Coase and Kelo: Ominous Parallels and Lott on Rothbard on Coase

Block, Walter E.

doi:10.1007/978-3-030-28353-7_17

Walter E. Block⁴

Part of the book series: Palgrave Studies in Classical Liberalism ((PASTCL))

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Abstract

In its Kelo decision, the Supreme Court upheld Connecticut’s decision to use its eminent domain powers to take property from one set of private owners and give it to another set of private owners. The state defended this plan on the grounds that the former group of owners was using their property in a less efficient manner than would the latter. There are ominous parallels between this decision, which amounts to no more than thinly veiled theft, and the works of Ronald Coase and the “Law and Economics” movement spawned by his 1960 publication. To wit, this philosophy can be used to buttress Kelo. Indeed, we need look no further than this literature for a spirited albeit entirely wrong-headed notion that courts are justified in ruling, in property rights disputes, not in favor of the historical owners, but rather on the side of those they think can make the “best use” of the property; for example, so as to maximize economic welfare, or economic efficiency, or the gross domestic product (GDP), or as in Kelo, all of them plus the tax base. This topic is addressed in part I of the present chapter.

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Notes

1.
Kelo v. City of New London, 125 S. Ct. 2655, 2669 (2005).
2.
See id. at 2658.
3.
R. H. Coase, The Problem of Social Cost, 3 J. L. & Econ. 1 (Oct. 1960).
4.
125 S. Ct. at 2658.
5.
See John R. Lott, A Note on Law, Property Rights, and Air Pollution, 3 Cato J. 875 (Winter 1983–1984) (available at http://www. cato.org/pubs/journal/cj3n3/w3n3-15.pdf).
6.
See Coase, supra footnote 3.
7.
Id. at 16.
8.
See Murray N. Rothbard, Law, Property Rights, and Air Pollution, 2 Cato J. 55 (Spring 1982), reprinted in The Logic of Action Two 121–70 (Walter Block ed., The Fraser Institute 1990) (available at http://www.mises.org/rothbard/ lawproperty.pdf).
9.
Lott, supra footnote 5, at 875.
10.
See Coase, supra footnote 3; Kelo v. City of New London, 125 S. Ct. 2655 (2005).
11.
See id.
12.
The Nobel Foundation, http://nobelprize.org/economics/laureates/ (last updated Oct. 10, 2005).
13.
There is an interesting debate concerning the implications of Kelo for federalism and decentralization. As this discussion is peripheral to our present interests, we content ourselves with merely noting it. See generally Stephan Kinsella, Woops, They Did It Again (Bad Supreme Court! Bad! Bad!), http://blog.mises.org/blog/archives/003745.asp (June 23, 2005); N. Stephan Kinsella, A Libertarian Defense of ‘Kelo’ and Limited Federal Power, http://www.lewrockwell.com/kinsella/kinsella17.html (June 28, 2005); Roderick T. Long, Federalism and the Bill of Rights: The Pros and Cons of Kelo, http://www.lewrockwell.com/long/long14.html (July 8, 2005); Tibor R. Machan, Kelo v. New London City, CT, versus the Free Society, http://groups.msn.com/TiborsPlaceontheWeb/general.msnw ?action=get_message&mview=1&ID_Message=1311 (July 6, 2005); Ron Paul, Lessons From the Kelo Decision, http://www.lewrockwell.com/paul/paul259.html (July 5, 2005).
14.
For another attempt to link Coase and Kelo, see Frank Speiser, Imminent Eminent Domain: Paying Tribute in Collectivist Society, http://www.strike-the-root.com/51/speiser/speiser1.html (June 28, 2005).
15.
See generally Coase, supra footnote 3.
16.
Id. at 15–16.
17.
Or, more generally, how resources will be allocated.
18.
Walter Block, Coase and Demsetz on Private Property Rights, 1 J. Libertarian Stud. 111, 112 (Spring 1977) (available at http://www.mises. org/journals/jls/1_2/1_2_4.pdf).
19.
Coase, supra footnote 3, at 6.
20.
Id. at 15–16.
21.
Id. at 19.
22.
Id.
23.
Id.
24.
Id. at 2.
25.
Id. (citations omitted).
26.
Id.
27.
Id.
28.
Id.
29.
See generally Kelo v. City of New London, 125 S. Ct. 2655 (2005).
