Use of eminent domain to take property from one private owner in order to give it to another is certainly wrong morally and politically. I hope that the Ohio Supreme Court will find it wrong constitutionally, although the U.S. Supreme Court did not. However, anyone listening to the arguments about the Norwood case, or the Kelo case for that matter, would have received the impression that the public has to choose whether to promote economic development or protect property rights.
I want to state the economic case for ending eminent domain abuse. The trade-off does not exist, at the state level. The morally correct approach of protecting property rights is also an economically efficient approach. A local government might sometimes gain by taking private property and thereby clearing space for a developer, but this gain is at the expense of neighboring communities, as well as the dispossessed homeowners. The state would rarely if ever, have any gain from that sort of “beggar your neighbor” policy. That provides a strong reason for the state to forbid local governments to abuse eminent domain.
The reason why eminent domain abuse is inefficient is that it substitutes the decisions of politicians for the discipline of the market. Even when politicians are honest and well-meaning, they rarely have the special skills and talents necessary to determine what sort of land use would be best. If they help a developer acquire land at a lower cost than the developer would otherwise pay, there is no way to determine that the land is going into the highest and best use. Our cities are littered with the failed projects of the politically powerful—or projects that would be business failures if they had not been subsidized. The situation is even worse when politicians are dishonest, because then it is the most corrupt developer, rather than the one with the best plan, that gains control of the resources.
The tradeoff between property rights and development is a fiction, a fraud, or a conceit of the politicians who like to think they are as creative as entrepreneurs.