Though not strictly Austrian in analysis, this new article from Bruce Benson in the Independent Review is worth reading for its strong attack on the fallacy put forth by Richard Epstein and others that we must have eminent domain, especially to build roads, because of the “holdout problem.” He also makes the case for private provision of roads. The piece nicely complements Walter Block’s work (and debate with Epstein) on the same topic.
Source link: http://archive.mises.org/4368/the-myth-of-the-holdout-problem/
The Myth of the “Holdout Problem”
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Even if it weren’t a myth, it somehow justifies taking property by force? How can someone who is supposedly a libertarian not know what theft is?
Yid,
Precisely. Which is why he spends his entire introduction (or preface — I can’t remember now) explaining that he isn’t a libertarian. It’s apparently too dogmatic for him; he much prefers to pick and choose his own results.
Then again, if Takings got the Dems on the Senate Judiciary Committee into a tizzy, he can’t be all that bad…
The article isn’t what is claimed — it does not explain or refute the “myth” of the holdout problem, but in fact admits there’s a holdout problem. it has no answer for the problems in which a person will not sell at any reasonable price to “put through the freeway” (which would increase the cost to taxpayers), nor does it have an answer to persons overvaluing their land because it is one of the “last links”. It is more a description of a litany of government failures and the liberal interpretation of the law by courts. We need a return to constitutional and limited scope government (as well as judges that hold government to a limited standard), not a libertarian fantasy world where people can land on earth from the moon and adopt their own personal constitutions at will and land is interchangeable and free, as are resources.
Jim:
How does one identify what a “reasonable price” for someone else’s land is and how do we know when people are “overvaluing their land”? Conventional wisdom has it that the government can determine this, but the libertarian believes that only the individual can do this and should always be free to do so.
The idea that the state, or the majority (the mob) should be able to force you to sell your land and at the price they insist on regardless of the individual’s desire is foreign to the libertarian.
Every statist thinks the state knows what is best for us all. For him, the interests of the mob (or of the political powers) trump those of the individual whenever the state deems it is expedient to do so. And it is often expedient to do so. With such a philosophy, it is easy to see why constitutions become irrelevant.
Jim,
You are woefully wrong on this one. Professor Block has written extensively on ways to work around the “holdout problem” that do not abrogate people’s rights to their property (e.g., offering to buy an option on all the property on a given route, executable ONLY if all owners accept). Your objection to the solutions offered by Benson and Block presumes that some kind of “fair market value” can be arrived at, and forced upon owners of land by government fiat. This is sophistry which is in direct contravention of one of Mises’ most fundamental definitions, and on which LibertyGuys have blogged extensively;
“A “market price” is defined (http://mises.org/humanaction/chap14sec5.asp) by the great economist Ludwig von Mises in Human Action as the price at which an exchange will occur, free of coercion. It means the price at which the two parties involved in a potential transaction both feel that they are getting something they value more highly than the thing they posessed before. In the case of an uncoerced real-estate transaction, for example, the buyer offers the seller a sum of money. Implicitly he personally values the property more than the sum he is offering. If the buyer accepts the sum, then he values the sum of money more than the property he is offering. Therefore, the exchange WILL occur at this sum, which is by definition the “market price”. This is free enterprise in action.
An exchange that is coerced, on the other hand, can NEVER be at “market price” or “fair market value” BY DEFINITION.”
http://www.libertyguys.org/articles/detail.asp?ArtID=885
But make no mistake – the “holdout problem”, accurately defined, exists only in the minds of those who stand to benefit from government taking private property by force. There is NEVER one single piece of property or route standing in the way, there is simply greed or stinginess on the part of government or business. Similarly, there is no way to write a legal means of confiscating property even for the highest and best uses that will not, sooner or later be used to benefit private interests exclusively, therefore it should be amended out of the US Constitution and the 50 separate state constitutions if a regime of real property rights is to be restored.
it has no answer for the problems in which a person will not sell at any reasonable price to “put through the freeway” (which would increase the cost to taxpayers), nor does it have an answer to persons overvaluing their land because it is one of the “last links”.
Um, are you sure? From what I read, the article was suggesting that, in order to avoid the “last link” problem, entrepreneurs should come up with two possible routes (or more). Next, the entrepreneur should ask each person on the two routes to submit a quote, and the entrepreneur should state that he will build on the route that has the cheapest overall cost. That way, it will not be in anyone’s interest to “hold out” or overvalue their property, because that would mean the people on the other route win the deal.
I think the people who think that the free market can’t handle such mundane problems as a “holdout” when building a road suffer from an extreme lack of imagination. Call options — the right to buy at a certain price — could easily solve the holdout problem, as well as making alternate planes for different possible routes. There’s also tunneling under a piece of property and building a bridge over it. The ad coelum doctrine is arbitrary, against natural law, and ridiculous/impractical (this is the idea that if you own a piece of land, you own a conical of space extending from the center of the Earth out into the infinite of the heavens).
