ABSTRACT
This chapter highlights the holdout problem related to a potential source of market failure that is the free rider problem. It elucidates the meaning of the public use requirement of the Fifth Amendment Takings Clause, which has been at the center of controversy over the appropriate scope of the government's eminent domain power. According to the Fifth Amendment, private property can only be taken for "public use", and provided that "just compensation" is paid. The chapter provides the examples of private takings to demonstrate the resulting incoherence of the public use restriction. It then examines whether economic theory can be used to restore some substance to it, and in the process, also provides a sounder basis for defining the proper scope of eminent domain. The chapter finally examines the relationship between the free rider problem associated with public good provision, and the holdout problem associated with land assembly.
