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entities may also serve as a constraint on government behavior. Whatever the explanation, the recent history of China suggests that caution is in order before concluding that strong legal rights enforced by courts are a necessary precondition for creating the degree of government forbearance needed for investment in property to flourish.
• The Rule of Law
The most general legal strategy for achieving a significant degree of government forbearance is a commitment to the rule of law. Like other concepts in political theory, there is considerable dispute about what “rule of law” means. For present purposes, we can define the rule of law as a strategy for promoting forbearance by requiring that the government act in accordance with rules that are generally applicable, knowable in advance, and enforced by an impartial judiciary. The objective, again, is to enhance the predictability of the government’s behavior, so that owners have greater confidence about what the government is likely to do in the future that could affect their property. The predictability here is supplied by the expectation that courts will require the government to obey existing laws that protect property, and that the government will obey the courts.
There is no freestanding rule of law norm in American law. Instead, the rule of law is supported by a variety of doctrines and understandings. We will briefly consider four: procedural due process, the doctrine of vested rights, stare decisis, and waivers of sovereign immunity to permit suits against the government.
Procedural Due Process
One very important doctrine reinforcing the rule of law is procedural due process. The Due Process Clauses of the Fifth and
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Fourteenth Amendments to the U.S. Constitution provide that the government may not deprive individuals of “life, liberty, or property, without due process of law.” These words have been interpreted to mean many things. The most important from the present perspective is a commitment to the principle of legality. Individuals who have entitlements to “life,” “liberty,” or “property” may not have these things taken away by the government unless the government demonstrates it has complied with all requirements of existing law that protect these interests. For example, assume the law provides that the government may not seize an individual’s real property for nonpayment of taxes unless the government proves that the taxes are owed and have not been paid. Under the Due Process Clauses, the individual is entitled to demand a hearing before any seizure takes place, to challenge the legal proposition that the taxes are owed and/or the factual claim that the taxes have not been paid. In effect, due process guarantees that the individual be given an opportunity to challenge the legality of the seizure before it occurs, both as to its legal and its factual basis.
This is a powerful reinforcement of government forbearance. Procedural due process provides a weapon for the property owner to assure that the government does not ignore the rules on the books, either because of hostility to the owner, a mistake about the relevant law or facts, or just plain sloppiness. To be sure, procedural due process does not protect property owners against prospective changes in the rules that have an effect on property. The government can change the rules, and in any future dispute the new rules will be applied, not the rules that were in effect at some time in the past such as when the property was acquired. Still, the due process guarantee makes the government’s behavior more predictable, and thus enhances the security and value of property rights.
One important question that arises in the due process context is how we define the “property” that is subject to this guarantee. (Similar questions are presented about the meaning of “life” and “liberty,” but this would take us too far afield.) The basic answer is
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that just about everything we have covered in this book qualifies as property for procedural due process purposes—and more besides. In a series of controversial decisions in the early 1970s, the Supreme Court held that property includes all entitlements grounded in law upon which people rely in their daily lives.13 Under this “new property” definition, not just conventional property—such as houses, cars, and securities—is included in the category of due process property, but also welfare benefits, disability benefits, government employment protected by civil service laws, publicly supplied utility services, professional licenses, and even public schooling.14 This goes well beyond the common-law idea of property as based in large part on a right to exclude others from specific resources. If a central reason for wanting to secure government forbearance is to enhance incentives to develop and invest in property, it is not clear that welfare benefits, utility services, or the right to attend public school should be regarded as property, as these benefits are not things in which individuals invest. They may use the stream of benefits to invest in something else, for example, in developing their own human capital. But the benefits themselves are not subject to individual control and direction. Arguably, therefore, the Court’s “new property” definition is overbroad.
The overbreadth of the definition of property would not matter, and might even be considered a good thing in terms of expanding the scope of the rule of law, except for one concern: the broader the definition of property, the greater the pressure on the courts to dilute the procedural protections afforded for the protection of property. There is some evidence that this has occurred. Before the Court embraced the “new property” conception, it was understood that the government must generally afford a person a hearing on the legality of a taking of property before the deprivation takes
13.See Bd. of Regents v. Roth, 408 U.S. 564 (1972); Goldberg v. Kelly, 397 U.S. 254 (1970).
14.Charles A. Reich, The New Property, 73 Yale L.J. 733 (1964).
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place, subject to some narrow exceptions for public emergencies and the like.15 After the expansion of coverage reflected in the new definition, the Court announced that the procedures appropriate in any given context should be determined by a balancing test, in which courts weigh the significance of the private interest, the marginal value of additional procedures in protecting that interest, and the cost to the government of providing the additional procedure.16 This balancing test has allowed the Court to declare that many interests are adequately protected by hearings held after, rather than before, the deprivation occurs,17 as well as to scale down the required procedures to include in some cases mere notice and an opportunity to voice objections before a nonjudicial officer.18 If these dilutions spill over to traditional property rights, this would represent a serious erosion of protection against unlawful government interference with property.
Vested Rights
A second and much less well-defined rule of law constraint is the doctrine of vested rights. Roughly speaking, rights are vested when there are no contingencies of law or fact that might stand in the way of their enjoyment. Thus, a future interest is considered vested either when it becomes possessory (“vested in possession”) or when any conditions precedent that must be resolved before it can take effect have been satisfied (“vested in interest”). (See Chapter 5.) The core example of a vested right is full ownership of tangible property,
15.See, e.g., N. Am. Cold Storage Co. v. Chicago, 211 U.S. 306 (1908).
16.Mathews v. Eldridge, 424 U.S. 319 (1976).
17.Id.
18.See, e.g., Goss v. Lopez, 419 U.S. 565, 576 (1975) (student entitled to brief face- to-face hearing and statement of reasons from school official before being suspended from public school, assumed to be a property right).
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for example, a fee simple in land. But the concept has a broader signification as well. In the famous case of Marbury v. Madison,19 William Marbury’s commission to serve as a justice of the peace was described as a vested right, because his appointment papers had been signed by the President and sealed by the Secretary of State and all that remained was for the commission to be delivered, which the Court concluded was a purely ministerial act that entailed no discretion. So the concept of vested rights can include things such as public offices as well as more conventional property rights.
Protecting vested rights was once described as the central concern of American constitutional law.20 In its strongest form, the doctrine of vested rights provided that neither courts nor legislatures could interfere with rights once they were vested. In a weaker form, the doctrine proclaimed that all retroactive interferences with vested rights were prohibited. Both forms of the doctrine have faded considerably over time. One reason is the lack of any express textual basis for the doctrine of vested rights in either the federal or most state constitutions. A second problem is the difficulty of defining the key concepts of “vesting” and “retroactive.” A third problem is the accumulation of counterexamples, whereby demands for social change have led to the overturning of vested rights. The freeing of slaves, who were regarded as property under earlier law, and the prohibition movement, which rendered distilleries and liquor stocks worthless, are examples. In both cases the “de-vesting” of rights was authorized by a constitutional amendment, but these and other upheavals nevertheless produced major cracks in the edifice of vested rights.
Notwithstanding its weakened status, the concept of vested rightscontinuestoplayaroleinpromotinggovernmentforbearance.
19.5 U.S. (1 Cranch) 137 (1803).
20.Edward S. Corwin, The Basic Doctrine of American Constitutional Law, 12 Mich. L. Rev. 247 (1914).