Jim,
I understand your wish for limited constitutional government, but it comes across a bit as though you see it as the answer to all problems. I think the issue here is that the power of eminient domain is expansive and dangerous, and posters here are appropriately wary of what it represents. Ordinarily, if I have something you would prefer to possess, be it a car, a piece of land, or some food, you must engage in a peaceful market transaction with me in order to possess it. But if you redefine that preference as a “need”, then somehow things change and you are no longer obligated to engage in a peaceful transaction with me. Instead, you can take it by force, since you now need what I have instead of simply want it. In the case of the holdout problem, if enough people need what you have, they can simply take it. It sets up a system where your property rights are determined by majority vote, and you only own something as long as the majority doesn’t decide they need it. I think that the issue posters here have with that is that it’s such an immense and expandable power that it’s not really compatible with any kind of limited government based on respect for rights. Therefore, limited government isn’t really a solution to this particular problem.
Vince, Paul, Blah, Lisa and all — the first issue is whether it is legitimate to force an individual to sell private land (example: a mountain pass). The second point is the practical implementation of any system proposed.
It sounds as if some of you have decided there can be no justification for the majority ever to infringe on private property rights… That’s nonsense (and you know it). By holding that position, you give moral authority to the statists.
Nor do the proposals offered have any grounding in present reality. This is truly science fiction. For “call options” or other things to work, many property owners would have to be forced to institute the new plan against their will, while future property owners would be held to the existing law, a massive “taking” of itself which may substantially upset the balance of power into a worse position. In fact, owners may be worse off with the new bargaining position — you’ve no way to know how it will land.
And because there cannot BE a measurement of subjective value doesn’t preclude state action or prescriptive law (certainly there may be no subjective value measurement for building a personal nuclear weapon, but it is precluded for good reason). Come on. The slide into libertarian fantasy gives the opposition a leg up … do the private-property arguments a favor and stick to well-grounded, practical, and implementable theory.
Epstein has shockingly little to offer in the way of intelligent analysis. He proffers some sort of quasi-utilitarian goal (“common good”) and proceeds to argue that we can’t have common good unless the commons can just take what it wants. Walter was surprisingly patient with this sophomoric (sophomoronic) reasoning. First 15 minutes and Walter’s rebuttal (~40:00) is worth listening to. He appeals to the remnant — those who can think.
Query for Epstein: Hey, if we are all “pardners” under our “pardnership agreement a.k.a. constitution” why do we have to incorporate or form private partnerships? I mean, aren’t we already bound together? Don’t we, like good shareholders and partners, already elect a president or managing partner? Shouldn’t he just go ahead and make all the decisions? And hasn’t this been tried before? How’d it turn out? (As if we need empirical proof.)
Jim says;
” For “call options” or other things to work, many property owners would have to be forced to institute the new plan against their will, while future property owners would be held to the existing law, a massive “taking” of itself which may substantially upset the balance of power into a worse position. In fact, owners may be worse off with the new bargaining position — you’ve no way to know how it will land.”
How does this require forcing property owners to accept put options? The only pressure allowed would be peer pressure. Either the puts and the peer pressure work, or the project doesn’t get built, period. What’s the hurry anyway? The state proposes nothing that is so important it can’t wait a few years for holdouts to die off, while truly private businesses will find better opportunity elsewhere.
Jim,
Do I have any rights that cannot be infringed on if the majority decides it is necessary? Or are rights always a matter for majority vote?
Lisa Casanova, when you ask a question like that, you implicitly concede that the person asked has a say in the matter. To ask a question like that is always to concede the point at issue.
I will concur that the article is mislabeled. No solution is given to the holdout problem, and most of the rest is merely a reiteration of all the evils and problems and MISUSES and ABUSES of emminent domain. This is a little like using an area where warlords rule as an example of the problems of anarchocapitalism. Or like using robbery and murder as the only examples of using a gun, and trying to then say guns are evil in and of themselves.
A case can be made against any emminent domain, but if so, it should be made against the best arguments for it, not abuses and straw men.
Consider an example where someone in the 1800s has created a trust for land with the specific condition that it is to be left in a natural state, and that it crosses all viable paths for a road. The trustee will violate the covenant at any price. The parcel, which might be quite large, is as bad if not worse than any natural barrier.
Some roads might be able to route around holdouts, but how many would like our cities laid out as a maze of twisty passages and cul-de-sacs, for freeways and secondary roads as well as subdivisions? I can already think of examples which I drive on each week that were politically engineered. Having individuals each have a veto on a road will make things worse.
