and, second, if it does, what amount of compensation would be ‘just’ for a taking of this sort.7

Judicial and academic discussions of these two questions have often appealed to the concept of average reciprocity of advantage. However, these appeals have frequently been cursory, leaving the concept unanalysed and consequently failing to understand its limitations. This chapter aims to rectify that situation. Its discussion shall proceed as follows. First, a brief survey of prominent examples from judicial opinions and academic commentary will give us a basic idea of what work the concept is intended to accomplish and how it is thought to achieve those ends. I then shall argue that the classic paradigm of average reciprocity of advantage is best understood as arising from a regulation’s having solved a coordination problem, and that the specific conditions necessary for regulatory burdens to reliably provide a genuine reciprocal advantage are likely to be satisfied only infrequently. Hence, when we closely examine attempts to justify various property regulations on the grounds that the owners burdened by those regulations have been made whole by receiving in-kind compensation, we see the implausibility of such justifications. Nevertheless, I argue, we should not conclude that average reciprocity of advantage therefore has no role to play in justifying property regulations, since such a conclusion would itself have implausible implications inconsistent with broadly and deeply held convictions about the legitimate scope of such regulations. Instead, I shall suggest, the proper conclusion is that when government regulations burden property owners, the presence of reciprocal advantages benefiting those owners derives its importance, in significant part, not from an illusory potential to make property owners whole but rather from the role that such reciprocity plays in preserving the respect due to civic equals.

2. Background

The basic notion of in-kind compensation or average reciprocity of advantage has been invoked to justify several central features of property law, including states’ power of eminent domain, the permissibility of zoning, and more generally the power to regulate property uses under certain circumstances without owing monetary compensation (i.e. without committing a ‘regulatory taking’). Although these justifications follow a similar general strategy of arguing that the presence of a reciprocal advantage remedies any deficiencies left behind by incomplete or wholly absent monetary compensation, the details of those justifications vary depending on context. Hence, before we attempt to analyse the concept of average reciprocity of advantage, it will be helpful to begin with a brief survey of these varied applications, in order to acquire a clearer sense of what work the concept typically is intended to do.

7 Although these questions are conceptually distinct, in practice they are sometimes conflated, with the answer to the first question about whether a regulatory taking has occurred hingeing upon whether the property owner has received sufficient ‘in-kind’ compensation to balance out the burdens imposed by the restriction.

2.1 Judicial opinions

The case generally credited with introducing ‘average reciprocity of advantage’ into the American legal lexicon is Pennsylvania Coal Co. v Mahon, decided by the US Supreme Court in 1922.8 At issue was the constitutionality of the Kohler Act, a Pennsylvania statute which prohibited mining for coal in ways which would cause the subsidence of residences located above the mine shafts. The Pennsylvania Coal Company had earlier sold the surface rights to certain land to Mahon (or Mahon’s predecessor in interest), but the contract had reserved the right to extract all of the coal under the surface and had explicitly allocated any risk of subsidence to the owners of the surface rights.9 Despite those express contractual provisions, Mahon sought an injunction to prohibit the company from removing coal that provided support for the land’s surface, arguing that the Kohler Act prohibited such removal. The trial court denied the injunction, finding the Act to be unconstitutional; the Pennsylvania Supreme Court reversed, and a subsequent appeal brought the case before the US Supreme Court.

Justice Oliver Wendell Holmes, Jr, writing for the majority, began his analysis of the case by noting that ‘[g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law’.10 However, once the diminishment ‘reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to sustain the act’.11 The court ultimately concluded that this particular regulation did go ‘too far’ and therefore constituted a ‘taking’ for constitutional purposes. However, in reaching that conclusion, the court had to distinguish an earlier case, Plymouth Coal Co. v Pennsylvania, which had upheld another regulation limiting the amount of coal that could be removed from a mine. That regulation had required ‘the owners of adjoining coal properties to cause boundary pillars of coal to be left of sufficient width to safeguard the employees of either mine in case the other should be abandoned and allowed to fill with water’.12

Holmes distinguished Plymouth Coal on two grounds. First, the regulation in that case was necessary to protect third parties—it ‘was a requirement for the safety of employees invited into the mine’—rather than merely a means of restoring

8The court actually had already used the phrase in Jackman v Rosenbaum Co., decided seven weeks before the decision in Mahon. Although both opinions were written by Justice Oliver Wendell Holmes, Jr, Jackman never attained the prominence that Mahon has enjoyed in recent decades. For an analytical overview of the development of the concept of average reciprocity of advantage in US Supreme Court jurisprudence, see Oswald 1997, 1489–522.

9Whether the contract was with Mahon or Mahon’s predecessor in interest is unclear from the court’s discussion. All that matters legally, however, is that during the relevant period a covenant bound Mahon and the coal company.

10Pennsylvania Coal Co. v Mahon 1922, 413.

11Pennsylvania Coal Co. v Mahon 1922, 413.

12Plymouth Coal Co. v Pennsylvania 1914, 540. The Plymouth Coal court noted that neither party questioned the constitutionality of the regulation which was the focus of that decision. The issue under dispute concerned the proper method for determining how large the required pillars would have to be.

landowners’ subsidence rights which they had freely bargained away.13 Second, the regulation in Plymouth Coal ‘secured an average reciprocity of advantage that has been recognised as a justification of various laws’.14 The latter explanation became the principle for which this case is remembered.

