Thank you very much. That fellow from the Sierra Club that Carol mentioned in her introduction, I do recall that when he was protesting at one point I said, "Stick your head in my mouth for lying, you've got to expect to get bit." In any event, It's a great pleasure to be back here. One of the things Carol did not mention in her introduction, is that although I live in Washington now, I grew up just fifty miles from here up in a little town called Galway, New York. A hundred and fifty population and we lived five miles outside of town across from a beaver pond. In fact, one of my classmates, Kurt Kilmer is right here now. When I tell people down in Washington I served for eight years in the Reagan Administration, that I grew up in a town of a hundred and fifty people they occasionally say that they grew up in a small town. I ask, "How many people?" They say, "Oh, it's only thirty thousand." I say, "Well, mine was a hundred and fifty." In any event, It's great to be back here.
Carol asked me to speak on a broader subject than property rights by way of setting a background for so much of what it is that concerns you and rightly so. And so my topic is "How Progressives Rewrote the Constitution, Undermining Property Rights in the Process." So, I'm going to focus mainly on that larger subject. This morning Jim Burling, my good friend with whom I was at a conference just two days ago in Washington, spoke to you much more narrowly focused on the property rights including recent cases that the Supreme Court has decided. I am going to sort of lay the background for all of that and not go so much specifically into the cases though I will discuss some cases along the way. But my main subject is how is it we got to a state of affairs in this country such that someone like Martha Boneta could go through what she had to go through. And the reason is is because what she was dealing with has come to be called the "Progressive Movement."
The Progressives who came out of the elite universities of the Northeast at the end of the Nineteenth Century and through the early decades of the Twentieth Century turned the Constitution on its head. And so in order to explain how that happened and to discuss it in some detail, what I want to do is to begin with the Constitution itself, not with modern Constitutional law under which all of you suffer today. Because modern Constitutional law is connected to the Constitution only occasionally. It's the kind of thing that the justices on the Supreme Court have to deal with. They have to try to square the decisions they reach with the Constitution itself, which is something of a herculean task. And so I'm going to begin with the Constitution. Even more important, I'm going to begin with the Declaration of Independence because that's where the Founders set forth their philosophy of government that they took with them eleven years later when they sat down to draft the Constitution. And so if you understand their philosophy of government, you will then understand the complexities that are often there in the Constitution. And yet, those complexities, when you understand them, are not all that complex. It's really a very clear and simple document at its core but it has been so much complicated by modern Constitutional law that you'd never recognize that simplicity today.
So let's start with the Declaration of Independence and remember Jefferson, who was the principal author of that document, was declaring our independence from Britain. And in doing so he was setting forth the proper relationship, as the Founders saw it, between the individual and government. Whereby we start with what is called "natural law." More precisely, the natural rights strain of natural law that came out of the Sixteenth and Seventeenth, and early Eighteenth Century. Whereby the project before the natural rights theorists was to show how it is that if we started with an imaginary state of nature where there was no government and asked, "What are our rights in that state of affairs vis a vis each other?" Then we will know what rights we have to create a government and to empower it and what it is we may not do in the course of creating and empowering a government. So their concern was with legitimacy, the very thing that Martha wrestled with over those many years that she dealt with those people claiming, in effect, that they were not legitimate in what they were demanding and that her rights were the legitimate rights. Not their powers.
And so what the Founders did was start with this idea of "state of nature" theory. And they started with the premise "all men are created equal." And the reason they did that was because if you're going to claim rights that are superior to your neighbor's, you better have a good reason for doing so. So, this sort of default premise is that we all start with equal rights. And what are those rights to? Life, liberty, and the pursuit of happiness. All of which are reducible, as John Locke, the philosophical founder of the American Revolution put it, to property. Property, by which I mean he said, "Lives, liberties, and estates." Your property in your life, your property in your liberty, and the property you acquire in the world, either chattels that's to say movables or real property.
That means that a right violation is the "taking" of something that belongs to somebody else. When you commit a murder you take a life that belong to someone else. When you enslave someone, you take the liberty that belongs to that person. When you take his chattels or you trespass upon his property, you take the control over his property that belongs to him. And that is the starting point for thinking about the theory of rights. Notice I've said nothing yet about government because we're trying to get clear about what our rights and obligations are with respect to each other.
