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Archive for January 24th, 2011


What’s happening to my public use lands?

In Epstein’s Supreme Neglect, Chapter Four focuses on public use. One particular passage caught my attention, ultimately leading me to write this post. On the top of pg. 78 he writes about “rational pricing” for government entities designated as public use. Perhaps I am misreading economists as cynical and only caring about what “the market” needs or naturally becomes (many would claim these are synonyms). I enjoy using the gorgeous wasatch mountain range free of charge and mountain biking, hiking, and camping in Logan Caynon during the summer. Recently, however, many places have begin to charge fees, and others increase theirs. State parks and other desinated wilderness areas do this often. As a college student, I relish the opportunity I have for health, fun, and most importantly, free entertainment. Adding a price ultimately makes things unusable for the poorest in and social system. You could also argue that is only means the poeple who wants something the most purchase it (grapes in winter example), which is true, but The richest don’t need as much relative interest in something to pursue it. Luckily for me I expect to graduate college and pursue a lucrative career enabling my family and me, but the economic question still puzzles me.

Efficiency and morality

David Friedman makes several interesting points regarding the consequences of liability and property rights.  In his example of the wheat fields and fires from trains really showed how much the system and rights affect the possible outcomes and costs.

The legal system has such a profound decisive influence over the efficiency of the market.  When David Friedman explained the difference in an optimal outcome when the court assigns a greater value that it should on destroyed property it really made me think of the relative power of a court on the economy.

It seems as if the words ambiguity, asymmetric information, and free riding are omnipresent when considering laws and efficiency.  Sometimes it seems impossible to arrive at a decision because nobody can really define exactly what they want.

I really found it interesting that a lot of the blogs considered efficiency to be anti-moral and in some cases even evil.  However, I find myself resorting back to efficiency when legal decisions need to be made.  Maybe it is just because it is something that we can define so that we actually have an objective.  Another argument could be that efficient outcomes tend to benefit society as a whole in a much larger way than “morally based” decisions.

Can we adequately determine value?

As I read the readings over the last few days on of the things that stuck out to me was the idea that ‘Just compensation’ must be paid. It seems like the moral thing to do. We know that the lost in opportunity cost alone, that comes with everything that would deal with the government taking your land, would be on top of the market value for the property you have. Everyone I think can agree on that point.

Where I think the interesting conversation comes in is when dealing with those who don’t want to sell their land and have more then just monetary value in mind. For instance there was a statement made in an early blog that the property could have sentimental value. The problem is we have a hard time properly valuing our sentiment. How much are these memories worth to us?

Most people, as was pointed out in the readings, will give an inflated value when asked how much they are worth, but I find it interesting that almost everyone can be bought out, not at a efficient price, but at a price none the less. I may not be willing to part with my car at the market value because of the wonderful memories that I have with it, but offer me twice the amount its worth and you’ve got yourself a new automobile. You see I think that we as a humans have a tendency to over value experiences that we’ve had. We take things that weren’t really that valuable and put a higher price on them they are in reality worth.

We might say some things are priceless, but really something just being priceless means that we haven’t found an efficient market to trade them on. When a market is found these things are no longer priceless. Because of our human inability to put a proper price on a good I believe that the lesser of the evils would be a standard percentage above market value.

It reminds me of the old MasterCard commercials. You know the ones; “Some things money can’t buy, for everything else there’s MasterCard.”

Except this time what money can’t buy might just be taken under the guise of ‘public use’.

Study of one

As I was reading and pondering Friedman’s hypothetical situation of trains and burning fields I couldn’t help but have the same feelings that a previous blogger posted.  At what cost is our society going to pay in order to be efficient?  The author of the post “Efficiency” said that eventually we would become a cold and heartless society driven only by money and the desire to be efficient.  I completely agree.  What will happen if all we ever wanted to do was be efficient?  Small locally-owned business would be out that is for sure.  What about the history of something?  What about tradition?  Are we to throw that all away just to save us a few bucks?

In a closely related note: I decided to pose this train example to my non-economics major roommate just for fun.  He is the same one who can’t watch certain movies, yet despite this he is perhaps one of the smartest kids I have met.  He is a mechanical engineering major who only understands basic principles of economics.  Principles such as supply and demand.  I read to him the example and asked him if he were the lawmaker what would he do?  He thought for just a few minutes and asked, “Well who was there first? the farmer or the train track?”  A little bit stumped I responded that I did not know.  To him it was simple, who ever was there first had the property, and liability right.  Forget what was going to cost more, or what provided more efficiency.  All he saw was that someone was going to loose their livelihood and that they had a right to that livelihood.  I would not say that he is correct but I will say: that according to my study of one individual, the general public is far less worried with efficiency than economists.

