Economic Rationale of the Law of Land Acquisition

What is it about?

This study seeks to frame the rationale of land acquisition by explicating on the market conditions necessitating the suspension of consensual exchanges in favor of the use of coercion to meet the land supply requirements of a project, and then examines the reasoning governing the use of the acquisition legislation in India. It has been argued that the character of intervention, in the form of the dismissal of the requirement of consent of the seller and the termination of the bargaining, provided by the land acquisition law have the chance to reduce the costs of resource exchanges only in cases where the inordinate bargaining power of the seller is the source of the obstacles at the stage of bargaining. The lack of substitutes for a piece of land, is recognized as the main condition which provides strategic position to the seller of that land and enables her to stall the project by dragging the bargaining and holding out her unit of land. The variable of the number of the land units to be assembled and the related size of transaction costs is observed to be meaningful in elaborating the market conditions requiring acquisition only when examined conditional to its contribution to the difficulty of substitution and the strategic bargaining related obstacles at the stage of the negotiation of the exchange.

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Why is it important?

Many a times, economics is cited as reason to legitimize land acquisitions against oppositions to the coercion involved in the use of the tool. However, as one seeks to theorize conditions requiring acquisition, against the background of economic theory, it appears that the way acquisition law is designed and is practiced, do not fall in conformity with the economic rationalization of the tool. Economics as a reason is cited in very arbitrary fashion. By examining both the economic rationalization and the in practice use of the law of acquisition, i hope the study will make explicit the arbitrariness in the use of the label ‘economics’ to legitimize acquisitions.