| With the rapid advance of industrialization and urbanization, China's current land condemnation institution is facing severe challenges. Based on the Law and Economics, this paper tries to study the collective land condemnation in China.Due to the standard of economic efficiency, we can consider three types of property righs—rights protected by property rules, rights protected by liability rules, and inalienable rights. A right is protected by a property rule to the extent that someone who wishes to remove the right from its holder must buy it from him in a voluntary transaction in which the value of the right is agreed upon by the seller. Whenever someone may destroy an initial right if he is willing to pay an objectively determined value for it, this right is protected by a liability rule. This value may be what is thought the original holder of the right would have sold it for. But the holder's complaint that he would demanded more will not avail him once the objectively determined value is set. A right is inalienable to the extent that its transfer is not permitted between a willing buyer and a willing seller in some circumstance. Generally, a right is protected by different protection rules in different circumstances, but different protection rules embody the same efficiency standard.Land property rights are protected by liability rules in land condemnation. This paper attempts to construct an analytical framework for land condemnation, the core of which is the economic analysis of three legal conditions of land condemnation. Because Britain and the United States are the sophisticated market economy countries, this analytical framework is based on the Anglo-American legal system, but the conclusions are universal, applicable to every country all over the world. Government which takes private property has to meet three legal conditions, which are public interest, just compensation and due process, and which are called "three conditions of eminent domain" by this paper. The purpose of "three conditions of eminent domain" is to prevent the government from abusing its power, and to achieve economic efficiency and fair distribution. This paper proposed an efficiency hypothesis of public interest in land condemnation, and proved it by the judicial practice of land condemnation in the United States. A conclusion indicates that: land condemnation is a social choice, and a substitution of government for market to directly allocate land resource, but should accord with an economic condition(market failure) and three legal conditions(public interest, just compensation, and due process); public interest in land condemnation is Kaldor-Hicks Efficiency; land condemnation can improve allocation efficiency of land resource, which will eventually compensate the loss of the transferors and improve their welfare. Under normal circumstances, just compensation means to compensate the loss of the property's market value or fair market value. Higher compensation level will bring "personal moral hazard", while lower compensation will bring "Government's fiscal illusion", both of which do not meet the requirements of economic efficiency. Legal process is similar to market process, which depends on the implementation of the main driver of economic self-interest by individuals.The characteristic of China's land institution is the division between urban and rural areas. From the land ownership settings, "the Constitution" of our country clearly defines two types of land property rights, which are state-owned and collective-owned, and which are connected together only by government's eminent domain of land. Two types of land property rights and the legal provisions of transfer between them bring about two types of divided land property rights institutions. One is urban land property rights institution, the other is rural land property rights institution. Because the complete land property rights include land use right, land income right and land transfer right, while the farmers do not have the land transfer right, so the collective-owned land property rights are "incomplete public property rights". The formation of China's current land condemnation institution has historical reasons, which changed with the revolution and the economic development, can be divided into five stages: the period of transition (1949-1956), the period of planned economy ( 1956-1978 ) , the period of first stage of reform and opening up ( 1978-1992 ) , the period of second stage of reform and opening up (1992-2008), and the period fo third stage of reform and opening up (2008-) . The division of urban and rural land property rights institution leads to the government monopoly of city land for construction, and forms a "Chinese characteristic" of land condemnation institution. The reason why we emphasize "Chinese characteristic" is that the land condemnation institution of our country has some questions, both from efficiency and from jurisprudence. From a legal point of view, our country's land condemnation institution contains a "land condemnation paradox". From the efficiency point of view, our country's land condemnation institution does not meet the "three conditions of eminent domain". The key problem is that government allocates too much land resources, while market allocates too little. There are legal barriers to market allocation in land property rights institution.Collective-owned land condemnation institution determines the associated economic performance. Misery Index of Eminent Domain can be used to describe the distortion degree of economic efficiency and the hurt degree to peasantry. According to the different content and different method of calculation, Misery Index of Eminent Domain can be classified as "Subjective Misery Index of Eminent Domain" and "Objective Misery Index of Eminent Domain". The causes of land fiscal can be attributed to the separate tax system and the deficiency of land condemnation institution. Land fiscal will have adverse financial consequences, such as: the food security due to rapid decrease of agricultural land, the impact of social harmony due to the occupation of peasants' interest, a serious waste of land resources, and probable land financial risks. The root causes of high house price are the immoderate land condemnation institution, the land market monopoly by local governments, and the corruption with land.Land reform must adhere to three points. One purpose is to achieve the efficient allocation of land resources, or Kaldor-Hicks efficiency improvement. Two means are "invisible hand" of market and "visible hand" of government, which need to act in concert with each other and exert their own advantages. Three conditions are public interest, just compensation and due process, which can ensure efficient allocation of land resources and prevent government for abusing eminent domain of land.
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