5 ms·

In other words, the canal pricing is just about right. As a canal owner you will want some of the ships to take a detour because if all ships used your canal yo

by yason 11y ago

In other words, the canal pricing is just about right. As a canal owner you will want some of the ships to take a detour because if all ships used your canal you wouldn't necessarily know if you're actually charging too little. In that case you would start raising prices until some ships, presumably with less urgent cargo, begin to drop out.

barrkel 11y ago
Yes; but make no mistake, it's pure rent extraction. The canal has a substantial public value (to the degree that improving the international economy creates public value) but by setting a price that is only just below the cost of avoid the canal, almost all of the potential public value is captured by the people who control the canal. There's some resdiual value accruing to the public from getting goods faster, but urgent goods aren't generally sent by sea.
- dalke 11y ago
  > it's pure rent extraction And this is bad because ... ? Is there a more reasonable alternative for how to set the fee? Would that shift in value, which currently goes to Egypt, instead go to the public? And if so, how? Or will it go to the owners of the shipping companies? Perhaps there should be some sort of Suez Canal authority, which follows a neutrality convention in regards to the national origin and type of shipping? In that way, it wouldn't have some of the crises which might occur with pure rent extraction. For example, a country might invade if its ships aren't allowed through, or face exorbitant fees compared to other countries.
  - barrkel 11y ago
    Capitalism is useful way to organize certain social activity because it uses prices to coordinate production and consumption, and uses profit to encourage competition. Competition reduces profits, and the surplus goes to the consumer. Capitalism isn't a naturally right or better thing in and of itself; its end effects are what matter. It has bad sides too; for example, it's easy to fund immoral practices when the only input you need to make is decide whether to purchase something or not. It's easy to make a purchase decision, and not worry about the effect that has on prices and incentives further down the line, that your purchase may be inflicting misery on other people. So, capitalism: good sides and bad sides. Overall though, it's mostly good. But break some of the underlying assumptions, and the good sides may not be enough to outweigh the bad sides. Apply this to the situation at hand. How does one compete with a canal like the Suez? Without some major technology innovation, it's either build another canal or go the long way around. The profit isn't actually encouraging much competition here, and probably won't for a few more decades, until we have ships powered by other forms of energy, probably. So we (the consumer) are not getting the benefit of a capitalistic approach to this problem. So market effects are probably not the right way to price this thing - they're not economically or socially efficient. This kind of rent extraction isn't good for countries like Egypt either. Like oil, getting a big dose of rent without needing much input means the money goes in at the top, and only a little bit trickles down. It's a great situation for a corrupt government. It can fund authoritarianism, cronyism, and keep a population underfoot for decades to come. Like Egypt, I guess.
    - dalke 11y ago
      > How does one compete with a canal like the Suez? Aircraft, railroads, slow- and superslow steaming, and supertankers come to mind. The latter two are variants of "go the long way around". The high-speed railway to Eilat is an example of the second form of competition. > The profit isn't actually encouraging much competition here I don't understand. Are you complaining that the profit isn't enough, because it doesn't encourage enough competition? I thought you were arguing that the profit was too high. > This kind of rent extraction isn't good for countries like Egypt either This sounds like the language of an ex-colonial power tsk-tsking at one of its ex-colonies. Are your proposed alternatives to the existing situation also is this vein? Are you arguing against nationalization, and that it would be better for Egypt if the Suez Canal Authority were re-privatized and/or put under more foreign control, like the Suez Canal Company was? How would that help "the public"? I'll be a bit more specific - what does "like Egypt" mean? Are you making an argument about economics, or an argument about your political preferences? We need only compare the UK and Norway to see how a difference in politics in how to handle the North Sea oil has a big difference in economic outcomes. Egypt's politics are far more different than either of those. Your complaint sounds more like you want to deny revenue to governments you don't like, rather than an indication that the rent seeking is a causative agent. (Surely US military support of the Egyptian government doesn't help, as does ex-colonianism, so it's not simple to deconvolve the different factors.) So let's lift it out of recent politics. Was Denmark "like Egypt" when Eric of Pomerania imposed the Sound Dues on Øresund traffic? "By this he secured a large stable income for his kingdom that made it relatively rich and which made the town of Elsinore flowering." says https://en.wikipedia.org/wiki/Eric_of_Pomerania https://en.wikipedia.org/wiki/Eric_of_Pomerania , to the displeasure of the Hanseatic League. By the 1800s it was clearly a bad idea, but was it a bad idea even in 1500?
      - barrkel 11y ago
        Are you complaining that the profit isn't enough If anything, I'm arguing that the canal is a monopoly. Are your proposed alternatives I haven't proposed any alternatives. sounds like the language of an ex-colonial power tsk-tsking at one of its ex-colonies you want to deny revenue to governments you don't like You're projecting some political ideology onto me here, and missing the mark, amusingly. I don't think this conversation is either productive or interesting.
  - DrScump 11y ago
    which currently goes to Egypt Do we know that it all goes to the national treasury, or is part of it skimmed along the way? After all, given the additional extortions (local crews, cigarettes and other goods), I'm wondering if it all really goes to benefit the country.
    - dalke 11y ago
      Well, the real difficulty is to figure out what barrkel meant by 'public value'. Either the current scheme contributes less to public value than the previous privatized scheme, or it doesn't. Is additional extortion by local crews better for public value than higher fees by foreign owners? Figuring that out requires making a political judgement, rather than leaving the discussion on the abstract concept of 'pure rent extraction'. (As the canal is artificial, and Egypt does maintain and develop the canal, and creates new wealth by providing an alternative transportation connection, I really don't see how it is 'pure'.)

