prior probability

KBO stands for the Korean Baseball Organization. ESPN2 is televising live ball games from the Korean peninsula, and I’m loving it!

By public theft, I mean the common practice of all governments, small or large, to grab a chunk of our incomes (via taxes) or interfere with our property rights (via zoning and myriad regulations). Of course, the optimal level is not zero. At the very least, we need police to protect our safety and courts to protect our rights, and cops and judges do not usually work for free.

Moreover, the optimal level of public theft, whatever it is, is probably even higher when there is a “global pandemic.” But at the same time, the optimal level cannot be complete and indiscriminate confiscation, especially when face masks are readily available, right? I have been blogging about the takings clause in the coronavirus age since March of this year, and in reply to one of my posts, my good friend and legal colleague Salvador J. Antonetti makes the following excellent point (ellipsis in the original):

“Conceptually, the problem is that ‘government’ means all of us, so yes, we’d be paying ourselves, but then getting the funds to make those payments by … levying taxes on ourselves. All of us would be on both ends of the process. It’d be an endless circle that ends in a wash. I’m betting that no court will find that that’s what the Takings Clause requires.”

This conceptual argument offers the best refutation of my takings theory by far, but couldn’t the same be said about the trillions of dollars the Congress is currently spending to provide partial relief to non-essential business firms and employees? (Again, this is not a rhetorical question!) My deeper point is that if we are going to close down certain places in the name of public health, then the owners of those places are legally and morally entitled to just compensation—not as a matter of charity or loans or bailouts but as a matter of right.

Consider, for example, the following thought experiment. What if a government had issued a lockdown order in normal (non-pandemic) times? Would anyone doubt that such an order constituted a taking? So, why should the presence of a health emergency change our analysis of the takings clause?

To conclude, consider a different conceptual model of these pandemic lockdowns, one based on the case of Vincent v. Lake Erie Transportation Co., a famous torts case that is known to all first-year law students. The facts of this famous case are as follows: The crew of a steamship had tied their vessel against a private dock to avoid a bad storm. Although they were able to save their ship, it damaged the dock during the storm. The owner of the dock then sued the steamship owner to recover the damages to the dock, and the court ruled for the dock owner.

Conceptually speaking, how are the facts in this classic case any different from what local and state governments are doing to “non-essential” business firms when they close them down completely to stop the spread of a contagious virus? The government is, in essence, inflicting enormous economic losses on these firms for the greater good, right? Notice that I am not questioning the cost-benefit logic of these lockdown orders, and like a good Bayesian, I am willing to admit I might be wrong, so change my mind!

Let’s resume my series of blog posts on the takings clause in the coronavirus age. The one case to consider whether a coronavirus lockdown order constitutes a “taking” is the case of Friends of Danny DeVito v. Governor Wolf, available here, which was quickly decided by the Pennsylvania Supreme Court on April 13, 2020. (No, not that Danny DeVito! The DeVito in this case was a candidate running for local office. Because his campaign office was not an essential or “life-sustaining” organization under Governor Wolf’s order, it had to close down. In addition, a laundry, a golf course, a real estate office, and a private citizen joined the lawsuit on the plaintiffs’ side.)

In this recent case, the five plaintiffs challenged the constitutionality of a statewide executive order shutting down all “non-life-sustaining” business firms in the Commonwealth of Pennsylvania. (But are courts of law “life-sustaining” operations? The entire text of Governor Tom Wolf’s Executive Order is reprinted on pp. 5-7 of the court’s opinion.) The plaintiffs challenged the governor’s order on various constitutional grounds, but for brevity’s sake, I will focus on their takings claims here.

In brief, the Pennsylvania Supreme Court, erroneously in my view, dismissed the plaintiffs’ takings claim because Governor Wolf’s order was a temporary measure. The court reasoned as follows (p. 37):

“The Executive Order results in only a temporary loss of the use of the Petitioners’ business premises, and the Governor’s reason for imposing said restrictions on the use of their property, namely to protect the lives and health of millions of Pennsylvania citizens, undoubtedly constitutes a classic example of the use of the police power ….”

