What's wrong with what Eduardo Penalver thinks is wrong with property rights initiatives

Geoffrey Manne —  7 July 2006

Over at Co-op, guest blogger Eduardo Penalver posts this screed against property rights initiatives like Oregon’s Measure 37 (about which I blogged here) and Washington’s proposed Initiative I-933.  To my mind he gets it pretty much completely wrong, so I thought I should weigh in.

First, he claims that “by most accounts” Oregon’s Measure 37 has been “a disaster for Oregon land use planning.”  True enough, if by “land use planning” you mean “that which the planners want to do without any regard for such trivialities as economic effect, distribution of costs or even social welfare.”  It’s like saying “the Constitution is a disaster for executive power.”  Well, I guess.  But there are, you know, other concerns out there than unfettered land use planning or executive power!

In defense of the claim, Penalver notes only that

To date, over 1000 claims have been filed, seeking over $3 billion in damages. Of claims resolved as of October 2005, 90% have resulted in waivers of regulation. Only 10% have been denied. No compensation has been paid.

But in what way does the fact that waivers were given instead of damages amount to disaster? I would think that any such claim would require some consideration of the costs of the regulations at issue, their benefits to society, and the appropriateness of waivers versus compensation in particular instances. In one important respect, the granting of waivers instead of compensation demonstrates the success of the law — success in highlighting that the social cost of land use planning regulations may exceed the benefit, a fact conveniently masked when only a tiny fraction of society actually pays the costs.

More below the fold.

Next Penalver asserts that

[Such laws] are based on the wrongheaded and frankly antisocial premise that we should not be expected to bear any burden in our use and enjoyment of property, no matter how trivial.

I guess this might be true if people didn’t pay taxes (including property taxes, which would tend to increase with any increases in property value attributable to the non-application of the land use planner’s Utopian vision).  But they do, generally, pay taxes.  Why bearing the burden of our use and enjoyment of property also should entail the application of disparate, politically-motivated and/or socially-costly use restrictions is not clear to me.

Next comes the stock response of the anti-property-rights folks:

Second, these laws are plainly unbalanced in their approach to the consequences of state action, since they do not require property owners to compensate the state for actions by the state that enhance their property values (UPDATE: in a way not shared with other taxpaying property owners).

The update helps make the claim a little more factually accurate, but would also seem to undermine it.  Again — people do pay taxes, and people with real property pay more taxes than those without and people with more-valuable real property pay more taxes than those with less-valuable property.  It is true that we don’t have a pay-as-you-go system for many government services.  Personally, I think we should (congestion pricing would be a good start; private toll roads might be even better; and, in fact, gas taxes are a colorable approximation).  But I think it is a ridiculous fallacy to assert that land owners are net beneficiaries of government services, who benefit disproportionately from the state action they pay for via taxes.  The whole point of the system is to facilitate the creation of socially-valuable but privately-costly services.  The government redistributes a vast quantity of wealth (not perfectly, but generally, from owners of high-value land to owners of low-value land and non-land-owners) as a result.  Penalver’s red herring would lead to many fewer services and less-widespread benefit, not more.  And to the extent that landowners do benefit from pork and similar targeted spending, I’m in complete agreement:  ditch the pork!  But two wrongs don’t make a right. 

Penalver’s third and fourth points (that these laws are often the product of interest group politics, and they exempt certain types of regulation from their ambit) are true, but irrelevant.  Seriously — what law isn’t the product of interest group politics?  The fact that such laws must be passed in the real world — in a world dominated by crass interest group politics – means the sausage making won’t be pretty and the laws will be imperfect, to say the least.  It’s hardly a substantial basis for condemnation that these laws exempt certain politically-favored forms of regulation or that they are backed by — horrors! — pro-property-rights groups.

Geoffrey Manne

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4 responses to What's wrong with what Eduardo Penalver thinks is wrong with property rights initiatives

  1. 

    Interesting post. I probably deserved the can of whoop-ass for my underdeveloped argument. Unfortunately, trackback does not seem to be working at CoOp, so I didn’t see it until Ben Barros pointed it out to me. I’ve got a response up now, though. Cheers.

  2. 

    Not that I know much about the economics of land use planning, but I would be willing to wager a lot of money that such governmental actions disproportionally harm the middle and lower classes. After all, anything that raises the cost of property and land ownership will be a harder burden on the poor than on the rich.

    Excellent point about the role of interest groups in politics. Does Mr. Penalver bemoan the existence of environmental regulation, not one of which would exist without the involvement of environmental interest groups?

  3. 

    Thanks for taking the time to respond to his post. My jaw dropped when I read it, I couldn’t find a coherent opposition to the law in the entire piece.

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