January 13, 2005

Die Eminent Domain, Die

David Sucher notes that:

Eminent domain came about precisely because the market could not solve the endless bargaining problem. Eminent domain was not part of some original condition given to us by God and from which we have to escape. It was adopted by human beings to solve a problem. You may not like eminent domain and indeed it has been and is abused and needs reform, at least in the USA. But let's start our discussion with reference to reality, not fantasy. Eminent domain is itself a solution to market imperfections. Eminent domain came into use precisely because the market could not solve the bargaining problem and so it conjured up a deus ex machina to intervene.

This is fine, as far as it goes but the analysis suffers from a common problem, treating a variable as a constant. The market could not solve the problem of the dual coincidence that was necessary for trade for quite a long time. Then, somebody invented money and we no longer had to have a dual coincidence. Situations of trade without money were renamed barter and we moved on, I believe somewhere around the bronze age.

Eminent Domain may solve the "endless bargaining problem" but what, in fact, is the endless bargaining problem? Google is no help (no results) and I'm not particularly familiar with any economic literature that describes it as such. Eminent domain is the application of the violence of the state to the problem of people not willing to part with their property at a price that the buyer is willing to agree to.

In fact, I think that the history of eminent domain is an attempt to pretty up a practice that is as old as government, simple property expropriation. The state, having the necessary arms, took what it wanted and paid nothing in compensation. Who would complain, or at least survive to complain twice when government was not usually based on the consent of the governed but on might makes right?

So if we've got something of an appendix of old time state coercion here, it seems like a great opportunity for the market to step in and provide a superior alternative. It's a pity that politically bankrupt ideas survive so much longer than economically bankrupt ones.

Posted by TMLutas at January 13, 2005 06:16 PM