RoR: Forum

Aah! But each coin has a certain defined market value. A quarter is only worth a quarter, a nickel... a nickel, etc. You would not want to pay somebody a dollar to buy their quarter.

jt

Post 61

Tuesday, September 16, 2008 - 5:06am

Marsha, Marsha, Marsha!

Real money doesn't have a "defined" value. It has the value of the metal it contains. That metal content depends on what the coin actually contains, not what is stamped on it. That is why the terms clipping and debasement exist. You are accepting the premise of fiat money with a stipulated value.

But even so, what of it? Plots of land are still not coins, and still not interchangeable as such. Coins are interchangeable because of their content. Plots of land are unique because of their attributes.

Location, location, location!

Post 62

Tuesday, September 16, 2008 - 9:46am

Jay,

You talk about how the phrase "fair market value" is used in 1000's of freely negotiated transactions every day. And you say, "It is, however, predicated on a free market. Perhaps that is the word I should have started out with, substituting "free market value" for "fair market value". The landowners in question are demanding more than twice the free market value."[emphasis mine]

Yes, Jay - Free - not eminent domain. So, perhaps the phrase you looking for is in this sentence, "Mr. Jones, we're with the Sheriff's department, and we have a court order here, to evict you from your home. But you will be compensated by the unfree, non-market value indicated on the check you will be given."

The amount that is given someone for their property is only fair (for that transaction), reasonable (in that transaction) and a free-market price - if it is voluntary and not by court order. Why should we keep typing at each other if we don't at least agree that words have meaning?

Let's say we have this project.... and this is in some ancient, imaginary country. It is very important. A nearby volcano has been acting up and local authorities have informed the government that a sacrifice is the only 'reasonable' approach to protecting the entire community. Now, you and I know that you own your life, it is your property. But, I'm sad to say, that it has been determined that by a kind of eminent domain process, local officials have decided that you are the only person whose sacrifice is most likely to appease the volcano god. You will compensated as best as the community can - a great last meal, time with a couple pretty maidens, and your heirs will be given a pot-full of money. Village actuaries have computed the value to be assigned to the life of someone your age and occupation. Do you want to argue about "fair" or "reasonable" as applied to the determined proper estimate of the price? The estimate is a very reasonable estimate and more than fair, especially with the maidens thrown in. Or, does it give you a sense of the importance of "free"?

Post 63

Tuesday, September 16, 2008 - 3:13pm

Steve,

I knew - even before I finished typing that last post - that someone would seize the argument you have just made. I almost even added a request not to use it. However, I never dreamed that they'd want to hurl me into a volcano.

The point is that the "free market value" is the value that the property would sell for if there were no project looming. If the government cannot purchase such properties at a price 'within reason of' what that free market value would be, then few such projects would ever succeed.

Ted,

So there are these three identical lumps of coal...

:-)

I'm going to go sit on a rock now and be pragmatic.

jt

Post 64

Tuesday, September 16, 2008 - 3:42pm

Jay,

If I were going to go be pragmatic, I'd not sit on a rock - I'd go mess about with my boat. Is that your boat in the picture? Looks like it has lots of character.

Post 65

Tuesday, September 16, 2008 - 5:05pm

Steve,

Yes. My greatest vice. A Nordic Tug 26.

jt

Post 66

Tuesday, September 16, 2008 - 5:15pm

Sweet! A lot of that Hawaiian water is rough and there aren't many close in cruising grounds - must be frustrating. I used to kayak on Kaneohe Bay.

Post 67

Tuesday, September 16, 2008 - 7:53pm

Thanks, but I'm an ex NY yankee living in the South, cruising the intracoastal when I get the chance.

jt

Post 68

Wednesday, September 17, 2008 - 12:26am

The point is that the "free market value" is the value that the property would sell for if there were no project looming. If the government cannot purchase such properties at a price 'within reason of' what that free market value would be, then few such projects would ever succeed.

