Can't Touch this! Private Property, Takings, and the Merit Goods Argument

Abstract

Over the past decades, economic theory has gained increasing influence in legal thinking, political theory, and public policy. This article argues that the popular characterization of economics as value-neutral obscures the fact that there are fundamental value judgments in any framework influenced by economics. Acknowledging this fact will shift the terms of the debate: instead of a neutral policy and one that imposes values, we see that both policies in fact entail values imposition to some extent. The public discourse is thus rendered more intellectually honest.

The article progresses in three parts. First, I describe the concept of merit goods. This concept, introduced fifty years ago, has met with resistance from traditional economists because it justifies interference with individuals' preferences and imposing values, something economics ostensibly rejects. Second, I show that the merit goods concept nonetheless can be used to clarify U.S. Supreme Court cases regarding regulatory takings, indicating that values imposition is not just a theoretical matter. Finally, I survey the writings of Hayek, Nozick, Buchanan, and Posner to show that even those authors who claim to be true to the principles of economics nonetheless have elements in their theory that involve imposition of certain values - that is, involve merit goods.

Merit goods, then, enrich those scholars' theories, properly describe constitutional reality, and add a needed dimension to economics.

Keywords: Regulatory Takings, Constitutional Law, Merit Goods, Law and Economics

JEL Classification: A00, H4, K19