The issue of eminent domain is at the heart of debates about the limits of government control over private property. At one extreme are private property rights advocates who believe that the role of the government should be limited to protecting property rights and enforcing contracts for the exchange of property. On the other are those who would grant the government expansive powers to regulate or take property in the public interest, which they broadly define to include the provision of essential public goods, protection of the environment, and the fostering of economic development. The case law and scholarly literature seeking to reconcile these competing views within the context of constitutionally imposed guidelines are voluminous. The purpose of this book has been to survey and synthesize the contributions economic theory has made to this important area of law. This chapter summarizes the conclusions of that effort in the form of lessons economics can teach us about the scope and practice of eminent domain.

Lesson 1: The proper economic justification for eminent domain is to overcome the holdout problem. When viewed from an economic perspective, eminent domain is a forced sale of property from the current owner to another owner, either the government or another private party, in an effort to achieve some public objective. The question is, why does the sale have to be forced?