Why? I should think that the free-market value is the price that it actually sells for, if indeed a willing buyer and seller can be found. If they cannot, then the free-market value of that particular property has yet to be determined.

Besides, if the property suddenly becomes more valuable, because a developer wants it for a very special project -- one from which he expects a big profit -- then why should it sell for the same price as it would to someone who doesn't value it so highly?

Suppose, for example, that oil were discovered on your property. Why should the oil company be able to buy your property for the same price that it would sell for if there were no oil there? Since your property has become more valuable to a buyer because of the oil discovery, why shouldn't the price be expected to increase? Why shouldn't the seller expect to receive a higher price for it than he would if there were no oil there? The situation is no different if your property is needed for an equally profitable transportation project.

In a free-market, prices are determined, not by arbitrary government fiat, but by a voluntary transaction between buyer and seller. If the transaction is coerced, the prices are not free market. They are legislated prices imposed by the government, which is precisely what eminent domain's "fair market value" amounts to -- a legislated price imposed by the government.

In any case, if an owner isn't interested in selling his property -- if he hasn't put it on the market -- then he can't be expected to accept the same price for it that he would if he were eager to sell it and were actively seeking a buyer. Anyone who is interested in buying his property under these circumstances will therefore have to offer him a higher price than someone would have to offer him if he were eager to sell it. To demand that he sell it at the same price that he would accept if he were actively seeking a buyer is patently unjust. Yet that is what the government is demanding under the rule of eminent domain.

And please don't tell me that there is a difference between private projects and government projects -- that eminent domain shouldn't be used for private ventures, only for public ones. All productive projects should be privately financed, including infrastructure. The only role that a government should have is the protection and defense of individual rights.

You have argued that big projects that require the consent of many different property owners could not be completed without coercive intervention by the government. As I've said, I don't agree that you demonstrated this to be true, but even if it were true, you wouldn't have a case, unless you want to expand the role of governmental intervention across the board.

Suppose that a developer wants to build a mall that would be a valuable asset to the community, but can't afford to complete the project without additional funding, which he can't obtain voluntarily. Would you say that people should be forced to help finance the project, because without forced contributions, the project couldn't be completed, in which case, the community would lose an important economic asset? It seems to me that the logic of your position commits you to just such a view.

And what about a military draft, or even a draft for policemen, if the military or a municipality can't find enough recruits? Given your rationale for eminent domain, on what grounds could you object to that? None as far as I can see. In short, your position commits you to a statist, not a free-market, society. You have endowed the government with the power and authority to take people's property at their arbitrary discretion. That is the clear implication of your support for eminent domain.

- Bill
(Edited by William Dwyer on 9/17, 12:33am)

Post 69

Wednesday, September 17, 2008 - 7:01am

Bill,

The examples you suggest aren't comparable. Oil found on a piece of property is a unique feature, which clearly adds intrinsic value to that property. The property we are discussing has no such unique feature. It only happens to lie on the needed path for the roadway. Also, I've said several times in past posts that I do believe the property owners should receive something more than the free market value, by way of compensation for the inconvenience.

Public vs private infrastructure projects. That's another debate entirely. Here we are only discussing he existing model - which is that eminent domain exists, and how do we deal with it. My logic skews toward at least limiting the damages on what we can't immediately change. It does not involve or require recanting principles, only limiting further bad acts by others.

jt

Post 70

Wednesday, September 17, 2008 - 7:18am

This: "The property we are discussing has no such unique feature. It only happens to lie on the needed path for the roadway." is an outright contradiction. Location is the sine qua non of real estate value.

Location, location, location!

Post 71

Wednesday, September 17, 2008 - 9:11am

Bill that's what really annoys me about eminent domain cases where the government tries to determine this "fair market value", that they don't consider what the future worth of the property is to the property-owner. Suppose I don't want to sell now (for e.g. my business) because I think in 5 years I can sell it for a heck of a lot more money because I believe market conditions will change, but here comes along this out-of-state developer that tells my local municipality he can build a huge development that will generate a bunch of tax revenue for the town, to which they forcibly take my property at a time I didn't want to sell at a price I didn't like because of current market conditions. I can understand eminent domain to be used in emergency situations, such as war or domestic unrest, but in any other situation it's nothing more than theft.

