over the next five years as small and medium-sized retail establishments close. Wholesale employment declines by approximately 20 jobs over five years." (3) Note that the "typical Wal-Mart store employs 150-350 workers. These results suggest that employment increases by less than the full amount of Wal-Mart’s hiring, even before allowing other firms time to fully adjust to Wal-Mart’s entry." (14)

Second, the data also show that Wal-Mart's entry into a community has a downward impact on overall retail prices of certain core consumer commodities. (Link)

Third, objective data on the impact of Wal-Mart's entry into a community on prevailing wages is difficult to find, but one suspects it is not positive. (Timothy Noah points out that Wal-Mart's CEO distorted Wal-Mart's wage picture in his speech by using average rather than median salaries.)

Fourth, entry of Wal-Mart typically results in exit by at least some local businesses, as suggested by the fact that the increase in employment is smaller than the number of positions Wal-Mart fills.

Fifth, even if the subsidies given Wal-Mart by many local communities to encourage opening a store are not as large as Wal-Mart's critics claim, does anyone seriously doubt that Wal-Mart often gets breaks on things like zoning, property or sales taxes, and other regulatory issues that small business competitors don't receive?

So opening a Wal-Mart has a small positive effect on consumer prices and employment for the community. The latter effect dissipates over time as Wal-Mart drives competitors out of business or, at least, the area. In addition, many of these employees appear to be part-time, according to Basker's study, who likely get smaller benefits and opportunity for advancement than full-timers. (Timothy Noah also pointed out that Wal-Mart overstates the number of full-time employees by counting as full-time anybody who works more than 34 hours a week.)

But even if Hugh is right that "the average worker who is not an owner would be better off at the WalMart," what about those owners?

In his article, Thwarting the Killing of the Corporation: Limited Liability, Democracy, and Economics, 87 Nw. U. L. Rev. 148 (1992) (Westlaw sub. req'd), law professor Stephen Presser writes eloquently about the role small business plays in our democracy. Presser explains that corporations were endowed with limited liability precisely so as to encourage the growth of small business:

The popular democratic justification for limited liability is rarely observed by modern scholars. Nevertheless, it appears that to the nineteenth-century legislators in states such as New York, who mandated limited liability for corporations' shareholders, the imposition of limited liability was perceived as a means of encouraging the small-scale entrepreneur, and of keeping entry into business markets competitive and democratic. Without limitations on individual shareholder liability, it was believed, only the very wealthiest men, industrial titans such as New York's John Jacob Astor, could possess the privilege of investing in corporations. Without the contributions of investors of moderate means, it was felt, the kind of economic progress states like New York needed would not be achieved.

The author of the most comprehensive study of New York legislative policy toward corporations in the nineteenth century concluded that New York's policy of limited liability, and its policy of encouraging incorporation by persons of modest means "facilitated the growth of a viable urban democracy by allowing a wide participation in businesses that could most advantageously be organized as corporations." "More importantly," he suggested, New York's general incorporation statutes "helped equalize the opportunities to get rich. The passage of general incorporation laws for business corporations was the economic aspect of the political and social forces that democratized the United States during the Age of Jackson, 1825-1855."

Note carefully this line: the "policy of encouraging incorporation by persons of modest means 'facilitated the growth of a viable urban democracy by allowing a wide participation in businesses that could most advantageously be organized as corporations.'" By trampling small businesses underfoot, through its mix of volume pricing and subsidies, Wal-Mart and its ilk undermine the possibility of "wide participation in businesses." Prospective entrepreneurs are thus pushed out of fields like retail.

Of course, maybe Wal-Mart makes up for that by buying products from small entrepreneurs in places like China. But do we really want to encourage our nation’s most likely future superpower rival to further build up its economy with massive trade deficits?

