William A. Fischel
Dartmouth College – Department of Economics; Lincoln Institute of Land Policy
Dartmouth Economics Working Paper No. 02-06
Regulatory takings arise when the government adopts a regulation so restrictive of private property’s use that it is tantamount to the loss an owner would suffer if the government had simply acquired it. Current American practice always offers compensation to landowners whose property is formally acquired or physically invaded, but it rarely offers compensation for owners whose property is devalued by regulation. This essay examines the consequence of this disparity by casting the government as a rational agency that has a choice «inputs» of regulation and physical acquisition. It is argued that in many cases, particularly when the owners of land coveted by the government lack political influence, the agency will overuse regulation relative to physical acquisition and also excessively expand the activities of the government agency. The principles are illustrated by follow-up information from the famous regulatory takings case of Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).