The District of Columbia recently filed suit in D.C. Superior Court to use eminent domain to take control of a piece of land the city needs to placate D.C. United, the District's major league soccer team. Without the land, D.C. United may leave for Virginia. This is just another in a growing list of local governments using the policy of eminent domain to enrich other private citizens, rather than for essential public uses. It's a policy only big business or a government bureaucrat could love.

Eminent domain allows governments to acquire private property from unwilling sellers for public use. In many cases, however, "public use" has been ignored or twisted beyond recognition, as local governments use it to take people's homes and businesses for different private uses, as long as these provide more of a "public benefit." The subtle switch from use to benefit spells trouble for many.

Now a carpet store in Glendale, Colorado, can be seized and handed over to a developer so that an entertainment complex can be constructed, as this provides jobs and a bigger tax base for the city. As for the proprietor's livelihood, who cares?

The use of eminent domain does require that the property holder receive "just compensation," which is usually interpreted as the market price for the property under the assumption of a willing seller and a willing buyer engaging in a good-faith negotiation. But remember, eminent domain is only used when a property owner is not a willing seller. So the government negotiates with a phantom representative seller, who is treated as if they value the property no more than a disinterested buyer would.



This process disregards a core economic concept known as "subjective value," which means that nothing has an inherent, universally agreed upon value. Something that is priceless to me may be worthless to you.

Now let's think about how subjective value relates to eminent domain. Suppose you bought a sweater three years ago for $50, and since then it has become your favorite sweater. Perhaps you were wearing it when you got engaged, or when your favorite sports team won the championship, and now it is worth more to you than when it was brand new. Now suppose someone approaches you about buying it and informs you that similar three-year-old sweaters have recently sold on eBay for $25, which is what they offer you.

You of course reject the offer, but the buyer is persistent and refuses to take no for an answer. After you refuse him several more times, he sues you to force a sale. The court sides with him and forces you to sell for the "just" market value of $25. The buyer can't understand why you're so upset – after all, you were given just compensation.

Luckily, our favorite sweaters are currently safe, but our homes and businesses are not. The government is not required to compensate a property owner based on how much the owner actually values the property; they only have to pay the owner an amount that a judge deems just. In essence, governments are able to use eminent domain to purchase property they want on the cheap.

Supporters of eminent domain insist that it is a necessary power, as it prevents lone holdouts from standing in the way of public progress. But if there is a lone holdout who refuses to sell at any price – which is unlikely – then perhaps an alternative location for the project should be found or it should be abandoned.

It is more likely that the holdout is not refusing to sell in general, but is instead refusing to sell at the "just" price being offered. If the public – represented by the government – is unwilling to pay enough to entice a voluntary sale, there's a good chance that the project is not as beneficial as it's cracked up to be.

When the government uses eminent domain to acquire a home or business, they actually destroy value. It reallocates property from a higher-value use to a lower-value use, as exemplified by the unwillingness of the government to pay the price required to obtain the property voluntarily.

This is especially true when eminent domain is used to transfer property from one private owner to another under the guise of "public benefit," like when a family is forced to sell the home they've lived in for 38 years to make room for condominiums, or when Texas homeowners are pushed out to allow a shopping mall to expand.

The use of eminent domain exposes an uncomfortable truth in America – there is no universal right to private property. Americans do have a right to be compensated for their property, but this compensation does not have to make them as well off as they were prior to losing it.