Epstein responds to Greider and vice versa on Takings

["Ian Murray" <seamus2001@xxxxxxxx>]

< http://www.thenation.com >
EXCHANGE | November 19, 2001


Taking a Chance on... Takings
Chicago

William Greider's "The Right and US Trade Law: Invalidating the 20th
Century" [Oct. 15] purports to explain the close connection between my
"radical" views of the "takings" clause and the current litigation
under Chapter 11 of NAFTA, which, among other things, requires
signatory states to pay compensation whenever their laws involve
expropriation and acts "tantamount to expropriation" of the private
property of citizens. His article is a troublesome mixture of truth
and half-truth laced with selective quotations from our phone
conversation.

Greider portrays me as an extremist and antigovernment ideologue who
invented the theory of regulatory takings in order to defeat
environmental regulation. He is wrong on every count. The idea that
regulations that stop short of seizure of property could count as
takings goes back at least as far as Justice Oliver Wendell Holmes's
1922 opinion in Pennsylvania Coal v. Mahon, which held that a
regulation of the use of private property could be treated as a
compensable taking if it went "too far." Even Greider, one hopes,
would regard it as a taking for the state to forbid a landowner to
enter his own property or to use it for any purpose at all, even if it
did not seize the land. Any constitutional provision worth its salt
has to be read to cover not only the precise wrong it identifies
(e.g., takings) but also the substitutes available to states to
achieve the same unconstitutional end.

Once it is accepted--as mainstream US law has long recognized--that
some regulations are tantamount to takings, the question arises, Which
ones and why? To sort out Holmes's tangled knot, I have long
championed a three-part approach that is far less radical (and more
coherent) than Greider's garbled account of my views suggests. The
first point is indeed a departure from established law. It says that
there is no principled way to decide that some limitations on land use
are takings and others are not. Partial restrictions can come at all
levels, from small to large, and the continuum cannot be broken at an
arbitrary point simply by saying that some are too big and others too
small.

By the same token, however, the willingness to think of all government
regulations as takings most emphatically does not mean that all should
be invalidated unless explicit compensation has been paid. At no
point, for example, does Greider so much as mention the central place
that implicit in-kind compensation plays in my system as a means for
reducing the instances for which compensation is required. Many
broad-based regulations do not only hurt property owners; they also
benefit them by imposing like restrictions on neighbors. These
benefits should count as compensation under the takings clause. In
general this approach tends to validate broad-based regulation that
both benefits and burdens regulated parties in equal proportion but
does not save the regulation that imposes (usually by design) far
greater restrictions on some landowners than on others. Zoning laws,
for example, can fall into either category. In some cases they impose
uniform restrictions (on exterior design, for example) that benefit
the regulated landowner, and these restrictions can be imposed without
any cash compensation.

More important is the scope of police power dealing with health and
safety. Greider writes misleadingly that the police power was an
invention of the New Deal, but that is sheer historical myth. The
invocation of the police power long predates the New Deal, and its
proper articulation occupies a central place in my own "radical"
exposition of the takings clause. In the Lochner decision, which
invalidated a ten-hour workday for some (but not all) kinds of bakers,
the question before the Court was if this statute fell within the
state powers to regulate private property (and restrict private
freedom of contract) to preserve public health and safety.

In my view the case was correctly decided on the ground that the
statute was in reality only a disguised "labor" statute, designed not
to protect health and safety but to place nonunion workers at a
disadvantage against union workers, given that the ten-hour work
restriction had a greater impact on their ability to do business.
(Nonunion workers had one long shift from late afternoon to early
morning and slept on the job in between. Union workers had two
shifts.) The Nation itself vigorously defended the decision in a May
4, 1905, story titled "A Check to Union Tyranny." The result in
Lochner is fully defensible without resorting to the woolly and
overbroad standard Greider falsely attributes to me, namely, that the
takings clause means that "government must pay those businesses or
individuals whose property value is in some way diminished by public
actions."