30.
Fred R. Shapiro, The Most-Cited Law Review Articles Revisited, 71 Chi.-Kent L. Rev. 751 (1996) (reporting that Coase, with 1741 citations, is far ahead of the next most cited article, which only has 359 citations).
31.
Kelo, 125 S. Ct. at 2658–60.
32.
Id. at 2658–59.
33.
Id. at 2659; See also Stephen Bainbridge, They Can’t Take That Away From Me… Unless They Can, http://remotefarm.techcentralstation.com/062305C.html (June 24, 2005).
34.
See Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 233, 235 n. 3 (1984) (forcing a landlord to give property titles to tenants to promote an egalitarian scheme of redistribution); Berman v. Parker, 348 U.S. 26, 28–34 (1954) (the taking of an apartment house for urban renewal to combat slums, even though it was conceded that this specific dwelling was sound).
35.
See generally Walter Block, Road Socialism, 9 Int. J. Value-Based Mgt. 195 (1996), http://walterblock.com/publications/road_ socialism.pdf (For a critique of eminent domain even in the case of highways and streets); Richard A. Epstein & Walter Block, Debate, Epstein vs. Block: Do We Really Need Eminent Domain? (U. Chi. Sch. L., May 13, 2004), in ___ N.Y.U. J. L. & Liberty ___ (audio version available at http://www.mises.org/media.aspx?action=showname& ID=443).
36.
Kelo, 125 S. Ct. at 2677 (Thomas, J., dissenting).
37.
Id. at 2677–78.
38.
Stephen Kinsella, A Libertarian Defense of ‘Kelo’ and Limited Federal Power, ¶ 6, http://www.lewrockwell.com/kinsella/kinsella17.html (June 28, 2005).
39.
Kelo, 125 S. Ct. at 2676 (O’Connor, J., dissenting) (citations omitted).
40.
See Coase, supra footnote 3.
41.
See John Fund, Property Rights Are Civil Rights: Opposition to the Kelo Decision Crosses Racial and Party Lines, ¶¶ 2,3,7, http://www.opinionjournal.com/diary/?id=110006941 (accessed Mar. 22, 2006) (making the point that the victims will tend to be poor and black).
42.
Kelo, 125 S. Ct. at 2677 (O’Connor, J. dissenting).
43.
See Kelo, 125 S. Ct. at 2687 (Thomas, J., dissenting); Martin Anderson, The Federal Bulldozer: A Critical Analysis of Urban Renewal, 1949–1962, 7–8 (Cambridge, MIT Press 1964). See also http://www. google.ca/search?hl=en&q=negro+removal&btnG=Google+ Search&meta= (accessed Mar. 22, 2006); Kennedy’s Vast Dominion: The Supreme Court’s Reverse Robin Hoods, ¶8, http://www.opinionjournal. com/editorial/feature.html?id=110006862 (accessed Mar. 22, 2006).
44.
Ron Strom, This land was your land: Supreme Court justice faces boot from home? Developer wants ‘Lost Liberty Hotel’ built upon property of David Souter, http://worldnetdaily.com/news/printer-friendly.asp? ARTICLE_ID=45029 (June 28, 2005).
45.
Kelo, 125 S. Ct. at 2671 (O’Connor, J., dissenting).
46.
Pfizer Inc., Pfizer Statement on Eminent Domain, http://www. pfizer.com/pfizer/are/news_releases/2005pr/mn_2005_0627.jsp (accessed Mar. 22, 2006).
47.
Economist.com, Eminent Domain: Despotism by Stealth, ¶¶ 17–18, http://www.economist.com/World/na/displayStory.cfm?story_id= 3672769 (Feb. 17, 2005).
48.
See Coase, supra footnote 3, at 3–8, 29–34.
49.
Id.
50.
Posner and Coase, of course, have their differences. However, for present purposes, there are no distinctions to be drawn between these two University of Chicago professors.
51.
Richard Posner, The Becker-Posner Blog: The Kelo Case, Public Use, and Eminent Domain, ¶¶ 5,7, http://www.becker-posner-blog.com/archives/2005/06/the_kelo_case_p.html (June 26, 2005).
52.
Walter Block, Total Repeal of Anti-trust Legislation: A Critique of Bork, Brozen and Posner, 8 Rev. Austrian Econ. 35, 55–68 (1994).
53.
The clear implication for a statist such as Posner is that if a price is “exorbitant” then the government must step in and force it to be lowered. In the aftermath of Hurricane Katrina, there is a movement afoot to stop price “gouging.” Posner, presumably, would favor this bit of economic illiteracy. For an antidote to it, see http://www.google.com/u/Mises?hl= en&submit.x=0&submit.y=0&&q=price%20gouge.
