PART 2 A) Takings - Holdout 1. When the government wants to build a highway that cuts across the property of many owners, the main economic justification for taking private property is it: a. overcomes high transaction costs caused by potential holdout problems. b. compensates landowners for the value of their property. C. reduces the incentive of property owners to make inefficient investments in their property. d. makes it more likely that the government will undertake socially valuable projects. 2. You are an attorney representing a large developer of shopping centers. Your employer is contemplating building a shopping center in East Podunk. This will require obtaining a number of parcels of contiguous land now owned by many separate people. You are asked for help in acquiring the land. One strategy might be to approach the City Council and ask for help in using powers of eminent domain in acquiring the land (i.e. taking the land). What are the two main reasons why having the government take the land suits your client better than separately purchasing each parcel of land in the market? B) Takings - Public Use 3. Now put yourself in the shoes of a lawyer employed by the City Counsel. Can you think of a constitutional objection to the developer's initiative? 4. Conversely, can you think of an argument in favor of the proposition that the construction of the Shopping Center serves the public use? C) Takings - Holdout 5. Suppose the City Council objects to government taking the contiguous properties. You are the developer's attorney. Your client decides to privately negotiate with each property owner the purchase of his individual tract of land. Your client asks you not to disclose (as much as possible) that each purchase is part of a larger project that requires the purchase of the separate pieces of land. Why would your client ask you to do that?client ask you to do that? D) Takings - Just Compensation 6. Let us compare taxation and expropriation as alternative means to raise revenues for the government. Does expropriation resemble more closely a tax on shoes or on clothes? Explain briefly how your answer relates to distortions in the behavior of people who own the property or pay the tax. E) Regulatory takings 7. Which of the following best describes the difference between eminent domain and regulatory taking? a. Under eminent domain, the injured property owner receives just compensation. b. Under eminent domain, a government takes title to someone's private property, but with a regulatory taking there is no transfer of title. c. There is no difference between the two. d. Under eminent domain, property is taken for public use and given to the public, but with a regulatory taking, property is given to private parties