Finally, there is an aesthetic/humanistic argument to be made. I come back here, as I do so often, to Russell Kirk's description of his beloved Detroit:

All my life I have known the city of Detroit, called-during World War II "the arsenal of democracy." ... In the shocking decay of that great city nowadays, we behold the consequences of an inhumane economy-bent upon maximum productive efficiency, but heedless of personal order and public order. Henry Ford's assembly-line methods had much to do with the impersonality and monotony of Detroit's economic development; and so, in some degree, did Ford's concentration of his whole productive apparatus at the Rouge Plant; but of course Henry Ford had no notion, in the earlier years of his operation, of what might be the personal and social effects of his highly successful industrial establishment; nor did the other automobile manufacturers of Detroit. Indeed, they seem still to be ignorant of such unhappy consequences, or else indifferent to the consequences, so long as profits continue to be made. Consider the wiping out of Poletown through the unholy alliance of industrial, municipal, and ecclesiastical power structures, regardless of the rights and the wishes of Poletown's inhabitants-all to build on the site of Poletown a new industrial complex, which already, far from supplying the promised increase in tax revenues for Detroit, is involved in grave difficulties.

Outside the most heavily urbanized areas, Wal-Mart typically builds on the edge of town, putting up a huge (and butt-ugly) big box building surrounded by acres of bare concrete parking lots. There are few sights in the American scene less attractive or appealing to the eye.

Kirk observed that "Detroit, during my own lifetime, has produced tremendous wealth in goods and services. But it has been a social failure. And so have nearly all of America's other major cities." I put it to you that Wal-Mart contributed to moving those failures into small town America by shuttering local business and creating huge barriers to entrepreneurial entry into fields traditionally the province of local small business men and women.

Being a conservative is supposed to be about things like tradition, community, and, yes, aesthetics. If I'm right about that, it's hard to see why a conservative should regard Wal-Mart as a societal force for good even if Hugh's right about the job story.

So what do we do? Well, we must strike a balance between respect for private property rights (see my Kelo post) and our other values. How? On the one hand, government should not legislate against Wal-Mart and its ilk. On the other hand, government should not subsidize Wal-Mart either through zoning or tax breaks. Wal-Mart’s a big boy, so to speak, who can take care of itself. We ought to let it compete in a free market. And those of us with a bully pulpit out to use it to encourage Wal-Mart to become a better neighbor and citizen.

Evans on Eisner and Disney

Everybody in the business world has been following the Disney saga with great interest. There's Roy Disney's Save Disney campaign, which helped spark the shareholder revolt last year that prompted Michael Eisner to agree to board changes and a deadline for his retirement. Eisner's world also was rocked by the massive shareholder suit against Disney over the firing of Michael Ovitz. James Stewart's book Disney War isn't helping much, as it paints Eisner as an out- of-control autocrat. Now, however, according to Drudge, Eisner is being "defended" by famed Hollywood producer Robert Evans:

Evans argues that a well- orchestrated PR campaign to overthrow Eisner by Walt Disney nephew Roy Disney is 'reminiscent of Goebels [sic] propagating the heroics of Adolf Hitler.'

Wow. Aren't people getting way too comfortable throwing around the Hitler analogy? In any event, with friends like Evans, Eisner certainly doesn't need enemies.

What's interesting about this from a corporate governance perspective is that during the run-up to Disney's 2004 annual shareholder meeting, Roy Disney waged an active campaign to persuade Disney shareholders to withhold their votes from Eisner and several other Disney directors. That campaign was notably successful. Although Eisner was reelected, he was badly embarrassed by the fact that the holders of 43% of the shares present at the 2004 meeting withheld authority for their shares to be voted in favor of Eisner.

During the run up to the 2005 annual meeting, Roy Disney announced that he personally would withhold his shares from Eisner, but he did not conduct a campaign to persuade other shareholders so to do. Query whether Evans little tirade will tweak Roy Disney into some response. At the very least, it seems reasonable to expect Roy Disney to be even more aggressive in holding Eisner's feet to the fire.

Which will just make Eisner's day, eh?

Volokh Joins the Scalzi Fan Club

My friend and colleague Eugene Volokh opines:

Just finished John Scalzi's Old Man's War, which was very good. I bought it in hardcover; cheapskate that I am, I rarely do this except with authors whose work I know well, but I made an exception because of Instapundit's and Professor Bainbridge's recommendations. They steered me well; really good science fiction, fresh and well-crafted.

Oddly, the weakest parts of the book are the first few chapters, which weren't quite as tightly written as the rest of the book. If you find yourself disappointed at first, stick with it; I think you won't be disappointed.