But with all due respect to the learned judges, whether a given taking is temporary or permanent is irrelevant. Why? Because it is not the temporal duration of the taking that matters but rather the magnitude of the economic loss suffered by the property owner. In other words, even a temporary regulatory taking is a “taking” requiring just compensation if the property owner can pass the Penn Central test. (For a scholarly treatment of the law of temporary takings, see this excellent paper by Daniel Siegel and Robert Meltz.)

Admittedly, the Penn Central test is a hard test to pass, but alas, the court in the “Friends of Danny DeVito” case did not even bother to go through or apply the Penn Central factors. Assuming the plaintiffs in this case could have proved a significant decline in revenues after Governor Wolf’s order went into effect, then they would have had a strong takings claim, even though the executive order was only a temporary one. Simply put, the closer to zero their revenues post-lockdown, the stronger their case.

In my view, the plaintiffs in the “Friends of Danny DeVito” case made a strategic error when they brought their lawsuit, like when the great Magnus Carlsen moved his pawn to the h5 square in his second rapid game against Ding Liren last month. The plaintiffs were not really suing for compensation. Instead, they wanted the courts to strike down Governor Wolf’s order altogether. This move was a strategic blunder because there is no legal doubt that state governments have broad “police powers” to protect the health, safety, and morals of their citizens and residents.

What if one of the other plaintiffs, like the laundry or the golf course, had brought their own separate lawsuit, and what if they had only sued for “just compensation” instead of trying to strike down the governor’s order altogether? Would the outcome have been different?

Move along … nothing to see here!

And free Brenda Stephanie Mata and Ana Isabel Castro as well! If state and local governments are going to use undercover cops pigs to infringe on our liberties and property rights, close down “non-essential” business firms, and simultaneously refuse to pay just compensation to such firms, then isn’t it high-time to follow Miss Luther’s example and defy the government? (No, this is not a rhetorical question.) I will pick up right where I left off (regarding the takings clause in the coronavirus age) in my next post …

Congratulations to the Class of 2020! It’s time to celebrate the end of the college spring semester, even in these awful times, but good grief, the videos of professional entertainers performing old John Lennon or Charlie Chaplin songs at home during the pandemic have been pathetic. (You know who I am talking about!) I thus feel compelled to interrupt my series of posts on the takings clause to share some potential summer anthems and new dance moves with my loyal followers. Enjoy!

I concluded my previous blog post “Justice Holmes to the rescue” by mentioning the controversial Kelo case. This case involved a curious kind of taking that resulted in a terrible miscarriage of justice. In Kelo, a local government wanted to take 15 parcels of private property, some of which belonged to individual homeowners (like the little pink house pictured below), and transfer these private parcels to a greedy developer in order to gentrify a blighted neighborhood. Worse yet, the Supreme Court allowed this socialist-style redistribution to happen on the pretext that promoting economic development was a public use.

Legally speaking, then, the Kelo case addressed the question of whether “economic development” was a public use or not as required by the Takings Clause. Thus, as Professor Somin correctly notes in his critique of my Kelo op-ed: “If the courts had ruled that the purpose of the taking was not a public use (which would have been the correct decision, in my view), the government would have been forbidden to take the property even if it did pay compensation. On the other hand, the absence of a public use would be irrelevant if the government action in question was not a taking in the first place.”

But as I see it, the public use question and the taking issue are not so separate as my fellow libertarian legal scholar would like us to believe. Why not? Because if we are going to define what constitutes a “public use” or “public purpose” in broad terms, as Kelo controversially does, then such a broad definition will inevitably lead to an expansion of state governments’ police powers.

Furthermore, if state and local governments—as per Kelo—are allowed to take property to allow private developers to gentrify blighted neighborhoods, then governments are certainly allowed to shut business firms down and interfere with their private property rights in order to stop a pandemic or slow its spread. But does a government order shutting down a “non-essential” business firm really constitute a taking?

Although it would be an uphill battle (from a legal realist perspective: “the house always wins”), a strong case can be made that lockdown orders are constitutional takings under the “diminution in value” test set forth in the Pennsylvania Coal case (which was the subject of my previous blog post) and as further refined in the Penn Central case (which I already reviewed in one of my Mercatus Center op-eds). Simply put, if the owner can show that his business suffered a significant reduction in post-lockdown revenues, he should win. The closer to zero his revenues are, the stronger his takings case.

