Taking Law from an Economic Perspective with Reference to German Law

Abstract

This paper on taking and eminent domain has a focus on compensation for taking and on substantive law and gives examples from German constitutional and subconstitutional law. A public taking of private property requires being in the public interest. It is shown, why a full damage award for taking from the state cannot guarantee this. It is shown that full damage compensation for the affected is neither a necessary nor sufficient condition for guaranteeing that taking decisions are in the public interest or even lead to a higher valued use of resources. Tight legal norms and judicial controls are necessary to achieve the policy goals behind eminent domain power.

Unlike in civil liability full damage compensation for expropriation following the differential method might lead to unintended consequences. If compensation is very generous and if still many taking decisions are not in the public interest and therefore unconstitutional this incentivizes citizens not to fight for their rights and for restitution of the condemned land. A "suffer injustice and cash in" attitude might prevail among the affected. It is also shown that this rationale does not apply in states in which public "land grabbing" in the private interest is endemic and the legal system is too weak to check this. This might lead to underinvestment, which governments in such countries can avoid by generous compensation as a second best alternative.

JEL Classification: K00