Frankly, however, I must disagree with Eugene about those first few chapters. I was hooked from page one. Your mileage may vary, of course, but with a line-up of recommenders like Reynolds, Volokh, and, dare I say, Bainbridge, how could you go wrong?

Can Martha Save MSO?

Martha Stewart Omnimedia's stock price has been surging as Martha Stewart's release date approaches, but that run-up appears to have ended as a number of key market analysts have turned negative and are making sell recommendations. Why?

MSO continues to lose substantial amounts of money, mainly in two areas. First, the TV side suffered when Martha's shows were cancelled during her incarceration. It's possible that Martha's release may turn things around there, but several questions must be asked: (A) How much will MSO benefit from Martha's participation in Trump's new version of The Apprentice?  (B) How quickly can they get Martha back on their air in cooking and other lifetyle programming owned by MSO?

Second, and perhaps more crucially, MSO's magazine publishing is hurting big time with major declines in both circulation and ad revenues. It's not at all clear that Martha's release will turn things around. Unlike the TV shows, which depended on her being available for taping, her absence from the office didn't do anything obvious for the magazines. Instead, the magazine losses may reflect a long-term loss of fans and/or a decline in interest in lifestyle content generally.

My guess? If you bought MSO stock the day Martha got convicted and sold two weeks ago, congratulations. If you're still holding some, sell. If you're thinking about buying, don't!

Will Leviathan Prevail?

Today the Supreme Court will hear argument in a case that, as lawyer Martin Garbus put it in the LA Times, will decide the question "Is Your Stuff Yours?" Garbus apparently thinks your stuff is yours only so long as the government doesn't want it and, moreover, that the reasons the government wants it are irrelevant.

But there is this little thing called the Takings Clause of the 5th Amendment:

Nor shall private property be taken for public use, without just compensation.

Note that the Takings Clause has two independent requirements: (1) just compensation must be paid; (2) the property must be taken for a "public use." This second requirement means that the government may not take away your property to give it to some other private individual (or company) who will then devote it to their own personal or business use.

As the facts of the case at bar, Kelo vs. City of New London, illustrate, however, Government increasingly makes use of its eminent domain power to take property for what are really private purposes:

At issue is whether governments can forcibly seize homes and businesses, for private economic development. Under a practice known as eminent domain, a person's property may be condemned and the land converted for a greater "public use." It has traditionally been employed to eliminate slums, or to build highways, schools or other public works.

The New London case tests the muscle of local and state governments to raise what they see as much-needed revenue, which they argue serves a greater "public purpose." (Link)

The Economist (sub. req'd) puts the problem quite succinctly:

Put simply, cities cannot take someone's house just because they think they can make better use of it. Otherwise, argues Scott Bullock, Mrs Kelo's lawyer, you end up destroying private property rights altogether. For if the sole yardstick is economic benefit, any house can be replaced at any time by a business or shop (because they usually produce more tax revenues). Moreover, if city governments can seize private property by claiming a public benefit which they themselves determine, where do they stop? If they decide it is in the public interest to encourage locally-owned shops, what would prevent them compulsorily closing megastores, or vice versa? This is central planning.

Exactly. The government's taking's power is a necessary evil that, if used broadly, can destroy the entire concept of private property rights. As Russell Kirk pointed out, doing so will have devastating affects on society:

[F]reedom and property are closely linked. Separate property from private possession, and Leviathan becomes master of all. Upon the foundation of private property, great civilizations are built. The more widespread is the possession of private property, the more stable and productive is a commonwealth.

The case here is a particularly egregious example of how the takings power can be abused:

The day before Thanksgiving 1998, Susette Kelo, a registered nurse, got an unwelcome holiday gift: an eviction order. Her house, and those of six other families living on an abandoned submarine base called Fort Trumbull, had been compulsorily purchased. She had five months to get out.

What is unusual about this is that her house is no rat-infested health hazard. She bought and spruced it up three years before. Nor is it being seized by a branch of government: the evictor is the New London Development Corporation (NLDC), a private non-profit body. The land is not going to be used for a public works project, such as a bridge or school. Indeed, it is not certain what her land is wanted for.