And then you look at that notion of a right to pursue happiness and you see there an insight that you have to grasp if you're going to understand the classical liberal. Now I mean the classical liberal, not the modern liberal. The classical liberal mindset. What makes you happy is not necessarily what makes me happy. Each of us has his own subjective values, the things he wants to pursue as he works his way through life. You may not like the color your neighbor painted his house. He may not like the color that you painted your house. And so on and so forth. The crucial difference is though, on the rights side, each of you has your own subjective values but we all have objective rights. And the point of drawing that distinction is this: It goes back to an old issue that comes from antiquity, from the ancient Greeks to the present. In epistemology, the theory of knowledge, there were two general schools of thought. Skepticism, which says that there are no moral truths or if there are we can't know them. Dogmatism, which holds that there are moral truths pertaining to every aspect of the human condition: What sexual practices you can engage in, what you can put in your body, the role of women in society.
Think of some of the draconian codes in various places around the world today. Neither of these schools is attractive. Skepticism gives you no morality. Nothing to get hold of. Dogmatism give you no liberty. So if you can distinguish objective rights and subjective values then you've got a way to chart a path through these two unattractive alternatives. You have morality with respect to your rights objective rights and you have liberty with respect to how you exercise those rights, provided that you do so while respecting the equal rights of your neighbor. Now you've got the building blocks for the theory of rights, all of it again reduced to property. That's your starting point.
But, of course, we don't live in splendid isolation on blackacre or whiteacre. We come together. And there are two morally relevant ways in which we do so. Either voluntarily or by force or fraud. Voluntarily by signing contracts or entering into promises and involuntarily by committing torts, that is accidents or crimes. And in doing so we change the world of rights and obligations. We extinguish some of our property rights and we bring into being new rights when we enter into a contract. So too, when we commit a tort or a crime. And so the world of rights and obligations gets changed over time by virtue of the events that take place over time. Either contracts on the one hand or torts or crime on the other. And through these two simple rights: Property on the one hand, that's your starting point; and contract on the other hand. You can create and explain the whole of what we call civilization or civil society. Everything from familial relationship to relationships between parent and child. Everything from small businesses to giant corporations to voluntary associations to religious associations and so on and so forth.
Now we have to ask, "How then does the government enter into the picture?" Well, it turns out in this imaginary state of nature, if we were all clear about what our rights are and our obligations and we were of perfectly good will, there wouldn't be any need for government. But as Thomas Hobbs wrote, "Life in the state of nature is solitary, poor, nasty, poor, brutish and short." In other words there are inconveniences as Locke put it with living in the state of nature. And so, it behooves us to come out of it and to create civil society and government.
And that's exactly what Jefferson turns to next when he writes, "That to secure these rights..." which ones? The ones I've just outlined "That to secure these rights governments are instituted among Men deriving their just powers from the consent of the governed." So notice government is twice limited. It's limited by its ends, to secure our rights and its means which must be consented to. And so the picture that comes out of the Declaration of Independence is a world in which each of us is free to plan and live his own life as he sees fit, provided he respects the rights of others to do the same and government is there to secure those rights and do the few other things that we may have authorized it to do. And when you spell those rights out more fully you see that it will explain even apparently difficult situations.
For example: If I have a home with a lovely view of the bay but between my home and the bay you have a home and you decide to build a second story on that home and therefore take my view, the question arises, "Have you violated my rights?" And the answer is, "No." Why? Because I never owned that view. I enjoyed it because it ran over your land and indeed I could have made that view mine. I could have gone to you and negotiated an easement running with the property that you didn't build the second story and paid you for that easement. Or I could go to the zoning board and say, "Zone that guy so that he can't build a second story," and then I could get my view free. In fact, this issue came up we were speaking about Virginia in the case of Thomas Jefferson and Monticello. It seems that there were lovely views from Monticello, but in a distant hillside there were some condominiums going up. And, of course, the Monticello group was so outraged at that and so they sought to have those condominiums condemned and no allowance of them on that distant hill. In other words they were prepared to traduce Jefferson's views to save his views. That's the kind of thing that we're up against here. You see?
