Regulatory Takings: Law, Economics and Politics.

• Author: Tullock, Gordon

The ideal form of government is one where any change is carefully evaluated with all of the gains and losses assessed. If the gains are greater than the losses the action is undertaken and the gainers are taxed to fully compensate the losers. If the gains are less than the losses, the action is not undertaken.

The only objection to this form of government is we have no way of assessing costs and benefits with any way near the necessary accuracy. For example, how much have I been injured by repair of work which closes a street that I only occasionally use, and how much will I benefit from the eventual improvement in the street. No one has the slightest idea what the answer to these problems are.

The second complication is that the king of England from whom our law largely descends was an impecunious person and could not afford to pay for everything he used. The need to economize on compensation has continued. My services were taken by the government from 1943-1945 for totally inadequate compensation.

All of this has roughly settled down to a rule that when the government physically takes something other than services, i.e., seizes your house, they compensate you, but changes sharply changing the value of your house are normally not paid for. Further, the government does not tax you if they do something which greatly improves the value of your property.

The present state of law in this area is in a state of confusion. Fischel's book deals with "takings," i.e., the question of whether the government has to pay compensation when a change reduces the value of somebody's property. The prospect of government being compensated when it increases somebody's value is generally left out of our law, and out of Fischel's. There are special...