by yason 11y ago

barrkel 11y ago

Yes; but make no mistake, it's pure rent extraction. The canal has a substantial public value (to the degree that improving the international economy creates public value) but by setting a price that is only just below the cost of avoid the canal, almost all of the potential public value is captured by the people who control the canal. There's some resdiual value accruing to the public from getting goods faster, but urgent goods aren't generally sent by sea.

dalke 11y ago
> it's pure rent extraction And this is bad because ... ? Is there a more reasonable alternative for how to set the fee? Would that shift in value, which currently goes to Egypt, instead go to the public? And if so, how? Or will it go to the owners of the shipping companies? Perhaps there should be some sort of Suez Canal authority, which follows a neutrality convention in regards to the national origin and type of shipping? In that way, it wouldn't have some of the crises which might occur with pure rent extraction. For example, a country might invade if its ships aren't allowed through, or face exorbitant fees compared to other countries.
- barrkel 11y ago
  Capitalism is useful way to organize certain social activity because it uses prices to coordinate production and consumption, and uses profit to encourage competition. Competition reduces profits, and the surplus goes to the consumer. Capitalism isn't a naturally right or better thing in and of itself; its end effects are what matter. It has bad sides too; for example, it's easy to fund immoral practices when the only input you need to make is decide whether to purchase something or not. It's easy to make a purchase decision, and not worry about the effect that has on prices and incentives further down the line, that your purchase may be inflicting misery on other people. So, capitalism: good sides and bad sides. Overall though, it's mostly good. But break some of the underlying assumptions, and the good sides may not be enough to outweigh the bad sides. Apply this to the situation at hand. How does one compete with a canal like the Suez? Without some major technology innovation, it's either build another canal or go the long way around. The profit isn't actually encouraging much competition here, and probably won't for a few more decades, until we have ships powered by other forms of energy, probably. So we (the consumer) are not getting the benefit of a capitalistic approach to this problem. So market effects are probably not the right way to price this thing - they're not economically or socially efficient. This kind of rent extraction isn't good for countries like Egypt either. Like oil, getting a big dose of rent without needing much input means the money goes in at the top, and only a little bit trickles down. It's a great situation for a corrupt government. It can fund authoritarianism, cronyism, and keep a population underfoot for decades to come. Like Egypt, I guess.
  - dalke 11y ago
    > How does one compete with a canal like the Suez? Aircraft, railroads, slow- and superslow steaming, and supertankers come to mind. The latter two are variants of "go the long way around". The high-speed railway to Eilat is an example of the second form of competition. > The profit isn't actually encouraging much competition here I don't understand. Are you complaining that the profit isn't enough, because it doesn't encourage enough competition? I thought you were arguing that the profit was too high. > This kind of rent extraction isn't good for countries like Egypt either This sounds like the language of an ex-colonial power tsk-tsking at one of its ex-colonies. Are your proposed alternatives to the existing situation also is this vein? Are you arguing against nationalization, and that it would be better for Egypt if the Suez Canal Authority were re-privatized and/or put under more foreign control, like the Suez Canal Company was? How would that help "the public"? I'll be a bit more specific - what does "like Egypt" mean? Are you making an argument about economics, or an argument about your political preferences? We need only compare the UK and Norway to see how a difference in politics in how to handle the North Sea oil has a big difference in economic outcomes. Egypt's politics are far more different than either of those. Your complaint sounds more like you want to deny revenue to governments you don't like, rather than an indication that the rent seeking is a causative agent. (Surely US military support of the Egyptian government doesn't help, as does ex-colonianism, so it's not simple to deconvolve the different factors.) So let's lift it out of recent politics. Was Denmark "like Egypt" when Eric of Pomerania imposed the Sound Dues on Øresund traffic? "By this he secured a large stable income for his kingdom that made it relatively rich and which made the town of Elsinore flowering." says https://en.wikipedia.org/wiki/Eric_of_Pomerania https://en.wikipedia.org/wiki/Eric_of_Pomerania , to the displeasure of the Hanseatic League. By the 1800s it was clearly a bad idea, but was it a bad idea even in 1500?
    - barrkel 11y ago
      Are you complaining that the profit isn't enough If anything, I'm arguing that the canal is a monopoly. Are your proposed alternatives I haven't proposed any alternatives. sounds like the language of an ex-colonial power tsk-tsking at one of its ex-colonies you want to deny revenue to governments you don't like You're projecting some political ideology onto me here, and missing the mark, amusingly. I don't think this conversation is either productive or interesting.
- DrScump 11y ago
  which currently goes to Egypt Do we know that it all goes to the national treasury, or is part of it skimmed along the way? After all, given the additional extortions (local crews, cigarettes and other goods), I'm wondering if it all really goes to benefit the country.
  - dalke 11y ago
    Well, the real difficulty is to figure out what barrkel meant by 'public value'. Either the current scheme contributes less to public value than the previous privatized scheme, or it doesn't. Is additional extortion by local crews better for public value than higher fees by foreign owners? Figuring that out requires making a political judgement, rather than leaving the discussion on the abstract concept of 'pure rent extraction'. (As the canal is artificial, and Egypt does maintain and develop the canal, and creates new wealth by providing an alternative transportation connection, I really don't see how it is 'pure'.)