All right. Now let's go to the Constitution because that's the vision that was held eleven years later when the Founders returned as framers to Philadelphia to write a new Constitution. They were faced with, as Madison put it, "How to create a government was at once strong enough to secure our rights and do the other things we want it to do yet not so extensive and powerful as to violate rights in the process." And they did that through the checks and balances we're all familiar with. But they started in the Preamble. "We the people" for the purposes listed "...do ordain and establish this Constitution." So notice they put us right back in state of nature theory. All power starts with the people. They bring the government into being. They give the government whatever power it has. The government does not give the people its rights. The people already have their rights. It's in virtue of exercising those rights that they bring government into being and empower it.
That's the order of things from the natural rights tradition. And so, you look at the body of the Constitution itself and you see how they went about that. On the one hand they sought to empower government, but on the other hand they sought to limit that power and to achieve the appropriate balance for that. To empower government to do the few other things that we authorize it to do yet not be so powerful as to violate our rights in the process. And you see the division of powers between the federal and state governments with most power left with the states. The separation of powers between the three branches with each branch defined functionally. The provision for a bicameral legislature with each house differently constituted. The provision for a unitary executive with the power to veto legislation and the power of Congress to over-ride it by a supermajority. The provision for an independent judiciary to check the political branches and to check the states later on. The provision for periodic elections to fill the offices set forth in the document.
But the main restraint on overweening government remember they had just fought a revolution to rid themselves of overweening government, they weren't about to impose it in turn on themselves the main restraint took the name of the "doctrine of enumerated powers." And I can state it no more simply than this: If you want to limit power, don't give it in the first place. And that's exactly what you see when you look at the very first sentence of Article I. "All legislative Power(s) herein granted shall be vested in a Congress..." By implication not all power was herein granted. You look at Article I, Section 8, and you will see that Congress has only eighteen enumerated powers. And then you look at the Tenth Amendment the last documentary evidence from the founding period and you see that doctrine of enumerated powers spelled out explicitly. And I'll quote, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." In other words the Constitution establishes a government of delegated, enumerated, and thus limited powers.
And then you look at the Ninth Amendment and you see the obverse of the Tenth. The Ninth Amendment says, "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people." During the ratification debates in the states it became clear that the Constitution would not be ratified unless a bill of rights were added. But there were objections to adding a bill of rights. Two main objections: That it was unnecessary; and secondly, that it was dangerous to have a bill of rights. "Unnecessary," said Wilson, Hamilton and others because, why declare that there is freedom of the press, for example, when no power is given with which to violate the freedom of the press? Notice, they took the doctrine of enumerated powers seriously as the main restraint on overweening government. Because where there is no power, by definition, there is a right.
Secondly, they said, it would be dangerous to have a bill of rights. Why? Because we have in principle an infinite number of rights. The right to get up in the morning when you want to. The right to go to bed when you want to. The right to wear a hat. Then you're not going to put these in a constitution, but by ordinary principles of legal construction, once you start enumerating some members of a category to be protected, the failure to enumerate all members will be construed as meaning that only those that are enumerated are meant to be protected in contradistinction from those that are not enumerated. And so it was to address that problem that they wrote the Ninth Amendment which says, "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people." And so with the Ninth and Tenth Amendments you have a recapitulation of the philosophy that was first set forth in the Declaration of Independence. The idea is that each of us has a right to plan and live his own life as he works his way through life, provided you respect the equal rights of others to do the same. Government is there to secure those rights and to do the few other things that we've all authorized it to do.
And we've lived under that limited government, more or less, for a hundred and fifty years. It wasn't perfect to be sure. There was the oblique recognition of slavery. The framers realized that slavery was inconsistent with their founding principles. They hoped it would wither away in time. They made their peace with it in order to insure unity among the thirteen states. It did not wither away. It took a Civil War and the passage finally of the Civil War Amendments: Thirteen, Fourteen and Fifteen. Which for the first time provided for federal remedies against state violations of our rights. The Bill of Rights did not apply against the federal government until the Fourteenth Amendment was passed and ratified. Once that was done you can think of the Constitution as having been completed because the grand principles of the Declaration were at last incorporated in the Constitution itself.
