Apr 21, 2020

Why COVID-19 Lockdown Orders Require Just Compensation

A property rights approach to pandemic policies
F. E. Guerra-Pujol

The COVID-19 pandemic poses a stark and tragic choice: how do policymakers balance the value of protecting people’s lives with the value of protecting people’s livelihoods?

Most state governors, following federal guidelines (paging Dr. Fauci!), have emphasized public health by issuing unprecedented and compulsory economic suppression orders, commonly referred to as “lockdown,” “stay-at-home,” or “shelter-in-place” orders. Broadly speaking, these orders require all “non-essential” businesses to close their doors and prohibit their employees from leaving their homes to work. Although the definition of “essential” varies with each order, the common goal of these lockdown orders is to promote social distancing and slow the spread of infection.

The key question remains: is it possible to balance the health of the economy along with the health of our people? So far, many of the economic harms from this crisis have been either outright ignored or partially addressed through a patchwork of ad hoc stimulus checks, loans to affected businesses, and monetary interventions. But these remedies are neither appropriate nor sufficient. There is an alternative approach to ameliorate the financial fallout from the current crisis that strikes a better balance.

I do not question the legal authority of the states to issue lockdown orders. The United States is a federal system, one in which power is divided among the states and the federal government. Under our unique system of federalism, the states—not the feds—retain a general “police power” to protect the health, safety, and welfare of their residents.

Therefore, rather than question the wisdom or efficacy of such lockdown orders, I shall make an alternative and constructive proposal, one that balances public safety with liberty and property rights. Specifically, all lockdown orders should occur within a well-defined legal and property rights framework under the takings clause of the Fifth Amendment to the US Constitution.

Any order requiring “non-essential” workers to stay at home or “non-essential” business firms to close their doors constitutes a constitutional taking because it prevents such employees and firms from exercising their property rights while depriving them of their liberty interests as well.

Accordingly, instead of handouts, loans, or bailouts through poorly targeted federal stimulus packages, people and firms adversely affected by state lockdowns must be compensated as of right. And because of the federal nature of our system, it is state and local governments who must provide this compensation.

Congress could still have a role to play: it could provide block grants to the states to fund the takings reimbursements. Either way, state governments are legally and constitutionally compelled to provide just compensation to all nonessential employees and firms who have been deprived of their property and liberty rights.

As a constitutional provision, the application of the legal takings principle is well established in US jurisprudence. It is the reason that governments must pay property owners when appropriating land for eminent domain, for example. In any case, while some may take issue with the specific legal application of the takings clause to the current pandemic, there is a more fundamental ethical reason for compensating shutdown-affected property owners and employees as well.

The takings approach follows from the moral reasoning laid out in Robert Nozick’s classic work Anarchy, State, and Utopia. Nozick begins with the premise that every person has rights, including the right to liberty and property. These rights are pre-political and must be respected by all, but at the same time, these rights are limited by the existence of other rights-holders. As a result, you must respect the rights of others; you do not have the right to cross any moral boundaries while you are exercising your rights. Specifically, you do not have the right to impose unjustified harms or unjustified risks on others.

This classical liberal approach may appear unworkable in the context of a pandemic because one person’s refusal to engage in social distancing by itself creates significant risks for innocent third parties, including the risk of death for persons with underlying medical conditions. In other words, every human activity—no matter how benign its motivation or useful its consequences—carries some positive and nontrivial risk of injury to self and to others. Or as Nozick himself points out, “it is difficult to imagine a principled way in which the natural rights tradition can draw the line to fix which probabilities impose unacceptably great risks upon others.” Difficult, but not impossible!

This is where the property rights solution to the current pandemic comes in. If an economic shutdown is indeed the most effective method of saving lives during a pandemic (by requiring most people to stay at home and most businesses to shut down), then everyone who is inconvenienced by the shutdown (rich or poor, small business or large) must be compensated for this inconvenience as soon as possible by the governmental entities that ordered the shutdown.

One of the advantages of this natural rights approach is that it recognizes the reciprocal nature of the pandemic problem. That is, on the one hand, not shutting down the economy makes it easier for the pandemic to spread, but on the other, the decision to order an economic shutdown also imposes significant costs on “non-essential” persons and business firms.

If the government is going to order a business to close its doors for the greater good, then the government is also required under the Constitution to pay “just compensation” in exchange for one’s cooperation. This property rights approach to the pandemic not only respects the federal structure of our constitutional system of government, it also represents a fair compromise between our need to make significant sacrifices for the common good (by staying at home for a reasonable period of time) and our bedrock moral right to receive some of form of meaningful or just compensation in exchange for the deprivation of our liberty.

F. E. Guerra-Pujol teaches business law at the University of Central Florida. He may be reached at fegp@ucf.edu.

Photographer: Andrew Harrer/Bloomberg via Getty Images

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