Score One for Richard Epstein
It Depends Whose Ox is Gored
Santa Clara County's Measure A, if enacted, would impose a bundle of land use restrictions on property owners in Santa Clara County.
With an election coming up, I have been receiving the usual flood of electoral junk mail. The most interesting piece is a glossy flier arguing against Measure A—not on the grounds that the proposed land use restrictions are a bad thing but that:
"If Proposition 90 and Measure A, the land use initiative, both pass, there would likely be numerous claims for compensation filed by property owners who contend that their property has been substantially damaged as a result of the restrictions on property contained in Measure A."
Elsewhere in the flyer, the total cost to Santa Clara Country taxpayers is estimated at a billion dollars.
The economic argument for Epstein's position is straightforward. Government actions, like private actions, should only be taken if they make us on net better off, if their benefits, summed over everyone affected, are larger than their costs, similarly summed. If an actor is free to ignore some of the costs of his actions he may take them even if costs are larger than benefits. So government actors, like private actors, should be forced to bear the costs that their actions impose on others. It is the same argument used by economists to support tort law in general and environmental regulations such as emission fees—Pigou's solution to the problem of externalities implemented via the legal system.
Consider the application of the argument to Measure A. Its supporters argue that by keeping land in the county from being developed—the measure, among other things, imposes a minimum parcel size in hillside areas of 160 acres (a quarter of a square mile) and a minimum acreage per dwelling unit of 40 to 160 acres depending on slope—the measure makes the county a pleasanter place for its current residents to live in. If so, and if the benefit to current residents is greater than the cost to landowners of limiting their ability to use their land, then the residents should be willing to vote for the measure even if they have to compensate the landowners. If, as the authors of the flyer obviously assume, residents are unwilling to vote for it if they have to pay the cost, that is evidence that the measure on net makes people worse off, which is a reason why it ought not to be passed.
The flyer is presented as an argument against Measure A, written by people who sound as though they consider Proposition 90 a bad thing. It in fact is an argument for Proposition 90, a demonstration that shifting the costs of political acts to the people who expect to receive the benefits makes it less likely that governments will do things that ought not to be done.
Score one for Richard Epstein.