Now we come to the great watershed: The Progressive Era at the end of the Nineteenth and early Twentieth Century. As I said at the outset, these are the people who were trained in the elite schools of the Northeast. They were looking to Europe for models of good government: Bismarck's Social Security scheme in Germany; English utilitarianism, which had replaced natural rights theory. The idea being that law, policy, judgment, were to be justified not with reference to whether they protected our rights but rather with reference to whether they provided the greatest good for the greatest number. Notice, it was an approach to law that lent itself peculiarly to statutory legislative-made law as opposed to judge-made law based upon principles of right and wrong. It was a policy approach to law. What shall we do as a people? And so this approach, this fundamentally different approach to government can be captured simply as this: The Progressives thought of government not as a necessary evil as the framers had but as an engine of good, and instrument through which to solve all kinds of social and economic problems, which they set about to do mostly at the state level.
And they did it in any number of ways. I will give you, first of all, an egregious example and then I will go into the property rights area and show you how they did it there. The most egregious example is probably in a case called Buck v. Bell in 1927, a decision written by the sainted Justice Oliver Wendell Holmes, the great Progressive from Cambridge, Massachusetts and Harvard Law School. It was a challenge to a Virginia statute that authorized the sterilization of people thought to be of insufficient intelligence. It was a sweetheart suit that was brought. That is to say, by parties in favor of the legislation in order to make sure that it is approved by the Supreme Court. By the way, I should note the modern eugenic movement which was all the science of eugenics was all the rage of the day. It was championed by such luminaries of the day as the president of Planned Parenthood, the president of Stanford University. The idea was: How are you going to improve the human race I mean that's our social goal, right if you're going to let those people procreate? So the idea was to sterilize them. Indeed, Herr Hitler went to school on some of the things that were taking place under the modern eugenics theory in this country.
And so it went to the Supreme Court in 1927 and in an opinion of no more than five paragraphs concluding with the phrase, "Three generations of imbeciles are enough." Holmes upheld the Virginia statute and there followed in this country some seventy thousand sterilizations right up into the 1970's in the state of Virginia, it turns out. And so this is one of the most egregious cases but it was basically in the area of economic liberties and property rights that they were making their inroads. And I'm going to come back to the property rights in just a minute but right now let me show you how it was that this finally turned the Constitution on its head.
During the early decades of the Twentieth Century most of this political activism by the Progressives took place at the state level and the courts were standing athwart this effort to a significant degree. Not entirely to be sure. But to a significant degree they did enforce the Constitution. By the time the New Deal came along and the Roosevelt Administration came into power, the focus of the Progressives shifted from the state level to the federal level. Well, during the first four years of the Roosevelt Administration, the Supreme Court found one program after another that Roosevelt had gotten through Congress to be unconstitutional. Either because there was no power to pass such a statute or because its exercise was in violation of our rights. And so, after the landslide of election of 1936 when all but two states namely Maine and Vermont, how Vermont has changed, it went for Landon when all but two states went for Roosevelt, you had Roosevelt in January of '37 unveiling his infamous court-packing scheme. His threat to pack the Supreme Court with six new members of his own choosing. Well, there was an uproar in the country and not even Congress would go along with that.
Nevertheless, the Supreme Court got the message and it was the famous "switch in time that saved nine" and the court began turning the Constitution on its head. It did it in three main steps. First of all in '37 it eviscerated the very centerpiece of the Constitution: The doctrine of enumerated powers. In 1938 it bifurcated the Bill of Rights and gave us a bifurcated theory of judicial review. And in 1943 it jettisoned the non-delegation doctrine. Those are technical issues. I'm going to just skim over the top of them just to give you a sense of what they were about.
In 1937, in eviscerating the doctrine of enumerated powers, the court took two clauses in the Constitution the so-called General Welfare Clause and the Commerce Clause, both of which were meant to be shields against overweening power, and turned them into swords of power. The General Welfare Clause was the first of Congress' powers to tax and spend for the general welfare of the United States.
