All Commentary
Thursday, May 1, 1986

Book Review: Takings: Private Property and the Power of Eminent Domain by Richard A. Epstein

Harvard University Press, Cambridge, Massachusetts and London, England • 362 pages, $25.00 cloth

Eminent domain is generally regarded as a power of government, not as a limitation on government. But this brilliant new book has the intriguing thesis that the eminent domain or (“takings”) clause of the United States Constitution, properly understood, provides clear limits to government power, protects private property, and forbids any legislation that has the effect of redistributing wealth.

In English common law, according to Blackstone’s Commentaries (1765), every Englishman had an “absolute right . . . of property, which consists in the free use, enjoyment, and disposal of all his acquisitions.” Richard Epstein, an eminent law professor whose main interest is the common law, proposes that this legal definition, when incorporated into the eminent domain clause (“nor shall private property be taken for public use, without just compensation”), forms the vital link between the individual’s bundle of rights and a government that is limited by those rights.

Although he is himself a Lockean, Professor Epstein disputes John Locke’s concept that by living in a civil society men give “tacit consent” to its laws and are therefore contractually obligated to obey them. This concept has been the thin edge of the wedge of escalating government power. “In its place belongs an explicit and rigorous theory of forced exchanges between the sovereign and the individual that can account both for the monopoly of force and for the preservation of liberty and property. The bulwark of the individual is no longer the ab solute protection of his property. Now it is that whenever any portion of it is taken from him, he must receive from the state (that is, from the persons who take it) some equivalent or greater benefit as part of the same transaction. The categorical command that property shall not be taken without tacit consent must therefore be rewritten to provide that property may be taken upon provision of just compensation.”

And so it was, in the eminent domain clause that was put in the Bill of Rights and also appears in some ver sion in all state constitutions. It is this clause that, because it presupposes the Lockean theory of the relationship of the individual to government, brings that theory into the Constitution.

In evaluating any government action, then, there are four questions that must be asked: 1. Is there a taking? 2. Is there justification? 3. Is it for public use? and 4. Is there compensation? These questions appear at the end of Part I, and are explored throughout the rest of the book.

Part II lays out the argument that if any of the common law conditions for private taking are present, then the plaintiff is entitled to some recovery, and the partial nature of the taking only effects the amount and nature of the compensation, and not whether compensation is due. in constitutional law, this would mean that partial takings are takings, that destruction of property is a taking, that interfering with the “use and enjoyment” of property is a taking (one case allowed compensation because smoke driven out of a tunnel by an exhaust fan went across the plaintiff’s property), and that consequential damages (like the loss of goodwill when a business is forced to move) are also takings. In other words, since under both common and civil law ownership is a set of rights—“p0ssession, use, and disposition”—infringement on any of these rights diminishes property value and is a taking. Further, the analysis of takings has equal force whether when the taking is from many people at once, or from a single owner at a time. “The modern effort to distance the taking clause from general laws cannot be maintained. All regulations, all taxes, and all modifications of liability rules are takings of private property prima facie compensable by the state.” (Emphasis in original.)

Having established the range of takings, what justifications make takings legitimate actions of government? Essentially there are three categories: the police power, consent, and compensation. The police power allows the state to take without compensation in response to a private taking. (The present day Supreme Court, says Epstein, impermissibly confuses the police power, which can act only to right a wrong, with public use, which allows actions to confer a public benefit upon payment of compensation.) The category of consent is a narrow one; an instance would be the ending by government of grazing rights on federal lands, when it was clearly understood that the government had the right to terminate at any time: no compensation is due for the termination.

Once it has been established that partial takings from the many are still takings for which compensation must be paid, the question of compensation becomes much more complex than is currently viewed. Much explicit compensation can be found to be inadequate or defective. Large-number takings are usually in the form of regulations, taxation, and modification of liability rules. These are not explicitly compensated for because it is assumed that the affected parties are both “benefited and burdened” by the same rule, and that therefore the affected parties receive implicit in-kind compensation.

An example of such a rule would be bankruptcy laws that assure that all creditors get something because any single creditor is barred from seizing the debtor’s assets. Such a rule can pass the three tests that Epstein applies in order to detect a mismatch of benefits and burdens—the economic theory of property rights, the lack of partisan motive, and the lack of disproportionate impact. Much legislation and regulation that now passes judicial scrutiny, Epstein argues, would not pass if subjected to these tests. He applies the tests to show that most contemporary economic legislation-price controls, minimum wage laws, windfall profit taxes, state severance taxes, estate and gift taxation, even the progressive income tax—are unconstitutional.

Sweeping as this conclusion is, Epstein goes further. He finds that the entire concept of transfer payments underlying welfare checks, social security legislation, unemployment benefits, food stamps, farm subsidies, in deed, most of our contemporary budget, is unconstitutional by this analysis. But being a real-world thinker, he then questions whether it is possible to undo such programs now that people have been led to rely on them, and ends by proposing a practical sequence of reforms that would start to reverse the damage. Overhaul the tax system, invalidate the minimum wage, strike down the National Labor Relations Board (NLRB), lift price controls on oil and gas, revise and rollback much zoning. As a result, “Production will rise; taxes will in general fall; the tradeoff between welfare and productive labor will shift in a favorable direction so that even if benefit levels remain the same, fewer people will demand them. That result in turn will reduce the taxes needed to fund them, which implies greater levels of productivity.” He warns that we do not yet have the will as a people to make these reforms, because the intellectual climate is so hostile to them. But a proper legal theory, if widely accepted, will lead to changes in the proper direction.

It would be hard to overestimate the importance of this book. Not the least of that importance is the stature of the man who has written it. Richard Epstein is a professor at the University of Chicago Law School who has al ready been offered a federal judgeship and has even been mentioned by legal reporters as a possible Reagan nomi-nee to the Supreme Court. The power of his interpretation lies in the fact that, although no one before him mounted his specific argument about the eminent domain linkage between private property and public law, “It]he received judicial wisdom about the linkage recognizes all the important parts of the picture.” In other words, he has taken theories that the legal community accepts separately but combines in other ways, and shown how much better his theory fits them together. It’s as if he found the pieces of a complicated jigsaw puzzle that no one else had completed, and was able to put them together into a coherent whole. The instant recogniz-ability of the picture that emerges, together with the identification of the pieces that everyone has been playing with, offers a strong presumption that Epstein has indeed found the solution to the puzzle. []

(Joan Kennedy Taylor is the editor of FEE’s latest anthology, Free Trade: The Necessary Foundation for World Peace.)