Policy Documents

Robin Hood in Reverse: The Case Against Economic Development Takings

Ilya Somin –
February 22, 2005

In this Policy Analysis, the author notes for CATO that the Fifth Amendment and most state constitutions prohibit government from condemning private property except for a “public use.” Traditionally, that has forbidden most condemnations that transfer property from one private owner to another.

In recent years, however, many state courts have read “public use” more broadly to allow government to transfer property from one private owner to another simply because the latter is expected to make a greater contribution to the local economy. The most notorious of these decisions was the 1981 Poletown decision, in which the Michigan Supreme Court allowed the City of Detroit to uproot some 4,200 people in order to make way for a General Motors plant.

But last summer the Michigan Supreme Court overturned Poletown, just after the Connecticut Supreme Court had relied on that precedent to uphold economic development takings in the case of Kelo v. City of New London. Shortly thereafter, the U.S. Supreme Court agreed to hear the appeal of the property owners. If the Court decides in favor of the homeowners, the resulting decision will constrain economic development condemnations nationwide.

Federal and state courts should ban economic development takings. Such takings are usually the product of collusion between large and powerful interests and government officials against comparatively powerless local residents. They generally produce far more costs than benefits, as thePoletown case dramatically demonstrates. Finally, the economic development rationale renders nearly all property rights insecure because it can justify virtually any taking that benefits a private business interest.