Understanding the police power is critical in evaluating NAFTA's
provision on expropriation and state actions "tantamount to
expropriation." For the record, these are the first words I have ever
written on NAFTA, and close readers of Greider's article will note
that it's only by inference and innuendo that I am made to appear to
champion the broad reading of Chapter 11. The blunt truth, however, is
that business interests who have pressed for compensation under NAFTA
have not consulted me on the question--not surprising, as, contrary to
Greider's nasty innuendo, I think Chapter 11 is a major policy mistake
if it is read to require compensation whenever a state seeks to
regulate or limit pollution. All nineteenth-century police power cases
(including Lochner) held that pollution and nuisance prevention fell
within the proper scope of the police power. I have extensively
defended and developed that notion of legitimate state power in all my
published writings.

That said, the only questions worth arguing are those about the means
chosen to reach a legitimate end: Was the ban discriminatory because
it applied only to foreign investment (in which case it should be
struck down)? Or was it overbroad (in which case the state should be
given a fair degree of latitude)? From what little I know of the
facts, the MTBE ban seems entirely appropriate, unless there are less
restrictive means that could protect state and local water supplies,
which does not seem to be the case. One does not have to believe,
however, that the state must have the police power to regulate all
sorts of "social and economic" issues in order to check pollution.

Had Greider asked me about the particular case, he would have gotten
this same emphatic answer. He could have written a far more powerful
piece on NAFTA had he stated that the most determined defender of the
takings clause lines up foursquare against the business interests that
have relied on Chapter 11 to gut the state police power. But that
would have required him to work through the implications of my
position, which is inconsistent with his muckraking ambitions.

RICHARD A. EPSTEIN




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Deming, Wash.

Isn't a logical extension of the "Epstein Doctrine" the position that
activities by corporations having adverse impacts on the commonweal
(health, environment, etc.) also constitute "takings"? And that
government is the public's litigator?

CHARLES KNAUFT III




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Oakland, Calif.

Government regulations are a "taking"? I say let's go for it--if
business costs to society are also deemed a "taking." Let's eliminate
all government regulation of business, but let's also stop the
socialization of the costs of doing business. If a business pollutes,
let it be sued by the government, or private persons in the name of
the public, for "taking" the public's clean air and water. If its
production machines cause serious injury or death, the business has
"taken" the value of that person's life or limb and so must compensate
him or her. If a large retail chain puts local mom-and-pops out of
business, the chain should compensate them. Fair's fair, right?

CHARLES B. HOLZHAUER




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Tucson, Ariz.

At just exactly what point will the trade-offs become unacceptable to
the multinational corporate robber barons? Will they cease their
depredations against the environment when it is so irreversibly
compromised that even their own children begin to sicken and die?
Under William Greider's able pen, the arcane and complex subjects of
regulatory takings and NAFTA's Chapter 11 are rendered eminently
understandable.

MARY PETERSDORF




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GREIDER REPLIES

Washington, D.C.

Professor Epstein's letter contains valuable news in his announcement
that he too considers NAFTA's Chapter 11 "a major policy mistake" that
poaches illegitimately on the government. Since he is a leading legal
theorist on the right, this might be useful to critics, and perhaps
environmentalists can recruit him as an expert witness. But don't
count on it. A careful reader will note that Epstein's lawyerly style
sprinkles dangling qualifiers and escape hatches throughout his
assertions. When I asked him about Chapter 11, he brushed the question
aside (then went off on the trade lawyers who--"talking about my work
behind my back"--failed to consult him). Who knows, maybe my article
persuaded him to distance himself from the Chapter 11 controversy,
lest it drag down his own theory.

Epstein complains that I garbled the meaning of his doctrine. But I am
not alone. When we spoke, he told me, "One of the dismaying things
about the debate is that none of my opponents get my position right.
In fact, most of my supporters don't get it right." Of course my
article quoted Epstein selectively--how could it not?--but I doubt
that printing his extended remarks would improve the portrait. "I'm
not a zero-government guy. I'm a limited-government guy," he explained
in our interview. "Once you allow any form of income redistribution to
take place from any individual or group to any other for any reason
the state thinks appropriate, then the game of limited government is
over." "I am a fierce defender of the yellow-dog contract." "I want to
undo the administrative state to the extent I think it's an instrument
of faction and wealth redistribution without any productive increase."
I described his theory as "radical" and "reactionary." I did not call
him an "extremist." I did not say the police power was an "invention"
of the New Deal, only that the Supreme Court reinterpreted the
doctrine to justify the New Deal's economic and social regulation.
What Epstein calls "sheer historical myth" is the standard
understanding among legal scholars, including conservatives.

