The Perverse Incentives of Eminent Domain

Over at the Show-Me Institute’s blog, my former colleague Dave Stokes notices a great example of the kind of damage eminent domain has done to our economy:

Kevin Minden studied a map of the future Mississippi River bridge, looking for clues as to how it might affect his engine rebuilding shop.

One of the connector ramps will run a few blocks from his building, which has him concerned that the bridge might lead to a development boom. Minden fears losing his land to a developer.

“Everything in that area is old,” Minden said. “What are they wanting people to see when they drive across?”

Of course in a rational world, business owners would welcome a development boom because it would mean more business and higher property values. But under the eminent domain laws currently in force in Missouri, re-development is a threat to existing business owners, especially smaller ones, who are likely to be pushed out of the way to make room for new shopping malls, big-box retail stores, and the like. It’s a serious problem. I documented Missouri’s flawed eminent domain laws in a study for the Show-Me Institute last year, but the problem certainly isn’t limited to the Show-Me state. In last year’s eminent domain report card from the Institute for Justice, only five states had done the kind of comprehensive reform necessary to earn an “A” grade, while almost half of states—Missouri included—received a “D” or “F” grade, suggesting that they have done little or nothing to strengthen property rights. Further reforms are needed to ensure that property owners in all 50 states can be secure in the knowledge that they won’t be shoved aside for the benefit of another private party.