China

Last summer I read a fantastic book titled “Out of Mao’s Shadow” by Philip P. Pan. One of the chapters in his book examines the experience one man, Liu Shiru, had losing his family hutong to developers in Beijing for the purpose of “easing the strained traffic in the Wangfujing shopping area and improving city redevelopment conditions” (Pan 151). While such redevelopment lifted the value of prime downtown real estate and developers could pay good money for such land, they usually found a way to take is on the cheap. In Liu’s particular case, the developer never recognized Liu’s ownership of his property, and Liu was compensated with “barely enough to buy an apartment on the outskirts of the city, and nowhere near the market value of his land” (Pan 152). The general manager of the project later boasted, “It took us 28 days to demolish the houses of 2,100 families” (Pan 165).

As disgusting as such a tale may be, it is not too surprising coming from China – especially the China of over a decade ago. After reading Liu’s story, I felt really grateful to live in America where property rights are protected and secure and something similar to Liu’s case would never happen. While I am still grateful to live in America and I still hold (some) faith in my property rights, the cases Epstein uses to demonstrate the loose interpretation of property rights left me feeling very discouraged, surprised, and angry. His description of the loose interpretation of “public use” is similarly infuriating. Of course, Epstein presents the worst-case scenarios, and such situations are probably not the norm, but even something as seemingly inconsequential as zoning laws can have a profound effect on one’s property ownership. (Of course, after this class, probably none of us will call zoning laws inconsequential again.) Honestly, I feel nervous about purchasing any property in the future! I absolutely agree with Epstein when he says, “Restricted public rights to condemn encourage more investment in private property, the surest way to prevent blight” (Epstein 85).

While America is certainly a long ways away from being China, the most fascinating part of reading Pan’s book was realizing some of the directions in which the U.S. has gone in the fairly recent past; directions that make Liu’s story seem a little less foreign and a little more close to home.

Pan, Philip P. Out of Mao’s Shadow. New York: Simon & Schuster, 2008. Print.

Public Use sounds like Hey public thanks for the free land.

Reading about “public use” and that kind of thing really is great.  Since I was young I always wondered why there were so many corrupt national political leaders and I remember always envying the local leaders and all that they stood for: integrity, hard work, leadership, and a genuine love for their communities.  Apparently not everyone grew up in River Heights, UT under Mayor Jensen.  These court cases made sense to me in certain aspects and in so many other ways were completely foreign.  It is appalling the amount of justification that goes on when judges pass their “judgment.”  In the case of the man that wanted $800,000.00 in exchange for granting the land rights to the men building a CVS, I seriously could not believe the selfishness of that man and how he could have possibly been chosen for such a position.  I am not naive.  I may have lived in River Heights just a mile from campus for a while but I spent the majority of my life in California where politicians being corrupt isn’t exactly news and I still could not believe how they behaved!  And then to go and turn around and sell the land right after toWalgreen’s just sounds ridiculous.  I understand the importance of the court decisions from a hundred years ago about needing the neighbors land for a railroad but how can you read that and bend it to meaning that General Motors can condemn an entire city??? This is where I think it is safe to say we should draw the line.  Once we are just attempting to get as much crap as we can for ourselves or see this in another person something needs to happen! And I can’t even believe the supreme court questioning the persons questioning of the local governments decision to take the man’s land.  I don’t know if that made lots of sense but if you did the reading you would understand.  What an interesting reading!!!

…And Justice for All

Reading chapters 4 and 5 of Epstein was really interesting.  Prior to reading the chapters I did not know the government had so much power in taking citizen’s land for ‘public use’ and their ability to define what ‘public use’ actually is.  I’m from Vegas and at one point (but mostly all the time) there is a lot of highway construction on the I-15 and US-95 that run through the city.  And they have to get the extra land from somewhere, most of the time homeowners.  Now in the newer parts of the city there is plenty of room for expansion in the future, but in the older parts the government had to buy a lot of property from private homeowners to be able to expand the highways that they wanted to.  Not living over there, I didn’t care.  And most of the homes were in rough neighborhoods that were stereotypically crime-infested.  So I thought it was a good thing.  More highway for me, more highway for them, and they probably got enough money to move somewhere nicer (hopefully).

Epstein cites many cases in which citizens and even townships were practically bullied out of their homes by local governments, but I wonder how many cases like those have ever happened?  Is it frequent?  I believe both sides have valid arguments.  I especially enjoyed Epstein’s expansion of ‘public use’ and what it means.  Evidently it means a lot of things to a lot of people (especially to the government).  But I think that regardless if it’s for public use, will it be used efficiently for the public good?  That’s great that the public uses it, but does it provide any benefit?  From reading these chapters it looked to me like entrepreneurs and the private sector could do a much better and more efficient job than the local government could in most instances.

