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June 30, 2005

Kelo: Strategic Holdouts vs Subjective Value

All I need to know about the recent Kelo decision starts here:

This "holdout" power potentially becomes a problem in a case such as Kelo, where the buyer needs to assemble several pieces of land to build a building. Any individual may decide to hold out to try to extract a larger share of the surplus associated with the higher economic value from the transaction.

The problem is that in theory, in any given situation when someone refuses to sell we can't tell whether it is because of strategic holdout or subjective value. If we knew this, then we could get rid of market transactions in general, and move to a system of central planning where the planning czar just assigned various goods to their highest valued user. But that obviously won't work. But there are better, and worse, ways of dealing with this problem. The overall facts of Kelo illustrate one of the worse ways of dealing with it, and why we need to have a real "public use" doctrine that doesn't permit taking from A to give to B.

There's got to be a t-shirt.

Posted by mbowen at June 30, 2005 03:17 PM

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Posted by: Lisa at July 9, 2005 06:19 PM