A Businessman Does Not an Economist Make

In the most recent Republican debate, Donald Trump made the following argument in favor of eminent domain:

Eminent domain is an absolute necessity for a country, for our country. Without it, you wouldn’t have roads, you wouldn’t have hospitals, you wouldn’t have anything. You would have schools, you wouldn’t have bridges.

And what a lot of people don’t know because they were all saying, oh, you’re going to take their property. When somebody — when eminent domain is used on somebody’s property, that person gets a fortune. They at least get fair market value, and if they’re smart, they’ll get two or three times the value of their property.

Ignoring the questionable claim that eminent domain is necessary for just about everything, there’s a fundamental economic misunderstanding that Trump makes here; it’s one I covered here just a few days ago: value is subjective.

Even if it were true that the owners of property who suddenly find themselves without get a fortune (another questionable claim), it doesn’t mean the deal is fair.  In fact, by its very definition, eminent domain is unfair.  Since the deal couldn’t be completed to both parties’ satisfaction, and that force must be used to get one party to capitulate, then both parties do not benefit.  It is a true zero-sum transaction.

What Mr. Trump doesn’t understand is that there is more to life than just money.  The value of a piece of property is more than just its dollar value.  There are sentimental values here, too: memories, families, traditions, etc.  If the relative value of those aspects were low, then the deal could have been reached without force.  But given that force was necessary, then the “selling” party is losing since they are not receiving adequate  compensation.

In short, eminent domain is exactly the kind of zero-sum deal that Trump claims he opposes.  There is one winner and one loser.  Eminent domain cannot, economically speaking, make the country better.