Testing the Value of Eminent Domain

Abstract

In their article (Guarding the Subjective Premium), Sebastien Gay and Nadia Nasser-Ghodsi add some empirical evidence to the ongoing debate over compensation for eminent domain.' Their model raises a number of interesting questions, some of which are identified below, but their principal contribution is actually conceptual. They identify countervailing pressures on property values resulting from the possibility of eminent domain. On the one hand, they hypothesize that property buyers will discount the value of property at risk of eminent domain. On the other, they identify the offsetting premium that buyers should pay for a community's economically beneficial use of eminent domain, an effect too often ignored by courts, scholars, and politicians. Gay and Nasser-Ghodsi perform an important service by drawing attention to these potential benefits of eminent domain.