The Free Lunch — Revisited

     One of the famous lines in eminent domain law is the Supreme Court’s observation in United States ex rel. TVA v. Powelson, 319 U.S. 266, 280 (1943), that “The law of eminent domain is fashioned out of the conflict between the people’s interest in public projects and the principle of indemnity to the landowner.” That has a  superficial ring of fairness to it, but it actually presented the country with a false choice — there was no such conflict. The government did what it wanted and paid for the land it wanted for its projects.  Even in the Great Depression  that preceded Powelson, the federal government engaged in a huge program of dam construction and had no difficulty paying for their sites. Indeed, the problem was that it built too many dams (see Marc Reisner, “Cadillac Desert” (1993)), and is now facing the problem of having to tear down some of them.

We recently gained an additional insight into the situation upon reading a passage in Jane Jacobs’ book  “Cities and the Wealth of Nations” (1984), 116-117. It turns out that, in fact, the TVA dam construction program generated huge economic benefits and, far from consuming public funds, was immensely profitable to the TVA and also supplied cheap electricity to industry at half the price charged for electricity generated elsewhere. After demand for electricity outstripped supplies of power generated by TVA’s hydroelectric dams, it built additional coal-fired generating plants, and after doing so it could offer power to its consumers at a 30% advantage. This attracted industry to the area, and though it did little to improve the lot of rural Tennesseans, it sure was good for industry.

So the moral of it all appears to be that “the people’s interest in public works” was in no peril, that TVA got a huge bargain, and made so much money that it became a leading power-generation giant. All this on  land taken from the local folks whose homes were either razed or inundated by the waters rising behind the newly built TVA dams, and who under prevailing judicial construction of “just compensation” were left undercompensated . TVA’s success also stimulated increased coal strip-mining in the area, that produced the familiar environmental degradation, plus air pollution from those coal-burning power plamts. “The people’s interest”? Perhaps. But it appears that it was the TVA’s economic interest that predominated. But TVA’s great success came at a huge price, and that price was not paid by the government.