In 1936, in the case called United States v. Butler, the Supreme Court revisited a debate that had taken place early in our history between Hamilton on one side, and Jefferson, Madison, and virtually everybody else on the other side, on the meaning of this clause. Hamilton stood for the idea that Congress had an independent power to tax and spend for the general welfare. "That couldn't possibly be right," said Madison and the others. Because if that were the case, since money can be used to accomplish anything, then any time the Congress wanted to do something that was not authorized to it, because no power had been given to it with which to do it, it could simply say that it was taxing and spending for the general welfare and make an end-run around the doctrine of enumerated powers. Indeed, they added, what was the point of having enumerated Congress' other powers? They could have stopped right there since Congress under this reading could do anything it wants. And they were absolutely right on that. Nevertheless, in 1936 in the Butler decision, the court came down on Hamilton's side in dicta, that's not the holding of the case, that's language peripheral to the holding. A year later, however, in the Social Security case the court elevated the dicta to the holding of the case and so the floodgates were opened to the modern redistributive, the modern welfare state.
In the case of the commerce power, this was a power that was granted to Congress in order to address the problem that had arisen under the Articles of Confederation. Namely that states were erecting tariffs and other measures to protect local merchants and manufacturers from competition from out of state merchants and manufacturers. And it was leading to the breakdown of the free flow of goods and services among the states. So, to address that problem the framers gave Congress the power to regulate or make regular commerce among the states. It was essentially a power to negate state actions that frustrated the free flow of interstate commerce. As indeed, in the first great commerce clause case Gibbons v. Ogden in 1824 was done. But in 1937, in National Labor Relations Board v. Jones & Laughlin Steel Corp. which upheld the National Labor Relations Act, you had the court saying that Congress had a power to regulate anything that effects interstate commerce. Of course, there's nothing that does not at some level effect interstate commerce so now the floodgates were opened to the modern regulatory state. So, there we now had essentially the evisceration of the doctrine of enumerated powers, the very centerpiece of the Constitution.
But you could still invoke your rights. So to address that little problem, in 1938, in the United States v. Carolene Products Company case which was an egregious case of special interest legislation passed by Congress to protect one part of the milk industry from competition from another part of the milk industry. This case came before the court and the court in famous or infamous Footnote Four distinguished two kinds of rights: Fundamental and non-fundamental. And two levels of judicial review. If a law implicated fundamental rights like speech and voting notice the democratization of the Constitution why then the court would apply what is called strict scrutiny. The government would have to have a compelling interest and its means would have to be narrowly tailored to serve it. In all likelihood the statute would be found unconstitutional. On the other side, if a law implicated non-fundamental rights: Property, contract, the rights we exercise in ordinary commercial relations, why then if a law implicated those, the court would apply the so-called rational basis test, which is no test at all. It says that if the government has some reason, some conceivable reason, that's good enough. And so, that legislation sailed right through. Essentially, the court stepped out of judicial review. We've thereafter had two and one quarter branches of government. And so there's the explanation of why it is you have, as Jim explained this morning, such a hard time getting into court and once you're there getting an opinion that will satisfy you.
But now the court was not through because there was a surfeit of legislation as a result of these three opinions that was pouring through federal, state, and local government. And Congress could not handle all of this. So what did they do? They started delegating power to the executive branch agencies that they were creating. There are over three hundred such agencies in Washington today. This was a violation going right back to the very first sentence of Article I. Remember I said, "All legislative power herein granted shall be vested in the Congress." That was focusing on the enumerated powers part.
Now, let me focus on the other part. "All legislative power herein granted shall be vested in a Congress." In other words, Congress is where you're supposed to do the legislating, not EPA, not HHS, not the National Labor Relations Board, and so on and so forth. All these lettered agencies that's the modern executive state that we live under today where virtually law is made. Congress passes a broad statute. Call it Obamacare. I think you've probably heard of it. Then it turns it over to the agencies: The IRS, HHS and so on and so forth, to write all the rules and regulations. And who writes them? Unaccountable, unelected bureaucrats are the people who write all these rules. So there is the origin of the modern executive state.
Now let me put this into a property rights context. During this time what you had was the slow early in the century accretion of power to these bureaucratic agencies that were being created, federal, state, and local. The first property rights case to come along, one could say, was Block v. Hirsh. It was a pair of rent control cases out of New York (City) and Washington (D.C.) during World War I. And it reached the Supreme Court and here it was again Oliver Wendell Holmes who found those rent control laws perfectly legitimate because they were passed under exigent circumstances. Well, of course, World War I ended. Presumably those exigent circumstances ended, but those rent controls are still in place in New York City, as we all know, and in Washington as well. And so there you had the beginning of the decline of property rights.