There are things (like canals) where there often isn’t an easy way to allow multiple potential paths.
It is also not a matter of a “majority” decision to infringe on a right. Either property rights are absolute and the highest, so that if someone has a heart attack and staggers onto your parcel, any rescuer could be shot as a trespasser, or the reason we recognize property rights is because there is a greater good of which they are a component. But they are not the only component, nor the most important.
Consider a major road between one area of town where there are a lot of elderly and a nearby hospital which will cut down transit times and would measurably save lives, and the increase in economic development would balance the cost of the road. What I seem to hear is that if even one person doesn’t want to sell, the road ought not be built. Nor do I think it would matter if a majority or minority (e.g. those who might die if it isn’t built) were for or against it. Nor does this have to do with the type of organization which would build and/or maintain the road.
Tz:
Protection of property would not afford you the right to shoot a rescuer who had to step onto your land to rescue a heart-attack victim any more than it does presently under statism.
The other examples you provide do sound inconvenient. But on what basis do you suggest we decide when it is necessary versus convenient or expedient to expropriate? And if it is not a matter of a “majority” decision to infringe on a right, on what basis can we decide to allocate this decision and to whom will we allocate it? In practice, it always eventually boils down to political influence rather than justice.
In contrast, it is likely that people living in a free market would provide for their elderly in such a way that health-care is convenient. It is under the nutty state system that you will find the tax-payer funded insanity of old-age care in one part of town, and a crucial element of this care at the other end of town. Usually subsidies, regulations and government works projects that benefit well connected concerns are involved with such decisions. And, since politicians are answerable to no one but their financial backers, and are unaffected by profit and loss considerations, they are free to do things that we can describe politely as uneconomic. Private enterprises, in a free market on the other hand, have to think about the desirability of the services they provide to actual customers because it does affect their livelihoods.
Vince – Starting point is now. There is no non-violent “call option” system that could be implemented without force.
Lisa – You have individual rights as endowed by your creator that cannot be legitimately usurped by the majority.
Paul – Turn your phrase and you see the nirvana of anarcho-libertarianism is specious: “it always eventually boils down to economic influence rather than justice” … Libertarianism wouldn’t last for long, as economic interests would eventually become political interests (witness the dispersion of power united into the Federal Reserve)… The objection stands: we need to be writing compelling and persuasive arguments to force our officials to recognize private property rights in OUR system and put limits on our PRESENT government. Not dream up alternate universes. The market will get to a more “libertarian” state-of-affairs if we are able to hold back the state.
“witness the dispersion of power united into the Federal Reserve”
Jim, you’re using the existence of the Federal Reserve as something to support an argument against A-C, and to support the argument for a constitutional government. You’re not trying to be funny are you?
To me, your argument seems almost to be that A-C is never going to work, because it will end up like a state. Therefore, what we need is a state instead. But not just any state, though, not a state like the US government: that state is ignoring its constitution and usurping powers left right and center. We need a state with a new constitution that the rulers will stick to and not step on and spit on.
And you accuse the A-C advocates of being unrealistic.
Mr. Heinrich, you state:
The ad coelum doctrine is arbitrary, against natural law, and ridiculous/impractical (this is the idea that if you own a piece of land, you own a conical of space extending from the center of the Earth out into the infinite of the heavens).
I disagree. Ownership of mineral rights has led to the very effective use of minerals in the US. Oil is a good example, as stated in a recent blog posting here, that because of this “impractical” ownership, far more efficient exploration for oil has occurred inside the US than anywhere else. There is also the very real question, without it, of how I dig a well, fly a kite, or bury my dead dog.
I must also object to your use of “ridiculous” and “impractical”, as well as making a claim towards “natural law”. All three of these are subjective opinion, which you state as if they are the most obvious fact. I find it very practical and useful, as well as perfectly natural. You may ridicule all you wish.
So if I do not own the mineral rights, who does? The State? Don’t try and make that assertion here.
Jim sez;
“Vince – Starting point is now. There is no non-violent “call option” system that could be implemented without force.”
HUH? Show me where force is necessary. Ideally, the call option system would result in prices acceptable to all landowners in the path of the project. Somewhat less ideally, the project sponsors may have to pay inflated prices, or wait longer than desired. In a non-ideal situation, the project sponsor may put pressure on the holdout, build around, or abandon the project. Where is the force?
Curt,
Your comment is a red herring. I’m not saying I’m opposed to mineral rights. I’m saying that it is impractical, and against natural law, for someone to act as if they own a cone of space extending from the center of the Earth to the infinity of the universe, simply because they’ve homesteaded a plot of land on the surface of the Earth. If you homestead a plot of land on the surface of the Earth, you own what you’ve homesteaded, and the degree to which that ends depends upon the technological unit. How far beneath your plot can someone burrow without causing structural risk? How high above it can they go without interfering with your use? Flying a plane over it doesn’t constitute trespass; building a opaque tent over it would.
