This blog post by Timothy Terrell originally appeared on November 24, 2009 on the now-discontinued Market Process Blog, published by the Initiative for Public Choice and Market Process at the College of Charleston.
A New York court has decided that the state may seize privately owned land in Brooklyn under the eminent domain power for the purpose of building a development to include apartments, office buildings, and an arena for the New Jersey Nets. “The New York justices, writing in Daniel Goldstein v. New York State Urban Development Corp., ruled that it was lawful under the state’s constitution for the state entity to seize the downtown Brooklyn land to improve blighted conditions,” writes the Wall Street Journal today.
The court may be right about what the state constitution allows. However, an expanded definition of “blight” should be a matter of concern even to those who might approve of the idea of eminent domain. Any low-income neighborhood could be subject to seizure. Indeed, concern over an expansive interpretation of the eminent domain power prompted many states to amend their constitutions after the infamous Kelo decision took private residences for a Pfizer development project in 2005. Yet the eminent domain power remains a dangerous source of uncertainty over property rights. As the role of government expands, the range of projects that might be deemed a “public purpose” could extend further.
From an economist’s perspective, if the value of the land as a development is truly greater than its opportunity cost (in its current use, at least), the developers would be able to compensate the current owners. This is not the only 22-acre tract in the New York City area suitable for an arena, and therefore a holdout problem seems unlikely here, even if holdout problems alone were enough to justify eminent domain.