7 ms·

I consider myself a relatively gung-ho free-market type, where it's appropriate. Utility and transport networks are one place where it isn't appropriate. This i

by nkoren 10y ago

I consider myself a relatively gung-ho free-market type, where it's appropriate. Utility and transport networks are one place where it isn't appropriate. This is for three fundamental reasons: 1. A free-market dynamic requires an actual market. If the buyer can't chose among competing sellers, then it's not a market. At the grocery store you can choose from among many different sellers: that's a functional market. The point where your plumbing connects to the water main, simply isn't. 2. The entire purpose of infrastructure is to generate positive externalities. Ready availability of transport, water and electricity, etc., makes it easy and desirable to do business in a place and with each other. This leads to emergent urban economies, where mutual comparative advantage among a heterogeneous population leads to mutually beneficial exchange, which in turn leads to more growth and prosperity for everyone. The fewer low-level frictions, the more prosperous everyone becomes. But capturing value at the point-of-use -- which is what private operators generally do -- creates a low-level friction with substantial knock-on effects. Every dollar you extract from the farebox of a public transport system, for example, is many dollars removed from the wider economy. It's much more appropriate to subsidise the infrastructure networks and then tax the positive externalities (via sales, income, and property taxes) after the uplift has been created. 3. There are broader socio-economic issues of accessibility to services that profit-driven companies have no incentive to be responsive to.

koolba 10y ago
> I consider myself a relatively gung-ho free-market type, where it's appropriate. Utility and transport networks are one place where it isn't appropriate. This is for three fundamental reasons: Cable internet falls into that category too. The common setup in the USA is effectively a municipally sponsored monopoly. > 1. A free-market dynamic requires an actual market. If the buyer can't chose among competing sellers, then it's not a market. At the grocery store you can choose from among many different sellers: that's a functional market. The point where your plumbing connects to the water main, simply isn't. Sure but rather than directly hiring N people to run the water works and plumbing crews, the city could contract out the maintenance of those things to a private company. It would still own the pipes and be on the hook for the maintenance, but it wouldn't be directly employing the workers. If company X doesn't work out (say due to crappy service), then they could award the maintenance contract to company Y. In this model, the private company doesn't get a local monopoly on the resource, only a contract to provide the service for some limited duration (say N years). It may well be that there are services that are not profitable to operate. It's governments job to fund those based on excess tax dollars it collects from other services. A bus route to a poor part of town that it's particularly popular isn't going to fund itself. Government smooths those bumps to provide services where they're needed.
- nkoren 10y ago
  Agreed. The government using private contractors to maintain the infrastructure is fine. In that instance, the government can still account the resource in a holistic fashion. Where it makes sense for end-user-fees to completely pay for the infrastructure, then fine (sometimes it will). But where it makes sense to minimise end-user-fees so as to maximise the positive externalities (and recoup the costs out of taxes), then they can still do that. Whether the workers on the infrastructure are managed by a public or private manager, in this case, doesn't make a lot of difference. The problem occurs when a private entity must make a self-contained business case off the back of the infrastructure. Since they'll never be able to capture any of the positive externalities, they have to take everything out of end-user-fees, externalities be damned. This can be very, very bad for the city as a whole. And yes, agreed about cable internet being in this category too!
- deleted 10y ago
  [deleted]
- sseagull 10y ago
  > Sure but rather than directly hiring N people to run the water works and plumbing crews, the city could contract out the maintenance of those things to a private company. I know this can work, but in addition to the usual misalignment of goals between public and private sector, I still see more inefficiency with this than just letting the government do it. For example, the government has to pay all the workers (indirectly, at least). On top of that, it has to pay to negotiate contracts, and an entire layer of oversight of the contractors (which also have their own HR and bureaucracy that you are paying for). On top of that, they will likely have built-in some extra profit to give them some flexibility in case they don't get the next contract. Plus money for lobbying in many instances. If you find the contractors aren't doing their job, now you will probably have to get lawyers and whatnot, and have expensive, time-consuming litigation. Then, if the government wants to change companies at some point, you have a large expense in finding a new one, with bidding, etc. And that is if there is another contractor available in your area. And then you have lobbying, cronyism, and other political issues. The entire reason for hiring another company to do this is to get around public pay and pension issues. If this is all just a workaround for that, fix the source of that problem, rather than trying to abstract away responsibility.
ancap 10y ago
I would invite you to reconsider your position, at least as it relates to utilities. In the early, "wild west" days of utilities, when utilities were just beginning to be a thing, there was a large surge of competition to provide electricity and gas in the major cities. It was only after a lot of lobbying that monopolies were formed to push out the competition. See "Myth of the Natural Monopoly" by Thomas DiLorenzo https://mises.org/system/tdf/rae9_2_3_3.pdf?file=1&type=document https://mises.org/system/tdf/rae9_2_3_3.pdf?file=1&type=docu...
smokeyj 10y ago
> I consider myself a relatively gung-ho free-market type I'm skeptical. > A free-market dynamic requires an actual market. Not really. A free-market type would say the supply is limited. Even if the supply is zero it's still a free-market if the actors are trading voluntarily. The supply for many markets is zero, but it typically correlates with demand. > The entire purpose of infrastructure is to generate positive externalities A free-market type would probably use the word value rather than positive externalities. But isn't the purpose of any action to create positive value? Your argument is essentially that forced trades via central planning can create more value than voluntary trades. > 3. There are broader socio-economic issues of accessibility to services that profit-driven companies have no incentive to be responsive to. A free-market type would probably say that the supply of accessibility services is low due to limited demand / profitability. While true maybe this is where charity plays a role.

