Can't Touch This! Private Property, Takings, and the Merit Goods Argument

Goutam U. Jois, Harvard Law School

Abstract

Over the past several decades, economic theory has gained increasing influence in legal thinking, political theory, and public policy. This article argues that the popular characterization of economics as “value-neutral” obscures the fact that there are fundamental value judgments in any framework influenced by economics. Acknowledging this fact will shift the terms of the debate: instead of a “neutral” policy and one that “imposes values,” we see that both policies in fact entail value imposition to some extent. The public discourse is thus rendered more intellectually honest. The article progresses in three parts. First, I describe the concept of “merit goods.” This concept, introduced fifty years ago, has met with resistance from traditional economists because it justifies interfering with individuals’ preferences and imposing values, something that neoclassical economic theory ostensibly rejects. Second, I show that the merit goods concept nonetheless can be used to clarify U.S. Supreme Court cases regarding regulatory takings, indicating that value imposition is not just a theoretical matter. Indeed, Justice Scalia’s reasoning in Lucas is flawed precisely because it conflates public goods and merit goods and assumes value-centrality is possible. Finally, I survey the writings of Hayek, Nozick, Buchanan, and Posner to show that even those authors who claim to be true to the principles of economics nonetheless have elements in their theory that involve imposition of certain values—that is, their theories involve merit goods and law. Merit goods, then, enrich those scholars’ theories, properly describe constitutional reality, and add a needed dimension to economics.