Bohanon: ‘Kelo in My Backyard’

August 21, 2012

by Cecil Bohanon, Ph.D.

Ball State University (full disclosure: my employer) is seeking to acquire property adjacent to campus in order to build facilities that will  “house 50 dorm rooms, 100 hotel rooms, a series of conference rooms, a student-run retail area and two restaurants.” The expected cost of the project is around $25 million. There is one parcel of property in the plan Ball State does not yet own: a copy shop owned by Chris Hiatt, a local businessman. As of this writing Mr. Hiatt and the University have not come to an agreement.

When I outlined these simple facts to two teenagers and asked them whether the university should be able to take Mr. Hiatt’s property with compensation but against his will their response was emphatic and immediate: “that’s wrong.” My less than scientific survey suggests such an opinion is widely shared in Muncie.

In December 2000 the City of New London, Connecticut, invoked its power of eminent domain to seize the home of Susette Kelo and 15 other homeowners. The power of eminent domain is subject to the Fifth Amendment of the United States Constitution, which requires that “private property . . . taken for public use with just compensation.”

Public use had usually been construed to mean direct government use, such as constructing a military base or a public highway. In this case, however, the homes were near a Pfizer pharmaceutical center. The city thought the neighborhood was a good location for new private commercial development. The city’s private development corporation proceeded to use the power of eminent domain to acquire the 15 properties. Ms. Kelo appealed and the case went all the way to the Supreme Court. In a 5-4 ruling the court held that the city’s action did not violate the takings clause of the Fifth Amendment, i.e.,  that potential future economic development can be considered a “public use” even if the government does not operate or directly use any facilities on the seized properties.

Kelo is an unpopular ruling. Classical liberals (aka libertarians) and conservative uniformly detest it, as do numerous progressives. Economists, independent of their political persuasion, generally recognize private property to be a cornerstone of a free-market market economy. Buying and selling, producing and consuming, innovating and risk-taking all require the certainty private-property rights afford. If a prospective entrepreneur does not have secure rights to the assets of his operation it is hard to see how much enterprise would get going.

Yet I suspect this straightforward economic argument for private-property rights is not the primary reason that the seizing Ms. Kelo’s house or Mr. Hiatt’s shop generates such passion. After all, in both cases it can be argued the “compensated confiscation” will ultimately lead to more commercial activity.

I have come to believe that private-property rights are not about economics per se. They are ultimately about affirming individual dignity and autonomy. Private-property rights ensure the rich cannot prey on the poor, the strong cannot oppress the weak and the politically connected cannot run roughshod on the outsider, the King cannot do whatever he wants. Private property ensures no one can take what is yours without your consent. In extraordinary or clearly prescribed circumstances this can be trumped. But speculative private economic development or attainment of the particulars of a university plan don’t meet this standard for most of us.

Flashback: According to the Institute for Justice in New London  “. . . there has been no new construction whatsoever and the neighborhood is now a barren field. In 2009, Pfizer, the lynch pin of the disastrous economic development plan, announced that it was leaving New London for good . . .”

I doubt the Ball State case will end in such a disaster but I hope the conflict can be settled without the use of eminent domain.

Cecil Bohanon, Ph.D., an adjunct scholar of the Indiana Policy Review Foundation, is a professor of economics at Ball State University. Contact him at director@inpolicy.org.



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