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Political Economy And The Efficiency Of Compensation For Takings

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  • TIMOTHY J. BRENNAN
  • JAMES BOYD

Abstract

To assess compensation for regulation‐induced “takings,” the authors model political support for regulation as a function of externalities, landowner wealth, and tax burdens. When competing social interests have equal influence on political outcomes, compensation should not be paid. However, when environmentalists and property owners have unequal influence, the model yields several counterintuitive implications. For example, disenfranchised environmentalists should support takings compensation, since it reduces landowner opposition to regulation. The authors also show how compensation rules can limit the deadweight social costs of income transfers, while recognizing their effects on regulator and landowner behavior. (JEL K11, D72, L51)

Suggested Citation

  • Timothy J. Brennan & James Boyd, 2006. "Political Economy And The Efficiency Of Compensation For Takings," Contemporary Economic Policy, Western Economic Association International, vol. 24(1), pages 188-202, January.
    • Handle: RePEc:bla:coecpo:v:24:y:2006:i:1:p:188-202
    DOI: 10.1093/cep/byj016
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    References listed on IDEAS

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    1. Brennan, Timothy J & Boyd, James, 1997. "Stranded Costs, Takings, and the Law and Economics of Implicit Constracts," Journal of Regulatory Economics, Springer, vol. 11(1), pages 41-54, January.
    2. Becker, Gary S., 1985. "Public policies, pressure groups, and dead weight costs," Journal of Public Economics, Elsevier, vol. 28(3), pages 329-347, December.
    3. Hermalin, Benjamin E, 1995. "An Economic Analysis of Takings," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 64-86, April.
    4. James Boyd, 1998. "The "Regulatory Compact" and Implicit Contracts: Should Stranded Costs be Recoverable?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 69-83.
    5. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    6. Miceli, Thomas J & Segerson, Kathleen, 1994. "Regulatory Takings: When Should Compensation Be Paid?," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 749-776, June.
    7. Lawrence Blume & Daniel L. Rubinfeld & Perry Shapiro, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(1), pages 71-92.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Brennan, Timothy J., 2008. "“Night of the Living Dead” or “Back to the Future”? Electric Utility Decoupling, Reviving Rate-of-Return Regulation, and Energy Efficiency," RFF Working Paper Series dp-08-27, Resources for the Future.
    2. Emma Aisbett & Larry Karp & Carol Mcausland, 2010. "Police Powers, Regulatory Takings and the Efficient Compensation of Domestic and Foreign Investors," The Economic Record, The Economic Society of Australia, vol. 86(274), pages 367-383, September.
    3. Timothy J. Brennan & Carolyn Kousky & Molly Macauley, 2009. "More Than a Wing and a Prayer: Government Indemnification of the Commercial Space Launch Industry," UMBC Economics Department Working Papers 09-112, UMBC Department of Economics, revised 01 Sep 2009.
    4. Paul Pecorino, 2013. "Compensation for Regulatory Takings with a Redistributive Government," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 488-501, October.
    5. Timothy Brennan, 2010. "Decoupling in electric utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 49-69, August.
    6. Brennan, Timothy & Boyd, James, 1996. "Pluralism and Regulatory Failure: When Should Takings Trigger Compensation?," RFF Working Paper Series dp-96-09, Resources for the Future.
    7. Robert Innes & George Frisvold, 2009. "The Economics of Endangered Species," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 485-512, September.
    8. Brennan, Timothy J., 2009. "The Challenges of Climate for Energy Markets," RFF Working Paper Series dp-09-32, Resources for the Future.
    9. Timothy J. Brennan, 2010. "The Challenges of Climate Policy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 225-239, September.

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    More about this item

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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