by nkoren 10y ago

koolba 10y ago

> I consider myself a relatively gung-ho free-market type, where it's appropriate. Utility and transport networks are one place where it isn't appropriate. This is for three fundamental reasons: Cable internet falls into that category too. The common setup in the USA is effectively a municipally sponsored monopoly. > 1. A free-market dynamic requires an actual market. If the buyer can't chose among competing sellers, then it's not a market. At the grocery store you can choose from among many different sellers: that's a functional market. The point where your plumbing connects to the water main, simply isn't. Sure but rather than directly hiring N people to run the water works and plumbing crews, the city could contract out the maintenance of those things to a private company. It would still own the pipes and be on the hook for the maintenance, but it wouldn't be directly employing the workers. If company X doesn't work out (say due to crappy service), then they could award the maintenance contract to company Y. In this model, the private company doesn't get a local monopoly on the resource, only a contract to provide the service for some limited duration (say N years). It may well be that there are services that are not profitable to operate. It's governments job to fund those based on excess tax dollars it collects from other services. A bus route to a poor part of town that it's particularly popular isn't going to fund itself. Government smooths those bumps to provide services where they're needed.

nkoren 10y ago
Agreed. The government using private contractors to maintain the infrastructure is fine. In that instance, the government can still account the resource in a holistic fashion. Where it makes sense for end-user-fees to completely pay for the infrastructure, then fine (sometimes it will). But where it makes sense to minimise end-user-fees so as to maximise the positive externalities (and recoup the costs out of taxes), then they can still do that. Whether the workers on the infrastructure are managed by a public or private manager, in this case, doesn't make a lot of difference. The problem occurs when a private entity must make a self-contained business case off the back of the infrastructure. Since they'll never be able to capture any of the positive externalities, they have to take everything out of end-user-fees, externalities be damned. This can be very, very bad for the city as a whole. And yes, agreed about cable internet being in this category too!
deleted 10y ago
[deleted]
sseagull 10y ago
> Sure but rather than directly hiring N people to run the water works and plumbing crews, the city could contract out the maintenance of those things to a private company. I know this can work, but in addition to the usual misalignment of goals between public and private sector, I still see more inefficiency with this than just letting the government do it. For example, the government has to pay all the workers (indirectly, at least). On top of that, it has to pay to negotiate contracts, and an entire layer of oversight of the contractors (which also have their own HR and bureaucracy that you are paying for). On top of that, they will likely have built-in some extra profit to give them some flexibility in case they don't get the next contract. Plus money for lobbying in many instances. If you find the contractors aren't doing their job, now you will probably have to get lawyers and whatnot, and have expensive, time-consuming litigation. Then, if the government wants to change companies at some point, you have a large expense in finding a new one, with bidding, etc. And that is if there is another contractor available in your area. And then you have lobbying, cronyism, and other political issues. The entire reason for hiring another company to do this is to get around public pay and pension issues. If this is all just a workaround for that, fix the source of that problem, rather than trying to abstract away responsibility.

ancap 10y ago

I would invite you to reconsider your position, at least as it relates to utilities. In the early, "wild west" days of utilities, when utilities were just beginning to be a thing, there was a large surge of competition to provide electricity and gas in the major cities. It was only after a lot of lobbying that monopolies were formed to push out the competition. See "Myth of the Natural Monopoly" by Thomas DiLorenzo https://mises.org/system/tdf/rae9_2_3_3.pdf?file=1&type=document https://mises.org/system/tdf/rae9_2_3_3.pdf?file=1&type=docu...

smokeyj 10y ago

> I consider myself a relatively gung-ho free-market type I'm skeptical. > A free-market dynamic requires an actual market. Not really. A free-market type would say the supply is limited. Even if the supply is zero it's still a free-market if the actors are trading voluntarily. The supply for many markets is zero, but it typically correlates with demand. > The entire purpose of infrastructure is to generate positive externalities A free-market type would probably use the word value rather than positive externalities. But isn't the purpose of any action to create positive value? Your argument is essentially that forced trades via central planning can create more value than voluntary trades. > 3. There are broader socio-economic issues of accessibility to services that profit-driven companies have no incentive to be responsive to. A free-market type would probably say that the supply of accessibility services is low due to limited demand / profitability. While true maybe this is where charity plays a role.