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Takings for Public Goods - Intangible Property Rights - Conclusion



Takings, Liability, and Externalities:
The Appropriate Balance in Classical Liberalism

Jarrett L. Hale
Graduate, Belmont University, 1999
Nashville, TN
Takings for Public Goods

The preceding section described how regulation can be imposed to balance rights and risk, while avoiding the pitfall of illegitimate takings. The issue of takings for the production of public goods must now be addressed, for this is an important aspect of the liberal model. Public goods, as defined by the parameters set forth earlier, may require the power of eminent domain to be exercised under certain conditions. However, while the power of eminent domain must be preserved, the actual extension of this power is usually not necessary or legitimate.

The use of the eminent domain power has already been significantly reduced by the arguments presented in the public goods argument. Eminent domain can only be extended to provide for public goods, and I have shown the number of these goods to be severely limited. There are, however, situations in which the community needs to acquire property for the production of public goods. This power, however, must be used as a last resort, very seldomly employed.

I have used defense as an example of a public good, for it possesses the qualifications of non - excludability and jointness of supply. For this good to be produced, however, military bases must be established to house the military forces. This involves the acquisition of land, likely currently held in private hands. The question then arises as to how that land should be attained in a system which protects property rights.

I have already described the process of the assurance contract to generate funds for goods production. The cost to secure land needed to produce the good must be employed in the sum requested to be generated. The owners of the desired land must first be asked what an acceptable price for the land would be, and this price would be incorporated into the assurance contract. Seldom is there an instance when a true public good must be placed in a specific location, for the aspect of non - excludability usually means that if one particular piece of land is needed, then the good is usually so localized that this requirement is not met. One piece of land may be needed for a lighthouse, for example, but this good does not meet the requirement of non - excludability. That makes the issue of eminent domain for public goods, in this instance, a moot point. This situation is an example of a private good, over which the institutional government has no eminent domain powers (except perhaps at the most local level).

All options of available land or other property must be exhausted before eminent domain can be extended, though mere exhaustion of efforts is not sufficient. Demands of legitimate prices for private land are not reason to exercise takings, but exemplifies that the good is not truly desired because the community is unwilling to pay the true price of the good. Eminent domain can only be invoked when a holdout situation occurs, which is the inability to acquire land at a legitimate price.

The holdout situation is a very difficult dilemma, for the liberal model certainly supports property rights. The holdout situation is very rare, however, for if the public truly desires the good, then the private landowner can usually receive a price acceptable to give up the land. The individual holding out, then, usually holds the only piece of land acceptable, and refuses to give it up for any price. It is only in this instance that eminent domain can be invoked.

The important factor in this dilemma relates to an issue not yet discussed, which is the right of individuals in a liberal system to receive the benefits of truly public goods. Public goods which actually meet the stipulations of the definition and demonstrate support through generation of required funds, though extremely limited in number, are a right of those in a liberal model. A truly public good benefits the entire community, either through protection or promotion, and is thereby protected as right when a fair cost is generated. The liberal model does not seek to eliminate public goods, but to define strictly what they are. Once these are defined, however, the liberal model protects acquisition of these goods as fervently as any other right.

Truly public goods promote, protect, and stabilize the liberal model by enabling communities to receive benefits unattainable at the private level. Only through the adequate production of public goods can the right to produce private goods continue to exist. For example, the liberal community itself is threatened when no system of defense is established, thereby endangering the future protection of individual rights. While public goods are limited, those that meet the requirements are essential to the longevity of the system, and thereby essential to individual rights.

It is only in extreme cases that holdout situations occur and eminent domain must be invoked. The vast majority of goods are actually private goods, as I have described in earlier sections, and eminent domain only applies to public goods. When a holdout occurs in the face of fair compensation, however, eminent domain may be invoked to protect the rights of the community, for the holdout is imposing unacceptable risks to the future of the model itself. The use of eminent domain does not alleviate the requirement of compensation, though, for the individual still must be compensated for the use of the land.

Intangible Property Rights

Interestingly, principles of takings are not limited solely to traditional forms of property. I have chosen two examples with which to illustrate intangible property rights and takings within the liberal model. I will examine speech and conscription, both of which can be examined under the same principles as the land issue. I explained earlier in the section referring to the commons tragedy that anything over which a person possesses ownership can be defined as property right. Both speech and one's own body can be legitimated as privately owned.

The liberal model protects the right of free speech with the same fervor that I have shown it protecting land. One's ideas are owned by the individual, and the expression of these ideas are the right of the individual. Claims arise, however, that certain speech should be banned for the sake of the public good. To limit speech would constitute a takings and be forced to meet the same rigid requirements as the land takings.

Two options are available to those who seek to limit speech. First, attempts can be made to prove unacceptable risk, though this would be extremely difficult in the area of speech. The other option is to pay compensation to the individual not to speak, over which the individual has complete discretion as to the value. These two options make takings of speech a virtual impossibility without meeting the price demanded by the individual. The liberal model uses this as justification that speech should rarely be limited, for the freedom of ideas itself is a true form of public good.