Post 72

Wednesday, September 17, 2008 - 1:41pm

That was well put, John

Post 73

Wednesday, September 17, 2008 - 6:42pm

John,

I'm really curious about that "domestic unrest". Can you elucidate?

jt

Post 74

Wednesday, September 17, 2008 - 7:10pm

Domestic rebellion or excessive criminal activity, domestic terrorism, that sort of thing.

Post 75

Tuesday, September 30, 2008 - 6:17am

Mr. Stolyarov wrote me a private e-mail to say he would be replying to my comments on this thread on his blog here. His blog doesn't accept replies, so I will reply here. He quotes me from post 34: "A good part of their being so poor is the huge volume of traffic they bear. The nicest roads tend to be where there is little traffic (or they are new)."

He writes:

While this is true, it still does not justify the same stretches of roads being repaved every single summer, as is frequently the case in the Chicago suburbs. The Chicago area is notorious for its corrupt governments, and I strongly suspect that the roads built there are specifically designed to fail once a year (or sometimes, once every few years) and thereby require repairs from the leading government officials� favored construction firms. Of course, I have no specific evidence for this aside from the general and well-known fact of Chicago corruption and the extreme plausibility of my theory when compared to alternatives and when considering that other less corrupt but equally large metropolitan areas in the country do not experience this kind of dismal road quality.

Firstly, I believe he should have also acknowledged what I wrote in post 36. The Chicago North Shore roads he criticizes are also subject to big temperature swings and lots of salt, which greatly add to their deterioration. Comparing Chicago roads to, say, roads in San Diego, is not exactly comparing apples and apples. San Diego roads are not subject to the temperature swings and salt that Chicago roads are. A comparison with, say, Minneapolis would be much better.

I remain skeptical that the same stretches of roads are repaved every summer, and will not believe it without concrete (-: evidence. I lived in Northbrook for many years and didn't notice it. We should also distinguish between repaving and patching potholes. While I imagine some stretches may be patched often, I very much doubt repaving.

I don't know the extent of corruption, but believe road job contracts are generally subject to competitive bidding. Many roads in the Chicago area are state or federal, which surely are. Many years ago I worked on road construction, both concrete and asphalt. The work is monitored by state inspectors who struck me as quite competent, at least the head engineers. I witnessed a state engineer order a stretch of brand new road be removed and redone because of poor work.

Mr. Stolyarov comments about sections of roads being blocked while not being worked on. No doubt that is true and many of us have witnessed it, but I suspect he exaggerates. For example, he says "... do nothing on it for a few months." Not days or weeks but months?

Lastly, to maybe somewhat de-mythologize private roads, give some thought to the varying quality of driveways. Are they all in great shape and made to last decades?

(Edited by Merlin Jetton on 9/30, 7:24am)

Post 76

Tuesday, September 30, 2008 - 3:41pm

Merlin, no need to concentrate on just the quality of the roads for the privatization question. Just look at the number of new roads being built verses the number of new cars entering our highways. When Eisenhower wanted to create a federal highway system, from 1956 to 1976 35,000 miles of highway from the 42,000 miles planned was created with the remaining 7,000 created in the next 20 years. Since then only 4,000 miles have been paved . Compare that to the number of new cars on the roads since then and the ever increasing traffic jams all over the country. From Michael Dickey's blog: "According the Bureau of Transportation Statistics the number of vehicle miles traveled in 1975 was 1.4 trillion miles, in 1995 was 2.4 trillion miles while in 2005 that number was 3 trillion."

I don't know the extent of corruption, but believe road job contracts are generally subject to competitive bidding.