Epstein seems anxious to detoxify the most provocative elements in his
theory by portraying his purpose as unexceptional reform--correcting
certain logical anomalies in the constitutional meaning of "takings."
The Fifth Amendment makes sense, he reasons, only if the requirement
to compensate property owners is extended to cover partial injury from
regulatory intrusions. Invoking Justice Holmes as his antecedent may
be read as an inside joke--Holmes was among the progressive jurists
who struggled many years to undo the property-first Lochner era that
Epstein wishes to restore. More to the point, the Supreme Court, even
the present one, has adhered to a contrary understanding, directly
expressed in the Rehnquist Court's 1993 Concrete Pipe decision: "The
mere diminution in the value of property, however serious, is
insufficient to demonstrate a taking."

If Epstein's logic is so straightforward, why would the Justices be
obtuse? Perhaps because they recognize the profound upheaval in
governance that would result if the Court consecrates his theory. The
federal judiciary, as even Epstein obliquely acknowledges, would be
picking and choosing which zoning laws are legitimate. Furthermore, as
dissenting Justice John Paul Stevens observed in the Palazzolo case
this past summer, an Epstein takings victory for property owners
requiring government compensation would constitute "a tremendous--and
tremendously capricious--one-time transfer of wealth from society at
large to all those individuals who happen to hold title to large
tracts of land at the moment this legal question is permanently
solved." It seems a bit late to try to sanitize the implications.

Epstein's protestation that his theory holds no threat to
environmental laws involves one of those points neither his supporters
nor his critics seem to get right, since they believe otherwise too.
Both sides know that most of the domestic takings cases are in fact
aimed at environmental regulation. Many are further aware of the
disingenuous wrinkle at the core of Epstein's argument. Pollution laws
are justifiable government action, he contends, so long as they are
based on common-law nuisance doctrine--one property owner may not do
harm to neighbors. Only, as Epstein assuredly knows, none of the major
US environmental laws derive from the nuisance premise, because that
would subject enforcement to an impossible thicket of litigious claims
over who injured whom. Science knows that rising air pollution will
cause more asthma victims, but proving which polluting factory caused
someone's illness is an evidentiary test designed to defeat the
objective. Likewise, wetlands are protected under the Clean Water Act
not for aesthetic reasons, as he supposes, but because science knows
the restorative, purifying powers of shallow marshes. Epstein
followers like Edwin Meese call them "landing fields for ducks" and
think developers should be compensated for not paving over this vital
public-health resource.

Epstein mentions his in-kind compensation scheme to show he is a
sensitive social thinker. Property owners who benefit from public
regulation, he suggests, should have that gain deducted from their
injury claims. But why stop there? Why not send a bill to the farmer
whose land is suddenly made more valuable because government built a
new highway alongside it? Perhaps we should require the wealthholders
to pay more for the Pentagon budget, since military protection
disproportionately benefits those with greater assets. These are
intriguing questions, but the subtext of Epstein's logic is the
familiar market fixation of the Chicago school. Society's collective
actions are to be broken down into a labyrinthine accounting system of
individual gain and loss. This would make new work for lawyers and
accountants. It would also further cripple government, which is the
professor's main idea.

Finally, the modern regulatory state is profoundly flawed and often
ineffective, though not for the reasons Epstein cites. Major
regulatory agencies are captured by their regulated industries. Laws
are written with purposeful vagueness and loopholes, which will
guarantee delayed enforcement often for decades. Business interests
mobilize resources to stymie what the public seeks. Epstein would
perhaps blame "factions" and say this is another reason to return to
limited government. As I have written for many years, progressives
ought to acknowledge the regulatory breakdowns more candidly and begin
the search for new legal doctrine and governing mechanisms that might
restore health to the defense of the common interest. That task is
very difficult, I concede, while the right wing persists energetically
in trying to invalidate what was accomplished in the twentieth
century.

WILLIAM GREIDER