At this point, however, I must concede a potential fatal flaw with my argument. The problem is not so much the police power “carve out” that Somin keeps returning to. The main problem is that all of these coronavirus lockdown orders are supposed to be temporary measures, and some courts have made exceptions for temporary takings. Suffice it to say that this problem presents a potential difficulty, one that I shall dispose of in my next blog post …

Since existing “shelter in place” orders went into effect way back in March of this year, I have tried my level best to explain why non-essential business firms and employees should be entitled to just compensation under the Takings Clause of the Constitution. Among other things, I published some op-eds for the Mercatus Center and wrote up multiple blog posts on this subject.

Last week, my friend and colleague Ilya Somin took notice of my arguments and published a thoughtful critique of one of my op-eds. Although we both agree that morally speaking non-essential business firms and employees deserve compensation, since their property rights and liberties have been significantly curtailed and restricted, where we disagree is on “the law”. Does the Takings Clause require compensation as a matter of law?

The Federalist Society has invited us to discuss our competing views of the Takings Clause at an upcoming virtual panel on May 15; in the meantime, taking the most charitable view of Professor Somin’s strongest legal arguments, I will take this opportunity to respond.

First off, allow me to fast-forward all the way to the end of Professor Somin’s essay, where he points out that I mistakenly described him as a “conservative” legal scholar in my Kelo op-ed–when, in fact, he is a libertarian legal scholar. Although I happily concede this taxonomic error on my part, I am now even more astonished and, dare say, disappointed than ever. How can a fellow libertarian be so reluctant to see the legal merits of extending the Takings Clause to non-essential business firms as well as to non-essential employees?

Professor Somin keeps returning to the police power issue. According to Somin’s reading of the relevant caselaw, a taking does not occur when State governments are exercising their police powers. For Somin, this police power exemption is almost insurmountable: before a court can even decide whether a given governmental action is a regulatory taking, the plaintiff must first “get around” the police power issue.

But Professor Somin’s presentation of the relevant precedents is incomplete, for he fails to mention the single-most important takings case in our nation’s history: Justice Oliver Wendell Holmes’s landmark decision in Pennsylvania Coal v. Mahon. Before that case was decided, the Supreme Court had adopted a very narrow view of the Takings Clause: only physical acquisitions of private property could constitute a taking.

What Pennsylvania Coal did was change the entire landscape of our takings jurisprudence. Justice Holmes introduced a new test for so-called regulatory takings. Under this test, the government can interfere with property rights without having to provide just compensation unless the regulation, in Holmes’s own words, “goes too far” in diminishing the value of the property.

Admittedly, Holmes’s test is underspecified; after all, how much of a diminution in value is too much? The Supreme Court began to fill this gap when it decided the Penn Central case in 1978, but I won’t rehash my analysis of Penn Central here because I now want to make a more important point: the police power issue is a constitutional red herring. What matters is the diminution in value of the property rights of non-essential business firms.

To the extent many non-essential business firms are unable to earn any income during a government-ordered lockdown, they are entitled to just compensation under any reasonable reading of the leading cases of Pennsylvania Coal and Penn Central–not as a matter of charity but as a matter of constitutional law.

Lastly, but not leastly, Professor Somin and I also disagree about the controversial Kelo case. I conflate the threshold takings question (does action x constitute a taking?) with the public use issue in Kelo, (does x promote a public purpose?), while Somin wants to keep these issues separate. Admittedly, my interpretation of Kelo is a novel one, so I will return to Kelo in greater detail in my next blog post.

More details here (via Kottke). Happy Anniversary, Sydjia!

File under: The more things change, the more they stay the same: “The most astonishing thing about the pandemic was the complete mystery which surrounded it. *** Science, which by patient and painstaking labor has done so much to drive other plagues to the point of extinction, has thus far stood powerless before it. There is doubt about the causative agent and the predisposing and aggravating factors. There has been a good deal of theorizing about these matters, and some good research, but no common agreement has been reached with respect to them.”

That passage, which refers to the influenza pandemic of 1917-18, is from this scientific paper (the first page of which is pictured below) published in the journal Science on May 30, 1919–a paper that is just as relevant today as it was 101 years ago.