The October 3, 2012 argument before the Supreme Court in Arkansas Game & Fish Commission v. United States revealed a grumpy Supreme Court that was struggling with a long-standing tangle in its own takings jurisprudence: just where should it draw the elusive line between a tort and taking. To most people that question has a nonsensical quality, because many torts involve the taking of the property of another person, even if others do not.

To orient the discussion, it is best to see how this distinction plays out in private disputes. Where property has been taken by the defendant, the plaintiff can sue on a theory of restitution for compensation equal to the benefits that the wrongdoer has received, if that amount exceeds the dollar value of the plaintiff's harm. But if those benefits are not easily calculable, the plaintiff can always recover full damages for the property damage sustained.

The question is what happens when the government takes actions that could be described as torts, takings, or in some cases both. The easy answer under the Takings Clause should be that the government can never be required to compensate the aggrieved property owner for the benefit it received. After all, the whole purpose of the Takings Clause is to prevent any landowner from holding out for the benefits that otherwise accrue to the state. The proper approach thus always awards the aggrieved property owner a sum equal to its actual losses. At that point, all the incentives are in the right place. The requirement of compensation has two singular virtues. First, it means that no one person has to bear all the costs of government-sponsored projects intended to benefit the public at large. Second, by making the state pay the freight, it incentivizes the government not to go ahead with those projects whose social costs exceed their social benefits.

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