54.
Posner, supra footnote 54, at ¶ 5.
55.
Or, he would build a bridge over, or a tunnel under, any such “holdout.” See Walter Block, Roads, Bridges, Sunlight and Private Property: Reply to Tullock, 8 J. Economistes Etudes Humaines 315 (June/Sept. 1998); Walter Block & Matthew Block, Roads, Bridges, Sunlight and Private Property Rights, 7 J. Economistes Etudes Humaines 315 (June/Sept. 1996); Epstein & Block, supra footnote 38; Gordon Tullock, Comment on “Roads, Bridges, Sunlight and Private Property,” by Walter Block & Matthew Block, 7 J. Economistes Etudes Humaines 589 (Dec. 1996).
56.
Posner, supra footnote 54, at ¶ 7.
57.
Id. at ¶ 5.
58.
Id. (emphasis added).
59.
Walter Block, O.J.’s Defense: A Reductio Ad Absurdum of the Economics of Coase and Posner, 3 Euro. J.L. & Econ. 265, 275 (1996).
60.
Id.
61.
See Murray N. Rothbard, Toward a Reconstruction of Utility and Welfare Economics, in The Logic of Action One 211, 225–27 (Edward Elgar Publg. 1997).
62.
Steven G. Medema & Richard O. Zerbe, Jr., The Coase Theorem, in The Encyclopedia of Law and Economics vol. 1 836 (Bougdewin Bouckaert & Gerrit De Geest eds., Edward Elgar Publg. 1999).
63.
Id. at 837.
64.
See Coase, supra footnote 3.
65.
Id. at 6–8.
66.
Kelo v. City of New London, 125 S. Ct. 2655, 2676 (2005) (O’Connor, J., dissenting) (“The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”).
67.
David Friedman, The Swedes Get it Right ¶ 14, http://www.daviddfriedman.com/Libertarian/The_Swedes.html (accessed Mar. 7, 2006) (reprinted from Liberty Magazine).
68.
Id.
69.
Id.
70.
Richard A. Epstein, Blind Justices: The Scandal of Kelo v. New London ¶ 1, http://www.opinionjournal.com/extra/?id=110006904 (July 3, 2005).
71.
Id. at ¶ 4.
72.
Id.
73.
See generally Richard A. Epstein, Takings: Private Property and the Power of Eminent Domain (Harvard U. Press 1985).
74.
Epstein, supra footnote 71, at ¶ 6.
75.
See Epstein, supra footnote 71.
76.
Coase, supra footnote 3, at 2.
77.
Id. at 6.
78.
See id. at 2–6.
79.
Id. at 6.
80.
Id. at 15–16.
81.
See id.
82.
See id. at 1.
83.
See Murray N. Rothbard, Law, Property Rights, and Air Pollution, 2 Cato J. 55 (Spring 1982) (reprinted in Economics and the Environment: A Reconciliation 233 (Walter Block ed., The Fraser Inst. 1990)).
84.
Id. at 58.
85.
See Walter Block, Ethics, Efficiency, Coasean Property Rights and Psychic Income: A Reply to Demsetz, 8 Rev. Austrian Econ. 61, 64 (1995); Walter Block, Coase and Demsetz on Private Property Rights, 1 J. Libertarian Stud. 111, 112 (1977).
86.
Coase, supra footnote 3, at 43.
87.
For critiques of Coase on Rothbardian lines, see Block, supra footnote 86; Block, Road Socialism, supra footnote 36; Cordato, North, Rothbard, & Stringham, supra footnote 19; and Timothy D. Terrell, Property Rights and Externality: The Ethics of the Austrian School, 2 J. Mkts. & Morality page# (Fall 1999).
88.
The Austrian side of the socialist calculation debate maintained that no one could accomplish any such task in any case. See Peter J. Boettke, Why Perestroika Failed: The Politics and Economics of Socialist Transformation (Routledge 1993); James Dorn, Markets True and False in Yugoslavia, 2 J. Libertarian Stud. 243 (Fall 1978); Richard M. Ebeling, Economic Calculation Under Socialism: Ludwig von Mises and His Predecessors, in The Meaning of Ludwig von Mises 56 (Jeffrey Herbener ed., Kluwer Academic Press 1993); Nicolai Juul Foss, Information and the Market Economy: A Note on a Common Marxist Fallacy, 8 Rev. Austrian Econ. 127 (1995); David Gordon, Resurrecting Marx: The Analytical Marxists on Freedom, Exploitation, and Justice (Transaction 1990); Hans-Hermann Hoppe, A Theory of Socialism and Capitalism (Kluwer Academic Pub. 1989); Ludwig von Mises, Socialism (LibertyPress/LibertyClassics 1981); Morgan O. Reynolds, The Impossibility of Socialist Economy, 1.2 Q. J. Austrian Econ. 29 (Summer 1998); Murray N. Rothbard, The End of Socialism and the Calculation Debate Revisited, 5 Rev. Austrian Econ. 51 (1991); Joseph T. Salerno, Postscript: Why a Socialist Economy is ‘Impossible’, in Ludwig von Mises, Economic Calculation in the Socialist Commonwealth 51 (Ludwig von Mises Institute 1990), David Ramsey Steele, Posing the Problem: The Impossibility of Economic Calculation Under Socialism, 5 J. Libertarian Stud. 99 (Special issue, Winter 1981).
