ECONOMY

352 the protection of liberty, property, and equality
the court has deferred to the ostensible expertise and impartiality of the legislature by
holding that any “conceivable” public purpose satisfies the “public use” requirement
of the takings clause (Hawaiian Housing Auth. v. Midkiff, 1984). Thus property could
be transferred from one party to another to break up a local monopoly or on tenuous
findings of blight control. The thunderbolt in this area, however, was Kelo v. City
of New London (2005) where a five-to-four majority of the Supreme Court upheld
condemnation of private homes for economic development, which in turn provoked
a firestorm of public protest and federal and state efforts to curb that limitless holding.
The insecurity of property rights has increased political intrigue, and the use of
restricted formulas for compensation has resulted in inefficient takings that have
moved property from higher to lower valued uses. On these matters, some state
courts, angered by high-handed local tactics, have taken a more restrictive view of
public use under the analogous provisions of their own constitutions.
Once the public use hurdle is overcome, compensation is owed when the state
occupies all or part of a parcel of property. The theoretical ideal suggests that the
compensation offered should leave the property owner indifferent between his former
holdings and the state compensation package. The legal rules advance that goal in part
by concentrating on the value of the property lost, and not that which is retained.
In addition, most courts properly make adjustments for any gains or losses in the
value of retained lands as a function of the taking, so that increased value from access
to a highway will reduce compensation, while any impediment to retained land will
increase it. But in calculating compensation, the legal rules that focus on the fair
market value of the “property taken” will in practice fall far below this standard. The
rules do not allow for any compensation of the owner’s subjective value because of
distinctive uses or attachments to property. That restriction is defensible perhaps on
the ground that subjective value is hard to measure. But even so, a small fixed bonus
of, say, 5 or 10 per cent is administrable, and offers a serviceable proxy for these hard
to measure elements of value. Less defensible than the subjective value rule are the
exclusions of any costs of defending against the taking, doing appraisals, moving,
and destroying good will. The upshot, however, is that the lax standards on public
use and just compensation lead to too much taking activity. It has been sometimes
suggested that individuals who are unhappy with these rules could purchase “takings
insurance,” but the risk that the state would selectively condemn such insured lands
makes it highly unlikely that any insurer would offer it, knowing that local political
processes could target insured lands for government occupation or regulation.
The second half of the takings issue involves regulatory takings, where the key
question is whether any compensation is owed at all for “mere” use restrictions. Here,
as noted, the lower standard of review means that many cases of value lost through
regulation are treated as non-compensable. In Pennsylvania Coal Co. v. Mahon (1923),
Justice Holmes famously held that a government was required to pay compensation
when it required a mine owner to conduct his operations so as not to remove the
support for the land and structures of the surface owner. The obvious defense of
Mahon’s result was that the miner had purchased the so-called support estate from
the surface owner, to whom he had to return it without compensation. But instead of