Coase and Kelo: Ominous Parallels and Lott on Rothbard on Coase

Abstract

In its Kelo decision, the Supreme Court upheld Connecticut’s decision to use its eminent domain powers to take property from one set of private owners and give it to another set of private owners. The state defended this plan on the grounds that the former group of owners was using their property in a less efficient manner than would the latter. There are ominous parallels between this decision, which amounts to no more than thinly veiled theft, and the works of Ronald Coase and the “Law and Economics” movement spawned by his 1960 publication. To wit, this philosophy can be used to buttress Kelo. Indeed, we need look no further than this literature for a spirited albeit entirely wrong-headed notion that courts are justified in ruling, in property rights disputes, not in favor of the historical owners, but rather on the side of those they think can make the “best use” of the property; for example, so as to maximize economic welfare, or economic efficiency, or the gross domestic product (GDP), or as in Kelo, all of them plus the tax base. This topic is addressed in part I of the present chapter.