Judge Guido Calabresi : The Future of Law and Economics [35:20-40:20]

of asking us to ask real questions, and it's that that I try to bring back, not necessarily to move it to the left, but to ask some of the questions that the really wiser people at the beginning, like Kose, who, as I say by the time he wrote the problem of social cost, was certainly very conservative, but who could see that this would be useful as a way of looking at the world and helping people then decide what they wanted to do and what the best way of doing it was. I'm going to go ahead and use one of the questions from the audience, because this question touches on something I know you talk about in the book. You certainly talk about tort law a great deal, but this question is, how does eminent domain figure into law and economics, so that's a whole other important field. Eminent domain is a marvelous example, because in eminent domain, we all think of the idea is to pay people the value of their property if it were on the market, and that's a kind of traditional economic analysis of law. You look, you take the market price, you look at the property for a public good, you take that property. But if you look at the world, it turns out that in the world, that often is either not done or is hated. Let me tell you one area where it's not done. In Italy, traditionally, when you took property for a public purpose, you paid not the value, not the market value of the property, but the value in use. So some very rich Lord wanted to have a very fancy villa, because he wanted it to be, because he wanted to look nice, and the land was worth more for redevelopment, or for development of something, but he kept it as farming, and then the state needed that land for something, they would only pay him the lower amount. That was because the society, social democratic, if you want, wanted to push people out of being in that situation. I know that very well, because my great uncle owned a lot of land outside Bologna and had a great villa, and it was worth much more if he had sold it for development because the city was moving out, he was an economist, and so he claimed that he was actually keeping it because the rate of interest was lower than the increased value of land, as it would come. At a certain point, the town fathers of Bologna said, we have to build a airport, and they looked, and they said, where is there lots of nice empty land, and they looked at my great uncle's land, and they said, oh, that's a perfect place for an airport. So they took it, and they paid the value of it as farming land, and a much poorer than I otherwise would have been. He had no children, and so I'm not complaining, but that was that society's deciding that it wanted to do that to make people be more willing to give up their property, which otherwise they wouldn't. On the other hand, take Kilo, you know, New London wants to take houses of relatively poor people who live in their houses, and their houses are not for sale, and they want to take that land to do redevelopment, and to make it nicer. So they give a private person the right of them in domain who wants to take their houses and pay only the market price. The Supreme Court said, that's okay. There was a huge stink. People said, that's unfair, that's not right, that's done. But you know, during the oral argument, just as Kennedy of all people, not the one you think of as the one will come up with some great new theory, said, wouldn't we all feel a lot better about this, if when it's a private person taking private houses for a public