October 18, 2006
Compensation for adversely affected property owners ... in the private and public sectors ...
Why do homeowners assert NIMBY? In many cases, it’s because a nearby land use plan may decrease the values of their properties or lower the quality of their lives. In economic terms, one person’s land use has an external effect upon another person’s property. If the effect is too much, the offending land use might be enjoined as a legal nuisance. Likewise, if government “goes too far” in regulating one person’s land in order to protect neighbors or other values, the regulation might be considered a “taking.” A solution to these external effects is to compensate adversely affected landowners for decreases in property values. Here’s a twist to this idea in the private sector: A Los Angeles developer is offering to give nearby residents an equity interest in other developments, in return for their not opposing the condominium. This solution would avoid the need for up-front “buy outs” of local opposition.
Governments probably can’t take similar steps because most government land use efforts –- such as permitting a locally unwanted water filtration plant, or a public housing project, or regulating land for environmental reasons –- don’t provide monetary profits to the government. Such projects DO, of course, provide a public service. Accordingly, some property rights advocates argue that adversely affected property owners should be compensated, with the money coming from those (the taxpayers) who presumably benefit from the public service. A tax-and-compensation scheme has the same effect as the private equity-sharing system. Governments typically resist such ideas, of course, because the citizenry rarely accepts arguments of, “We’re raising your taxes for good projects.” The public usually prefers to be told that politicians can both provide services and cut taxes at the same time –- perhaps through magic. In my state of Florida, most of the politicians are filling the airwaves this election season with variants of, “I’ll protect your home from hurricanes, I’ll subsidize your homeowner’s flood insurance, and at the same time I’ll cut your taxes.”
October 17, 2006
The Wal-Mart wars, continued … today, the Nobel Prize …
I’ve written many times that land use law is not an effective way to deal with perceived problems outside of land use, such as complaints about the labor practices of Wal-Mart. But some go further and contend that Wal-Mart is a force for good in the world. John Tierney, the quirkily conservative columnist for the New York Times, suggested today that no organization has done more to pull people out of poverty than Wal-Mart, largely through providing decent factory wages in poor countries to people who otherwise would be living in abject rural poverty, and through low-cost goods in the developed world. He suggests that the Nobel Peace Prize this year should have gone to Wal-Mart, instead of Bangladesh’s Grameen Bank, which provides micro-credit to help poor farmers. Perhaps it’s my affluent American bias, but I can’t fully swallow the argument that it’s always better to take a factory job than to stay on a poor third-world farm.
October 16, 2006
The "Rationale Razor" ... and the example of farm subsidies ...
The Washington Post has continued its remarkable series on the faults of the federal farm subsidy program. Although the system was touted as helping farmers in times of distress, it practice it provides windfalls to many farmers and large profits to a handful of competition-protected insurance companies. Among the land use implications is the fact that the program encourages farming in areas that are risky and susceptible to floods, droughts, and other hazards, including many stretches of the intensely farmed Great Plains. The taxpayer is the loser.
The distortion is an example of what I’ll call law’s “Rationale Razor”: If a policy CAN be explained by protectionism of a favored group, protectionism likely IS the lawmakers’ motivation for adoption of the policy. The “Rationale Razor” is a variant, of course, of Occam’s razor, which suggests using the simplest explanation to solving any problem. It also relates to the Public Choice theory of politics, which suggests that lawmakers are driven my personal benefit (including political gain), just like other economic actors. While I do not deny that the “public welfare” motivates some policies, the “Rationale Razor” suggest that protectionism should be the presumption.