If you want to own the minerals beneath your land, you have to homestead them. To the degree that you homestead, you own.
The ad coelem doctrine is sheer idiocy: very 2-dimensional thinking. The absurdity of it can be demonstrated by considering what happens when human beings start homesteading outer space, where there clearly is no plane of reference.
Now, it is quite obvious that there is a physical relationship between the land or space your are most able to homestead and what you’ve currently homesteaded: that is, you most likely have better ability to homestead the Earth beneath your house than anyone else, for obvious spatial reasons. This doesn’t mean you’ve actaully homestead it, or in any way own it. Prior to it being homesteaded by someone (digging, utilizing), it is simply unowned. I don’t have to say it’s owned by the State: it isn’t owned by anyone, until someone homesteads it.
What you’re saying is that if no-one has homesteaded a piece of land, if you don’t own the Earth beneath your land, then the State owns it. That’s a non-sequitar. Rightful ownership comes into being by homesteading, not by decree. Consider the converse of your statement: If I step outside of my house, and look straight up (perpendicular to my land), there will be some set of stars that are above my land in a conical. These are probably thousands, hundreds of thousands, or millions of light years away. Now, to ask, “If I don’t own those stars, who does? The State?” is silly. I don’t own them because I haven’t homesteaded them; neither does the State (and as should be obvious, the State can’t justly or legitimately own anything; it is always in the position of a criminal).
Mr. Heinrich, I am not arguing a red herring. You are making an absurd statement about infinitely out into space and into the core of the earth, neither of which is reachable. I said mineral rights, a very practical and very natural ownership of what is exploitable.
And no, I did not say the state owned it. I asked YOU who owned if, if not I. I asked if you meant the state, which would be difficult to assert in this forum.
Well, I’d better get right on drilling a very deep oil well, before someone diagonally-drills themselves. Then I won’t be able to sink any well at all, deeper than my basement foundation? I consider your assertions to be what is absurd, sir.
Curt,
I was explaining the ad coelum doctrine, and how absurd it is. That is to what I was objecting.
As to your drilling beneath your land, come on! Your in the best position to drill there by default of having homesteaded the land above it. But, until you homestead the Earth beneath it, someone can drill diagonally. But if your aim is to get those minerals, you’re clearly in the best position to do so, being right above it, and already having set up shop. Now, if for some reason, you need to do various things ont he surface before drilling to drill most effectively, you can just sort of fence off the area underground using an “aeration-like” method, to create homesteading, if you are really so absurdly paranoid about some competitor setting up shop along side you and drilling diagonally. This is, I think, however, not a practical concern.
One thing I have noticed is that Mr. Bradley think the state can limit itself which is an impossibilty. It has no incentive to do so. There are of course cycles of statism as long as you have forcible because they themselves can hungry at the trough and even though they know they cannot milk people too much they try and always overextend themselves(tax above the Laffer cruve) and sooner than later they collapse. And what Mr. Bradley also does not realize is that as long as there is one band of criminal robbers that is always allowed to take away your money at will you have no full property rights, you only have partial property rights. And as to everyone making their own little constitutions, you have to understand common law comes out of that tradition since common law was made in private courts. Obviously if you are in a state of anarchocapitalism law is made with a purely economic basis as every law rule or whatever you want to call it has its costs and benefits. And obviously there would be a resurgence in common law, state law runs opposed to common law as it makes uneconomic laws every second around the world. And even the laws that are universally just such as protecting against murder rape theft assault etc. these are enforced on an inefficient basis. Just look at the failure of 9′-11 and our wasteful border guards and our policemen that go around acting like jack booted thugs and not giving a damn about federal and state constitutions.
I’ve only partially read the article (been too busy), but it seems to me that it does address the holdout problem. Besides the idea of two routes, it also suggested, bundling the purchase of properties in a conditional purchase or auction, and plain old secret purchasing, which the government naturally cannot and should not do. It also suggested that purchasing part of an owner’s land could be desirable to the owner because a road could increase the value of his remaining land, and thus increase the owner’s desire to reach a mutually agreeable price and not jeopardize a potential sale by being too obstinate.
There may be other suggestions in the article, but those are the ones I’ve seen and remember.
All in all, it seems to me that the point has been adequately made that the holdout problem is not insurmountable, and is not sufficient justification for eminent domain powers. The resulting private road system would undoubtably be different from what we have now, but given the market factors and how road access affects land value, there’s plenty of reason to think it would be at least as good, if not better, than the public road system.
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