From a pragmatic viewpoint as well, the suggestion is grounded. If a dogmatic, rigid application of the principles of the law is attempted, then there will be real-world harm to society at large. Thus, rather than adopting a dogmatic approach, a pragmatic approach to the issue yields less societal loss, and the pressure is only on the private entity by way of strict compensation.
Coming to Kantian analysis, law operates on categorical imperatives. Law is to be obeyed and is not supposed to be reevaluated through a cost-benefit analysis. Encroaching on public land is an unlawful act and it cannot be rendered right even if the wrongdoer offers compensation or is creating a positive outcome. Such an attempt is the adoption of consequentialist logic. In result, compensation to rectify an illegality is in effect admitting that rule of law is negotiable.
Dicey’s concept of rule of law expects the application of law equally. A person encroaching on government land is summarily evicted. The buyout option extended to an affluent entity is creating a privileged exemption which is violating the formal equality before the law.
Legal positivism expects the disposal of government land through a procedure, or rather a priori. Compelling the State to accept a post facto land swap inverts this. A court compulsion to implement the same is a posteriori, which makes the formal procedures a nullity. Such an attempt, in effect, allows an encroacher to bypass mandatory administrative channels and forces the government into a compensatory settlement through litigation. This effectively replaces the positive law with judicial fiat, rendering statutory means illusory.
As per Nozicik, property rights are bound by legitimate acquisition and transfer, and are basically absolute. Entitlement to property should be through legitimate means. A unilateral expropriation of property and a subsequent judicially facilitated land swap or buyout from the rightful owner is illegitimate. When the government is the landowner and the court is compelling a transfer, it is questioning the superiority of the State and law.
Reading in Richard Posner, bringing in legitimacy to a remedial measure merely by an economic mandate is actually an incentive for future similar behavior. Mere economic analysis of a remedy is a tool for finding loopholes. It can be observed that the remedy suggested by the Supreme Court is ultimately bringing in an economic element for the balancing act which is in effect ignoring other aspects such as the sanctity of law. It incentivises deliberate, strategic encroachment.