Which is a horrible idea. Imagine if you were building an addition to your home, would you pick the contractor that came in with the lowest figure without regard to the quality of workmanship the contractor has demonstrated on past projects? The best contractors tend to be more expensive and can do projects with fewer overruns with a higher quality of workmanship. I own a hotel and in my industry hotels are notorious for needing constant renovations so I deal with contractors a lot. We don't pick the lowest price, if we did my business would be in a heap of trouble with a much larger construction cost.

Lastly, to maybe somewhat de-mythologize private roads, give some thought to the varying quality of driveways. Are they all in great shape and made to last decades?

How about comparing the number of new driveways created compared to the number of new miles of highways created?
(Edited by John Armaos on 9/30, 3:43pm)

Post 77

Tuesday, September 30, 2008 - 4:10pm

In response to my saying road job contracts are generally subject to competitive bidding. John replied:

Which is a horrible idea. Imagine if you were building an addition to your home, would you pick the contractor that came in with the lowest figure without regard to the quality of workmanship the contractor has demonstrated on past projects? The best contractors tend to be more expensive and can do projects with fewer overruns with a higher quality of workmanship. I own a hotel and in my industry hotels are notorious for needing constant renovations so I deal with contractors a lot. We don't pick the lowest price, if we did my business would be in a heap of trouble with a much larger construction cost.

I don't think it is the cheapest w/o regard to quality. The party asking for bids puts out specs for the project, which include specific materials, standards, etc. Those who bid do so knowing the specs.

John wrote:

How about comparing the number of new driveways created compared to the number of new miles of highways created?

I don't get it. How does what you say relate to Mr. Stolyarov's article or blog comments?

Post 78

Tuesday, September 30, 2008 - 4:33pm

Merlin:

In response to my saying road job contracts are generally subject to competitive bidding. John replied:

"Which is a horrible idea. Imagine if you were building an addition to your home, would you pick the contractor that came in with the lowest figure without regard to the quality of workmanship the contractor has demonstrated on past projects? The best contractors tend to be more expensive and can do projects with fewer overruns with a higher quality of workmanship. I own a hotel and in my industry hotels are notorious for needing constant renovations so I deal with contractors a lot. We don't pick the lowest price, if we did my business would be in a heap of trouble with a much larger construction cost."

I don't think it is the cheapest w/o regard to quality. The party asking for bids puts out specs for the project, which include specific materials, standards, etc. Those who bid do so knowing the specs.

Merlin, I take it you don't have a lot of experience hiring contractors or working with building inspectors? Certainly even the most unreliable contractor can come up with all manner of specs, plans, and work schedules, and claim they will do all the work to what they've committed to on paper and to a workmanlike manner and within a reasonable time and within the cost they propose. Meeting building code doesn't mean meeting deadlines, budgets, and quality work, or for that matter even meeting building code. I was in a lawsuit where I had sued my town's sanitarian for not upholding state codes for approving building lots. Building codes are also notorious for holding back improvements in new construction techniques, new building materials and new technologies. A friend of mine had his electrical work done on his house by a NASA electrical engineer friend of his, done in a manner that was far safer than any existing building code, but his local building inspector didn't understand what he was looking at, and demanded the entire electrical panel be rewired to current building codes. If you believe a contract is all that is needed to ensure you're going to get a good construction experience, and if you think state inspectors will ensure standards are met, then I think you are not approaching this with a full body of experience for how these things usually work themselves out. Nothing beats a contractor that has a history of quality craftsmanship and credentials of satisfied customers to back it up.

John wrote:

How about comparing the number of new driveways created compared to the number of new miles of highways created?

I don't get it. How does what you say relate to Mr. Stolyarov's article or blog comments?

My only point is that the advocacy for the privatization of roads need not be centered just on the quality of roads the government provides but rather the number of roads, the cost of them, and the pace it builds them. It's hard to argue about the craftsmanship of our roads since this entails a great deal of civil engineering knowledge.

Post 79

Tuesday, September 30, 2008 - 6:34pm