Takings, Insurance, and Michelman: Comments on Economic Interpretations of "Just Compensation" Law

Abstract

UNDER the takings clause of the Constitution, the state is required to pay just compensation whenever it takes private property for public use. Yet the explicit command of the Fifth Amendment does not foreclose asking whether, on balance, this rule is a good thing. If pressed on the question, most economists and lawyers would, we believe, conclude that the government should pay for the property that it takes. The argument, especially that of economists, might be that forcing the government to pay for the resources it gets promotes efficiency.' In a world lacking any compensation requirement, the obvious fear is that private investors will be inhibited by the thought that government will snatch away or unthinkingly destroy the fruits of their venture. The fears of what will happen at the end of the process work themselves into the calculation of property owners at the beginning of that process, so that too little capital will be invested in productive enterprises. The compensation requirement thus serves the dual purpose of offering a substantial measure of protection to private entitlements, while disciplining the power of the state, which