Now, we move a year later in the Mahon case, Pennsylvania Coal Co. v. Mahon. This was a case of a statute being challenged from the state of Pennsylvania. In Pennsylvania, prior to that, the coal companies had entered into contracts with the surface owners to mine the coal under their property and in the contract they distinguished three levels. The surface estate, the mineral estate down deep, and then the support estate between those two estates. And the idea was that they were going to mine the deep estate but eventually they were going to also mine the coal in the support estates. And when they would do so there would be some subsidence of the farms and the stores or whatever else may have been above that. And then the question at contract was who should bear the risk when they eventually get around to do that? And it was decided at contract that the surface owners would bear that risk for which they were paid a fee. So, this is the way things went for a while until, you know, eventually, of course, some of those surface estates started to subside. And what do you think that the good burghers of Pennsylvania did? They went to the legislature and asked for relief in the form of the statute that was before the Supreme Court.
Now this was a statute which could have been decided on the contractual grounds that they had entered into. But it wasn't. It was decided on the basis of a "takings." And here the sainted Justice Oliver Wendell Holmes came down on the coal miners' side with an opinion that read, "If a regulation goes too far then it constitutes a taking." Well, we have had since then some seventy-odd years, as Justice Scalia said in 1995, of ad hoc regulatory takings over the meaning of this phrase "too far." And so that was the state of things then.
Four years later in the Euclid decision, Village of Euclid, Ohio v. Ambler Realty Co., you had a challenge to the zoning statute whereby the owners of the property who brought the suit had suffered a seventy-five percent loss of the value of their property. It went to the Supreme Court and the court upheld the statute and therefore the seventy-five percent loss of these people. And so there you had essentially the end of the classic approach to property rights which was rooted in the idea that you have a right to use your property as you wish. And the burden is upon anybody who objects to show why you should not be able to use it that way and in particular should be able to show that you are violating a right of his and that's why you cannot use it that way. We're talking here about the standard nuisance and risk objections to property rights. You can't use your property in a way that harms your neighbor. I think we would all all property owners agree with that because that's the defense of property rights. It's your neighbor's property rights. They are being upheld. But in order to carry this regime out you've got to have a clear conception of what rights you do have in your property. And the old common law judges basically got it right. But remember they were starting with a procedural law whereby you had the presumption as a property owner and if somebody objected he's got to show that your use violates his rights.
What we had with the Progressives, however, was the rise of planners. I'm sure that rings in your ears. Planning agencies: Local, regional, state, federal planning agencies. All of which prohibit you from using your property until you can prove that it is a rightful use. And, of course, that is all but impossible under many regimes around the country today. In other words we have flipped the presumptions and burdens of proof by virtue of what has come to be called the "permitting regime." You cannot use your property until you get a permit to be allowed to do so. If we had to do that with respect to speech, to religion, to assembly, we would scream bloody murder. "You mean, before I can speak I've got to get a permit allowing me to speak? Before I can practice my religion I've got to get authorization from the government to practice my religion?" We would not for a minute stand for that. This is why Chief Justice Rehnquist in the Dolan v. City of Tigard decision in 1994, spoke of property rights as being like poor relations in the Bill of Rights. They are second class rights.
And we have today two fundamentally different approaches to this problem although they are intimately connected. One is the eminent domain regime and the other is regulatory takings regime.
In the eminent domain regime, what you have is an invocation of the Fifth Amendment's Takings Clause, "...nor shall private property be taken for public use, without just compensation." There are two fundamental problems with the way that is applied today. One, with the definition of public use, and two, with the definition of just compensation. Today just compensation means market value. That obviously, in most cases, will not be what the property is worth to the person from whom it is taken. If it were he'd have his property on the market. The fact that he doesn't have his property on the market means it's more valuable to him than what he can fetch on the market.
With respect to the public use, we can think of four different categories of public use definition. The first is the standard one with the government takes the property for a literally public use in order to build a highway, a school, a fort and so forth. No problem there with respect to the definition of public use.
