You know the alleged problem. The gummint wants to build a road/erect a dam/string some power lines over some farms, and some recalcitrant property-owner up and says, "Not on my land sunshine!" At this stage statist economists, planners and journalists start talking about market failure and "the holdout problem," and the government -- if it's American -- whips out its powers of Eminent Domain and a small sum and confiscates. (If it's a New Zealand government is simply cites the Public Works Act and gives the owner a small cheque and his marching orders.)
Aside from being a complete and utter abuse of the property rights governments are supposed to protect, the economists, planners and journalists are however wrong. There is not 'market failure.' There is no 'holdout problem.' In fact, says Bruce L. Benson in a lengthy anaylsis, the problem is generally one of government failure. Remove the system of compulsory purchase and government control of infrastructure, and and the holdout problem goes away -- just as I argued here some time ago.
If you like lengthy and learned analyses of problems such as these (Scott, are you there?), then this is a reading for you: 'The Mythology of Holdout as a Justification for Eminent Domain and Public Provision of Roads,' by Bruce L. Benson.
LINKS: The mythology of holdout as a justification for eminent domain and public provision of roads -- Bruce L. Benson, Independent Review [30 pages in PDF]
Government bullying over pylons - Peter Cresswell, Not PC
TAGS: Property Rights, Economics, Urban Design, Cartoons