The Supreme Court has held that private property can be seized via eminent domain as part of an urban renewal project when the property is blighted, a loophole that local authorities have greatly abused to seize private property. Yet, in this case, the government doesn't even bother trying to hide behind that fig leaf. They assert baldly the power to seize private homes because they think some other user can put them to a higher tax generating use. Except, in this case, they don't even know what the land will be used to do!

This is no minor technical dispute. Kirk's dicta is confirmed by the brilliant work Richard Epstein did in his classic book Takings, which makes a compelling case that the power to take private property is the critical and central power of government that must be constrained if liberty is to have any substance.

After news of Napoleon's victory in the Battle of Austerlitz was conveyed to British Prime Minister William Pitt's, Pitt pointed to a map of Europe and said: "Roll up the map; it will not be wanted these ten years."  If the Supreme Court sides with New London, we might just as well roll up the Bill of Rights, for we won't need it any longer.

Update: Regretably, SCOTUS blog reports that "based on the impression left by the oral arguments, the government-side is going to win today's property rights cases overwhelmingly." Get ready to roll it up.

Update: For additional commentary, see my subsequent post New London = Old Moscow.

Update: In the Kelo case argued before the Supreme Court today, dealing with whether a city can take private property and give it to some other private actor, the city's legal counsel recognized no bounds on the power of government to take property:

Justice Antonin Scalia ... describes Horton's position as: "You can always take from A and give to B, so long as B is richer." And O'Connor offers this concrete example: What if there's a Motel 6 but the city thinks a Ritz-Carlton will generate more taxes? Is that OK?

Yes, says Horton. (Link)

Wow. The arrogance is breathtaking. Other than his presumably grudging acceptance of the Constitutional requirement that the city pay fair market value for the land, the city's counsel - one Wesley W. Horton - would make the creators of the old Soviet kolkhozy proud.

Note, by the way, that the requirement to pay fair market value is a grossly inadequate safeguard on government power for two reasons in Kelo. First, it fails to take into account the subjective valuations placed on the property by people whose families have lived on the land, in at least one case, for a 100 years. In other words, if the Supreme Court rules for the city, the government will be able to seize land at a price considerably below the reservation price of the owners. Second, unlike the prototypical eminent domain case, in which the land is seized to build, say, a school or road, in this case the city is using eminent domain to seize property that will then be turned over to a private developer. If this new development increases the value of the property, all of that value will be captured by the new owner, rather than the forced sellers. As a result, the city will have made itself richer (through higher taxes), and the developer richer, while leaving the forced sellers poorer in both subjective and objective senses. As I opined this am, it's a moral outrage.

New London = Old Moscow

In the Kelo case argued before the Supreme Court today, dealing with whether a city can take private property and give it to some other private actor, the city's legal counsel recognized no bounds on the power of government to take property:

Justice Antonin Scalia ... describes Horton's position as: "You can always take from A and give to B, so long as B is richer." And O'Connor offers this concrete example: What if there's a Motel 6 but the city thinks a Ritz-Carlton will generate more taxes? Is that OK?

Yes, says Horton. (Link)

Wow. The arrogance is breathtaking. Other than his presumably grudging acceptance of the Constitutional requirement that the city pay fair market value for the land, the city's counsel - one Wesley W. Horton - would make the creators of the old Soviet kolkhozy proud.

Note, by the way, that the requirement to pay fair market value is a grossly inadequate safeguard on government power for two reasons in Kelo. First, it fails to take into account the subjective valuations placed on the property by people whose families have lived on the land, in at least one case, for a 100 years. In other words, if the Supreme Court rules for the city, the government will be able to seize land at a price considerably below the reservation price of the owners. Second, unlike the prototypical eminent domain case, in which the land is seized to build, say, a school or road, in this case the city is using eminent domain to seize property that will then be turned over to a private developer. If this new development increases the value of the property, all of that value will be captured by the new owner, rather than the forced sellers. As a result, the city will have made itself richer (through higher taxes), and the developer richer, while leaving the forced sellers poorer in both subjective and objective senses. As I opined this am, it's a moral outrage.