An Economic Analysis of Takings

Abstract:     
This paper identifies econmically efficient rules to govern compensation when the state takes private property. Despite a variety of informational and behavioral assumptions, a basic principle emerges: a fully efficient rule entails compensation based on the gains society enjoys from the taking (either its actual gains or its expected gains). Moreover, in many takings situations this principle can be implemented in more than one way, providing society some flexibility with which to achieve its other goals without sacrificing econmic efficiency.

JEL Classification: K00

Accepted Paper Series