It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Tuesday, December 9, 2008

The Taking

There's an interesting exchange at an interesting article in Environmental Economics. The article advocates cap-and-trade along with market creativity. (Pessimists argue that the market isn't all that creative, and that the wealth of the past century has been more about expending seed capital than about actual expansion in human per capita wealth. I don't entirely buy it, though there's certainly a case that it has been that way of late; see Fig 4 here.)

Anyway. There's an above-average exchange on the old "takings" question in the comments on the E-E article between "LVTFan" and "Hydra". The former suggests that land values in previously unpalatable places are the result of public investment, and the public rather than private investors should be capturing the increase in value. The latter argues that doing so retroactively is unfair, raising the old property rights problem.

I personally have been the "victim" of a government "taking" just recently. When I bought my house, I inquired about its flood status, and it was not in a flood plain. Due to recent FEMA reanalysis, I have been demoted to the 100-year floodplain, even though the property across the street, barely a foot higher it seems to me, is still outside the 500 year flood plain. I am obligated to buy flood insurance, and report this when I sell my home; two very substantial financial hits. I don't know whether the old or the new FEMA evaluation is the sound one; it's a strange gully behind the house, emerging from a highway interchange with no visible source upstream.

Now, I think the coal companies should not be allowed to sell their product without sequestration, and it's up to them to make that work. I think houses discovered to be in a flood plain should be required to be insured, too. However, changes like that are very disruptive. I am taking enough financial hits about now along with everybody else to have to put up with this totally random hit.

There is no question that policies need adjustment, and there is no question that such adjustment inconveniences people in what feels to be a random and capricious way. Being a liberal, I am willing to take this relatively in stride (though if anyone can tell me how to check FEMA's actual results I'd be grateful) but I can see how something like this would cause some people who run on tighter margins to become absolutely beside themselves. Changes like this should be softened by the public sector, but nowadays we seem to be too busy nationalizing the financial and automotive sectors to compensate individuals inconvenienced by factors beyond their individual control.

Unsurprisingly people are less opposed to capricious bailouts than to capricious liabilities. (Even though you could argue that public ownership of General Motors pretty much amounts to a capricious tax on all other industries.) On the whole, though, it would be best if there were some sort of meta-policy so people would understand how much invisible risk they actually carry.

On the other hand, the "takings" philosophy is nuts. The commons is held in common. Without air or water your property is worthless. Real estate confers some complex set of socially determined rights; your home may be your castle but it isn't a separate planet.


Rich Puchalsky said...

On cap-and-trade: it's better than nothing, but mostly I think it's a relic of now-discredited market fundamentalism. Markets are very bad at causing overall changes in infrastructure, and governments are very good at it. Look at what happened when gas prices in the U.S. went up -- people drove somewhat fewer miles, but infrastructure didn't change at all.

On the other hand, look at what happened with the existing U.S. cap-and-trade program for acid rain precursors. As of the latest year of data, there are 40% more permits for pollution then there is actual pollution. What happened? Well, the Clean Air Act mandated scrubbers, so people put on scrubbers, and now they are overall far under the cap. So the program is really doing nothing, except giving a free ride to the top polluters who are left. The European program seems to have a similar history.

And there's nothing easier than to relax the cap if it actually starts to bind and industry complains. Politicians now can't completely commit politicians in the future through laws or regulations, which can after all be changed -- but they can build things that effectively do so.

Dano said...


fix your first link - something extra in there I can't figger out.


I realize you put taking in quotes, but legally there was no taking.

Takings dicta are strict and you did not lose all economically viable opportunities on your land (the presumed decline in value of your land is not a result of 'excessive' regulation, as USACE has done this across the country and suits have upheld their actions).



Michael Tobis said...

D, link is fixed. Thanks.

Hank Roberts said...

First link is munged, should be:

Michael Tobis said...

If at first you don't succeed...

I checked it this time. If the link breaks again I will start getting paranoid.

Eric Hacker said...

The flooding issue you raise is a particularly thorny one. My house went in the other direction from a flood zone to a non-flood zone when the city upgraded the storm drain system. They went from 8 and 12 inch pipes to 24 to 60 inch pipes and put a huge pump at the end in case of high storm tides which are common here on the New England coast. Not that long afterward we had a storm that caused flooding in many parts of our and neighboring cities which were not flood zones, but we were spared, so obviously they got that right.

The problem is that the reason for the flooding elsewhere was over development with inadequate storm water run-off planning. To then declare those areas as flood zones is reasonable, but not without compensating for the loss. The flood problem was caused by the government's inability to protect some people from the actions of others. That they failed to do this, especially as such planning has been practiced for decades, means they should bear the burden.