Justice Brandeis, however, offered a vigorous dissent. He conceded that average reciprocity of advantage, conceived as Holmes did, was ‘an important consideration, and may even be an essential [sic]’ when the state was exercising its power ‘for the purposes of conferring benefits’ on others, but when the goal was ‘to protect the public from detriment and danger’, average reciprocity of advantage was irrelevant. Brandeis reached this conclusion on the basis of previous Supreme Court cases which had upheld the constitutionality of harm-preventing regulations, contending that in each case the owner who suffered the restriction enjoyed ‘no reciprocal advantage . . . unless it be the advantage of living and doing business in a civilized community’.15

As a matter of interpreting the Fifth Amendment’s constraints on the scope of governmental power, later US Supreme Court decisions declined fully to embrace the potentially sweeping implications of Justice Holmes’s analysis. Nevertheless, the notion of reciprocal advantage continued to play a role both implicitly and explicitly in Supreme Court opinions.16

The most prominent explicit invocation of the principle came decades later in Justice William Rehnquist’s dissent in Penn Central Transportation Co. v New York City. At issue in Penn Central was New York City’s Landmarks Preservation Law, which had been enacted in the wake of the 1965 destruction of Manhattan’s stately Pennsylvania Station and was now being challenged for its prohibition of alterations to Grand Central Terminal.17 Explicitly invoking Holmes’s language in Mahon, Rehnquist argued that because the buildings protected as ‘landmarks’ were scattered throughout the city rather than concentrated together in zoning units, the owners of those landmarked buildings received no average reciprocity of advantage from the existence of the restriction. Therefore the regulation should be deemed a taking, because it sharply reduced Grand Central’s economic value ‘with no comparable reciprocal benefits’.18

The majority, however, held that the regulation was not a taking under the Fifth Amendment. Justice William Brennan’s majority opinion conceded that ‘[i]t is, of course, true that the Landmarks Law has a more severe impact on some landowners than on others’, but asserted that this fact ‘in itself, does not mean that the law

13Holmes asserted that the third parties in Mahon, who had chosen explicitly to sell their right to surface support, could be protected simply by being warned in advance that subsidence was likely.

14Pennsylvania Coal Co. v Mahon 1922, 415. Holmes did not indicate whether either of these two bases for distinguishing the cases would have been sufficient to do so on their own. Nor did he indicate the relative weight of these two considerations.

15Pennsylvania Coal Co. v Mahon 1922, 422.

16See generally Coletta 1990, 304–45; Oswald 1997, 1489–520.

17Penn Central Transportation Co. v New York City 1978.

18Penn Central Transportation Co. v New York City 1978, 140 (Rehnquist, J., dissenting). Chief Justice Warren Burger and Justice John Paul Stevens joined in the dissent.

effects a “taking”’.19 Invoking past cases which had upheld regulations restricting landowners’ ability to engage in activities harmful to their neighbours, Brennan noted that ‘[l]egislation designed to promote the general welfare commonly burdens some more than others. . . . Similarly, zoning laws often affect some property owners more severely than others, but have not been held to be invalid on that account’.20

Nevertheless, even Brennan felt the pull of the reciprocal advantage intuition, and he hastened to argue that the owners of Grand Central received at least partial compensation from the landmark law’s operation: ‘Unless we are to reject the judgment of the New York City Council that the preservation of landmarks benefits all New York citizens and all structures, both economically and by improving the quality of life in the city as a whole—which we are unwilling to do—we cannot conclude that the owners of the Terminal have in no sense been benefited by the Landmarks Law’.21 Thus, although full reciprocity clearly wasn’t required as a constitutional matter, the presence of at least partial reciprocity continued to be important.

In Keystone Bituminous Coal Ass’n v DeBenedictis, the US Supreme Court suggested that average reciprocity of advantage is the justification even for the state’s police power (while adopting a very generous accounting of reciprocal advantage to uphold the constitutionality of the regulation in question).22 Writing for the majority, Justice John Paul Stevens, who had joined Rehnquist’s dissent in Penn Central, cited that dissent as he asserted that ‘[t]he Court’s hesitance to find a taking when the State merely restrains uses of property that are tantamount to public nuisances is consistent with the notion of “reciprocity of advantage” that Justice Holmes referred to in Pennsylvania Coal. Under our system of government, one of the State’s primary ways of preserving the public weal is restricting the uses individuals can make of their property. While each of us is burdened somewhat by such restrictions, we, in turn, benefit greatly from the restrictions that are placed on others. These restrictions are properly treated as part of the burden of common citizenship.’23

19Penn Central Transportation Co. v New York City 1978, 133.

20Penn Central Transportation Co. v New York City 1978, 133–4. The fact that Brennan relied on cases which involved activities harmful to neighbours left his argument potentially open to the objection, modelled on Brandeis’s dissent in Mahon, that even if average reciprocity of advantage was irrelevant for regulation of harmful activities, it still remained a relevant requirement for property regulations which were designed to produce a public benefit rather than to prevent a public harm. However, Brennan could have two available lines of reply. First, he might have argued that landmark preservation law was in fact a harm-prevention measure. (The harm in question was the loss of aesthetic value imposed by the planned alterations to Grand Central.) Second, he might have invoked the academic literature which has argued that there is no principled way to distinguish between imposing harm and ceasing to provide benefits.

21Penn Central Transportation Co. v New York City 1978, 134–5.

22Keystone Bituminous Coal Ass’n v DeBenedictis 1987.

23Keystone Bituminous Coal Ass’n v DeBenedictis 1987, 491 (internal citations, quotation marks, and footnote reference marks omitted). Justice Stevens’s argument that the regulation in Keystone complied with the requirements endorsed by the Penn Central dissenters did not sway Justice Rehnquist, who remained a dissenter in Keystone as well.