The second is where it takes the property and transfers title to another private party but that private party is a public utility-like institution a cable company, a railroad, a sewer line, that kind of thing which may be in the hands of a private party. And there it's justified because usually the private party is highly regulated to whom it is sent, is highly regulated with rates of return and the people are enabled to take advantage of private ownership which is usually much more efficient than having to do all of this through the public instrumentality.
The third and the fourth categories are closely connected and that is blight reduction and the fourth is economic development as in the Kelo v. City of New London case. In these two areas what you've got is the government, in the case of blight, condemning whole neighborhoods, sound property and unsound property alike. The federal bulldozer, think of it that way. And in the economic development area think of the Kelo case whereby, again, they do it not for reasons of blight but in order to encourage economic development. In other words, in order to encourage upscale building as opposed to the people that are there. And this is the kind of thing that is a rank abuse of the public use restraint. It is actually turning it over to private use and it is replete with the kind of shenanigans and money under the table that we see often in small communities and large alike.
Now, I'm going to conclude on the regulatory takings because this is where so much abuse takes place today and we don't have anything like a well worked out theory of the matter. If government intrudes physically on your property you will get relief. That was the Loretto v. Teleprompter Manhattan CATV Corp. decision. If it engages in a temporary taking, that's the First English Evangelical Lutheran Church v. Los Angeles County decision, 1987, you will get compensation for that. If there is no nexus I think probably Jim talked about the Nollan v. California Coastal Commission and Dolan v. City of Tigard cases this morning you will probably get relief there. But if you are in a Lucas v. South Carolina Coastal Council kind of situation, that is to say and I'm going to give you the facts of that just to give you an idea of how bad it is in this area then you will probably not get relief unless you are completely wiped out.
David Lucas bought two parcels of land in 1986 on the outer banks of South Carolina with the idea of building a home on one plot and a home to sell on the other. Nothing extraordinary about what he was doing. There were homes on either side of these two lots and between them. But between the time he bought the lots and he acquired the financing to build the homes, the state of South Carolina passed the Beachfront Management Act to promote tourism, to preserve certain flora and fauna, but the effect of which was to render his property all but useless. He could picnic on it. He could pitch a tent on it. But it was pretty expensive tenting and picnicking property at a million dollars. And so he did what every red-blooded American would do, he sued. And he won at the trial level the state trial level and he lost at the State Supreme Court, three to two. He went to the U.S. Supreme Court and there he prevailed five to four.
First of all, notice there were four justices who would have allowed this to stay right as it is. He spends a million dollars for two parcels of land, the government comes along and zones it useless and he's out a million dollars. That's fine with them because their aim, being good Progressives, was to promote tourism, to preserve certain flora and fauna, and the like. Now it's perfectly all right with four members of the Supreme Court. Scalia said that because it was virtually a wipeout he was entitled to compensation. But the problem is that most of these takings do not result in a one hundred percent wipeout. You lose fifty percent, seventy-five percent of the value, as in the Lucas case and so forth. To which Scalia responded, "Well, takings laws are full of these all or nothing situations." Thank you very much Nino. And so that is the situation that we're in today. Regulatory takings law is most often adjudicated under the Penn Central Transportation Co. v. New York City case which Jim discussed this morning, That three-part test which nobody understands. And he probably told you if you are up against Penn Central there's one thing you have to know. You will lose. It is that bad. Occasionally you find someone who does win. There was a case in California recently where someone did win, but it is a fluke.
And so, to sum this all up, what we are suffering from today is the kind of mindset that came from the Progressives. It's small "d" democracy with a vengeance. It's majoritarianism run amok. At best, it is more often special interest knowing how to work the system than it is majoritarianism. And we see this in Washington over and over again. K Street is full of the people who know how to work the system to the advantage of the people who hire them. And so this is what we've come to under modern Progressivism. And it will not change until we get in office the kind of people who understand what has happened to the Constitution. It was never set up as a small "d" democratic institution. It was set up to preserve liberty. That's exactly what Madison had in mind when he said that the aim of the Constitution and of government is to preserve property. And by property he meant to preserve lives, liberties and estates. So we have to go back to those first principles if we're going to address the kinds of problems that we heard Martha talking about and that all of you know so well.
Thank you very much.