89.
It is a basic element of Austrian economics that costs are alternatives foregone, and hence subjective. See William Barnett II, Subjective Cost Revisited, 3 Rev. Austrian Econ. 137 (1989); James M. Buchanan, Cost and Choice: An Inquiry into Economic Theory (Markham 1969); Roy E. Cordato, Subjective Value, Time Passage, and the Economics of Harmful Effects, 12 Hamline L. Rev. 229 (Spring 1989); Thomas J. DiLorenzo, The Subjectivist Roots of James Buchanan’s Economics, 4 Rev. Austrian Econ. 180 (1990); Roger Garrison, A Subjectivist Theory of a Capital Using Economy, in Gerald P. O’Driscoll & Mario Rizzo, The Economics of Time and Ignorance (Basil Blackwell 1985); Ludwig von Mises, Human Action (Regnery 1949); Mario J. Rizzo, The Mirage of Efficiency, 8 Hofstra L. Rev. 641 (1980); Murray N. Rothbard, Toward a Reconstruction of Utility and Welfare Economics, reprinted in The Logic of Action vol. 1, 225 (Edward Elgar 1997).
90.
Block, supra footnote 62, at 272.
91.
See John R. Lott, A Note on Law, Property Rights, and Air Pollution, 3 Cato J. 875 (Winter 1983–1984).
92.
Id. at 875.
93.
This is minor only in the present law and economics context. Actually, it is of the first importance in determining whether economics is an empirical or deductive science.
94.
Milton Friedman, The Methodology of Positive Economics, in Essays in Positive Economics 7 (U. Chi. Press 1953).
95.
See Lott, supra footnote 92.
96.
Id. at 875.
97.
Id. at 876.
98.
Id.
99.
See Rothbard, supra footnote 84.
100.
See Block, Coase and Demsetz on Private Property Rights, supra footnote 86.
101.
Rothbard, supra footnote 84, at 57–58.
102.
Lott, supra footnote 92, at 876 n. 2 (“Rothbard’s statement (p. 59, n. 6) that ‘there may well be farmers so attached to their orchards that no price would compensate them,’ leads one to believe that, like Block, he is forgetting Coase’s assumption of zero wealth effects.”).
103.
Id. at 876.
104.
Coase, supra footnote 3, at 5.
105.
Lott, supra footnote 92, at 875.
106.
Coase, supra footnote 3, at 5.
107.
Lott, supra footnote 92, at 876.
108.
See Coase, supra footnote 3.
109.
Id. at 19 (Coase maintained, only, that the allocation of resources, e.g., who would end up with the flowerpot, would be independent of the judicial finding. But this, we can now clearly see, was a mistake. The flowerpot will be retained by the poor man if he is judicially awarded it; if not, he will not have the means to bribe the rich man into giving it to him).
110.
See Rothbard, supra footnote 84; Block, supra footnote 86.
111.
See Lott, supra footnote 92 (This error committed by Lott is similar to that made by Demsetz, Ethics and Efficiency in Property Rights Systems & Block’s Erroneous Interpretations, supra footnote 19. The latter author also criticized Block, Coase and Demsetz on Private Property Rights, supra footnote 86, but was responded to in Block, Ethics, Efficiency, Coasean Property Rights and Psychic Income: A Reply to Demsetz & Private Property Rights, Erroneous Interpretations, Morality and Economics: Reply to Demsetz, see supra footnote 19).
112.
Id. at 875.
113.
Coase, supra footnote 3, at 15.
114.
See id.
115.
See supra footnote 88.
116.
Lott, supra footnote 94, at 878.
117.
See Coase, supra footnote 3.
118.
Rothbard, supra footnote 84, at 126.

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Block, W.E. (2019). Coase and Kelo: Ominous Parallels and Lott on Rothbard on Coase. In: Property Rights. Palgrave Studies in Classical Liberalism. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-28353-7_17

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