Business Ethics Fortnight "More Fun than Decent People Think Should Be Legal"

United States Naval Academy

Team Members: Peter Barkley, Jennifer Ahart, Emily Lapp, Frank Robinson

Advisor: John Truslow

Topic/Audience: Eminent Domain and Economic Development: The Case of Kelo vs. City of New London, CT

Executive Summary

As your town’s appointed analysts on the use of Eminent Domain for Economic Development (specifically, by transferring private property over to another private entity), we present for your consideration a) the facts of the case Kelo vs. City of New London, CT, as well as b) an analysis of this situation to your Town Hall meeting.

In this case, the City of New London (a city similar to your own) is attempting to use eminent domain to seize Mrs. Kelo’s home - as well as those of several neighbors - for the continued development of the property surrounding a recently built Pfizer plant. The City would like to give this land to developers for a variety of uses, including expensive condos, office space, and possibly a hotel.

It is our conclusion that eminent domain should be not be used to transfer property from one private owner to another for the sole purpose of increasing tax revenue and the number of jobs. While we would allow for the use of eminent domain in cases of blight, we urge your city not to use it in cases where the only benefit is in the form of increased revenue. We believe we have found ample legal, economic, and ethical evidence to support our position.

The primary legal argument in support of our findings is the “public use” requirement of the 5th Amendment which requires all eminent domain takings to be for a public use. While a number of cases have begun moving towards considering economic development a public use, the primary precedent for such an action has been overturned in a state supreme court.

There are several economic factors to consider. Our society gains an economic benefit by upholding private property rights, free market driven resource allocation, and the positive externalities of many of the communities, businesses, and non-profit organizations which often pay less taxes than a big business would. However, on the other side of the argument, there is a net economic gain in efficiency because the property is being transferred from a less profitable use to one which is more profitable, and the city will benefit from this increased efficiency. This, however, fails to account for the high subjective value which some people place on their homes and businesses.

Ethically, the government must consider whether this choice is just, whether it promotes the public good, and whether it ensures liberty. By failing to account for the rights of the individuals and the broader implications for society, New London’s decision fails these moral tests.

We therefore recommend that the citizens of your town reject taking similar measures.