So if one is truly concerned about the holdout power problem, then the correct solution is to require the city to eliminate the artificial scarcity that "requires" the building to be built in New London rather than some other city, the same way that a new school would have to be built in New London. If we allow both the subsidies and the Taking for the benefit of the private party, we are allowing the distribution tail of what city the Pfizer headquarters will be built to wag the efficiency dog of whether the homeowner is holding out versus having subjective value. Instead, we want to have the parties bargain ex ante before they finally select the city--i.e., choose the city and the plot of land at the same time--not bargain ex post after the city is selected. Forcing an ex ante bargain when there are still many substitutes for the proposed site would eliminate the holdout problem and allow us to determine the extent of parties' subjective value, because the negotiations would be conducted against the backdrop of a competitive market, rather than a bilateral monopoly. The bilateral monopoly is thrust upon the city in the road or post office scenario; it is freely-chosen in the Kelo situation.

Instead, the ruling in Kelo enables the worst possible economic outcome--it permits cities to create artificial scarcity just to get a larger piece of a stable-sized pie (getting Pfizer to New London rather than Hartford), while then permitting cities on the back end to take land from private landowners who may or may not be losing subjective value and being undercompensated in the process.

And the incentive effect of Kelo is obvious--it now enables corporations to extract both subsidies and takings as the price for locating in city A rather than city B.

Justice O'Connor and the other justices in dissent were deeply troubled - and rightly so. "The specter of condemnation hangs over all property," worried Justice O'Connor. "Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory."

The majority dismissed these concerns as mere "hypotheticals." To the petitioners' plea to stick to the founding conception of the Takings Clause and categorically exclude economic development takings, the Court said no. When the homeowners argued that "public use" ought to stay limited to an actual use by the public or at least an assured right of public access, the Court said no again. Instead of setting forth clear guidelines, Justice Stevens - writing for majority - simply deferred to the urban planning of the municipality and said other cases "can be confronted if and when they arise."

Well, they're here. The ink was barely dry on the opinion when a Texas town filed to seize two family-owned seafood companies, in favor of transferring these properties to a fancier business with a private boat marina.

A few weeks after Justice O'Connor's expression of worry, a Missouri municipality voted to condemn 85 homes and small businesses, intending to use the property for a $165 million shopping center and office complex.

And yet another city in the "show-me state," Arnold, plans to take 30 homes and 15 small businesses, transferring the property to be used for a Lowe's and a strip mall.