The freedom of speech, however, is also subject to the principle of strict liability. Libel and slander laws are examples of speech which must have liability attached. Slander is the issuance of false accusations leveled against an individual with the sole purpose of damaging character. Just as an individual cannot be forced to bear the cost of goods from which he receives no benefit, an individual cannot be forced to accept negative impacts upon his character for actions he did not commit. Negatively impacting the character of an individual with statements of truth, however, is not slander. For example, suppose someone was formerly a member of a white supremacist hate group, but has since given up membership. This individual now seeks to run for local public office in his hometown. The individual accepts the risk of this activity being a future liability when he joins the group, making future statements about his involvement protected under free speech. If the stories of the membership are completely fabricated, however, then the speech is not protected. The fabricated story is intended to destroy the character of the individual, and liability cannot be levied against anyone not incurring it.

The true issue involved in the discussion of libel and slander liability is harm. Speech brings forth a very difficult dilemma in the liberal model, for the actual existence of harm is very difficult to distinguish when factors such as slander and reputation are involved. Classifying slander as a harmful attack against a person creates a slippery slope in which all future speech may be endangered. One solution to this problem is to leave speech completely uninhibited, accepting that words cannot cause actual harm. I have taken a position that reputation is personally owned, but positions claiming that reputations are not privately held might be viewed as equally valid. The importance of freedom of speech and the protection against imposed harm can become so blurred that a balance is impossible to attain. An inappropriate balance can lead to a loss of free speech altogether, thereby destroying the liberal model. The actual harm of speech is an issue which must be carefully examined in each individual situation.

Conscription, which deals with the ownership one has over his own body, is another issue entirely. The argument made in defense of conscription is that the draft is instituted to protect the society, which is a universal public good. The problem, however, is that the benefit is entirely unequal. Those not drafted do not pay the same cost for the equal benefit, for the risk is much greater for the soldier. This creates free - riding by society on the forced draftees. I would further argue that the draft imposes unacceptable risk on the draftees, and therefore giving them the right of nullification against the claims of society. The only available option, then, is for society to pay acceptable compensation (in present and/or future benefits) to a volunteer army. The individuals enlisting will determine if the pay is worth the risk, thereby increasing the proportionality of cost.

Conclusion

Examination of the public goods question invariably leads into a variety of attached issues. Problems such as externalities, risk, takings, and regulation are all entangled to some degree within the public goods debate. I have suggested that the liberal model is effective in balancing the needs of the public and supporting individual rights, using many approaches such as strict liability, unacceptable risk, and the assurance contract to accomplish these ends. While the public goods debate is often viewed as a strictly economic issue, I feel the principles involved in this debate are just as relevant to the area of civil liberties. While public goods and individual liberty may often be viewed as incompatible creatures, I have hopefully demonstrated this to be a false conclusion, reviving and/or generating many strategies within the liberal model which have been often overlooked by contemporary liberalism.


Endnotes

1. David Schmidtz, in his book The Limits of Government: An Essay on the Public Goods Argument fully explains the commons dilemma and relates the need for private property to the Lockeian Proviso. This argument relates to original appropriation of property rights, which will give further understanding to their justification than I have included in this paper. See page 20 - 27.

2. David Schmidtz, as footnote 1, beginning on page 109, explains the empirical testing of the assurance contract. These contracts were tested for their feasibility, with results of these tests found on these pages.

Works Cited

1.) Buchanan, James. The Limits of Liberty; Between Anarchy and Leviathan. (1975). University of Chicago. Chicago, IL.

2.) Buchanan, James. Property as a Guarantor of Liberty. (1993). Edward Elgar Publishing Co. Brookfield, UT.

3.) Buchanan, James; Tullock, Gordon. The Calculus of Consent. (1965). University of Michigan. Ann Arbor, MI.

4.) De Jasay, Anthony. Social Contract Free Ride. (1989). Oxford University Press. New York, NY.

5.) Epstein, Richard. Bargaining With the State. (1993). Princeton Press. Princeton, NJ.

6.) Epstein, Richard. Takings; Private Property and the Power of Eminent Domain. (1985). Harvard University Press. Cambridge, MA.

7.) Mitchell, William; Simmons, Randy. Beyond Politics; Markets, Welfare, and the Failure of Bureaucracy. (1994). Westview Press. Boulder, CO.

8.) Nozick, Robert. Anarchy, State, and Utopia. (1974). Basic Book. New York, NY.

9.) Olson, Mancur. The Logic of Collective Action. (1965). Harvard University. Cambridge, MA.

10.) Schmidtz, David. The Limits of Government; An Essay on the Public Goods Theory. (1991). Westview Press. Boulder, CO.



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