Moral Definition Dilemma

In part of understanding economics and politics I understand that there is a social cost associated with many “public use” concepts.  For instance, each of us attends a university, which gives us a higher education.  That higher education not only benefits us individually but it benefits society as a whole.  Many great ideas stem from this higher education concept.  I noticed that the mobile home park on 12th east has recently been undergoing some demolishing.  Many of those trailer owners had a right to be there, and occupy that space.  But there still remains a few of these mobile home owners left in the park, and it looks absolutely ridiculous that they are still there.  My conscience tells me that they have a right to be there on that parcel of land, but my economic understanding tells me that these people need to move on and allow the greater purpose to move in, whatever the University has in store for that parcel of land.  I have a hard time deciding which choice to side with about the matter but I tend to lean toward letting the University to demolish the park entirely.

This leads me to my next question of what would be just compensation for the few who remain in the park.  A majority of the mobile home owners felt that they received just compensation for leaving the park or else they wouldn’t have left.  But there remains the few who won’t give up their small parcels.  In this situation I want to believe that these individuals are being a bit too greedy.  In a situation like this I wonder what they are looking for as just compensation to vacate their homes and move on.  Obviously people who have their land taken away from them and given to a different person does not see the “greater good” to turn the land over.  Now this leads us to the definition dilemma.  For instance, the word “set” has over 450 definitions.  In my opinion I find it hard to create black and white decisions when I could have so many definitions.  Epstein believes that the law went wrong because, “the politicians who are given an inch take a mile.”  I tend to side with that logic, because the government is constantly trying to change the definitions of the Constitution.  Gun control, gay marriage, rights to privacy are proof that politicians are trying to change definitions to meet the needs of every voters rights.

Epstein’s Suggestions: Yea or Nay.

“Just compensation.”  What does it mean?  Reading Epstein, I decided that it’s hard to define.  So it seems like any attempt to make compensation more just is going to be subjective, anyway.  But the current system of providing compensation only as “fair market value”, ignoring the owner’s full losses that are attributable to the taking, is definitely flawed, in my opinion.  So these losses should be considered part of “just compensation”.

Another of Epstein’s suggestions was a 10 to 20 percent bonus.  This seems really arbitrary.  But again, it’s all arbitrary.  The government is taking property.  And “just compensation” is ambiguous.  Maybe just compensation could be as simple as fair market value plus a fixed bonus, but I don’t think so.

Epstein says, in defense of his fixed bonus idea, “Perfect compensation cannot be awarded to each owner, but the overall burdens on the state will better reflect the full cost of its actions and thus help curb excessive condemnations.” (91)  But is that the goal?  To curb excessive condemnations?  Shouldn’t it be to justly compensate?  Epstein has put on his economic glasses here.  But I don’t know that this the best conclusion.  Granted, curbing excessive condemnations would simply be the result of compelling governments to pay more for compensation, but it seems to me that the goal is still just compensation more than curbing government condemnations.  The policy shouldn’t be in place merely to limit government condemnations, it should be in place to compensate justly, is what I’m saying.

I agree that owners should be compensated beyond “fair market value.”  But I think such  compensation should account for specific losses rather than offer an arbitrary 10 to 20 percent bonus for everyone.  So, in summary, I agree with one of his suggestions, that owners should be compensated for losses attributable to the taking, and disagree with his suggestion that a fixed bonus should be tacked on to make the compensation “just.”  The end.

Efficiency

As I read Friedmans theories about the railroad and the farmers and their never-ending quest for efficiency, I was quite bothered by the fact that he was looking at the burned fields only in terms of dollars. While I understand he was trying to make a simple example to teach the lesson, the fact that he failed to factor in other pieces of the puzzle frustrated me a little. A farmer who loses his field not only loses his crop and the income that would have come from it, he loses hours of hard work and suffers the pain of watching the land he most likely love being damaged by fire. This could in fact create another type of farmer, one that no matter what the monetary incentive, will not allow the railroad to burn his crop.

This complicates the issue and makes it much harder to asses the real damage done and much harder to reach a true efficiency. This has been the case in other examples, such as the shop keeper or homeowner who refuse to let big corporations to buy them out for roads or comercial buildings. While solutions to situations such as these are eventually reached, is the outcome ever truly efficient? What is the cost of efficiency? Cold hearts and a money driven society? Perhaps this is all too true in our society today.

While efficiency may be a good thing, it may not always be the best. And while courts and laws exist to protect citizens in situations such as these, they may not always work. Thus instead of striving towards a utopian economy where everything is efficient and all parties are happy, a divided world exist and these goals are never truly met.