4 ms·

The government should be directly provisioning natural monopolies like utilities. There is absolutely no sense leaving it to the private sector (though of cours

The government should be directly provisioning natural monopolies like utilities. There is absolutely no sense leaving it to the private sector (though of course the private sector shouldn't be prohibited from providing a private option as well). Private enterprise only works when there can be meaningful competition through low barriers to market entry.

eru 3y ago
You are mixing up two concerns. (1) In standard economics the way to exploit a monopoly is by supplying less to customers than what a competitive market would provide. That enables you to charge more. There are at least two ways to get around that: you can try extensive regulation, or you can auction off the right to run the 'natural monopoly'. A competitive auction open to all comers will naturally capture whatever extra revenue exploitation of the monopoly could bring. (You can also mix and match.) (2) The second concern is about who should own the entity that provides the service in question. You claim that it should not be the private sector, but don't bring any arguments for it. (The arguments you do bring are applicable to the first concern.)
- ETH_start 3y ago
  Charging for the right to run a natural monopoly is the ideal way to do it in my opinion, but only so with markets where there is a strict natural barrier to market entry for parties other than the monopolist, which doesn't apply to utilities. It works with land, where if one person owns a plot of land, another person can't own it, which is why a land value tax is so efficient. With utilities, you could only charge for the right to run the monopoly if the government artificially prevents market entry, which is a bad idea IMHO, for all sorts of reasons. Better to have a public option, and a right by anyone to provide their own private option.
  - eru 3y ago
    > With utilities, you could only charge for the right to run the monopoly if the government artificially prevents market entry, which is a bad idea IMHO, for all sorts of reasons. Better to have a public option, and a right by anyone to provide their own private option. You can have that right, and still auction off the right / obligation to run the public option.
    - ETH_start 3y ago
      True, you could create a public option, subsidize it until achieves dominant network effects that makes the option the market standard, and then auction off the right to run it.
      - eru 3y ago
        Well, I'm assuming the public option already exists and is heavily regulated, and we are talking about how to improve on that situation. If there's no public option already existing, I wouldn't give any subsidies etc.
        ETH_start 3y ago
        I'm advocating abolishing all regulations, including on those that prevent market entry by private actors, and then — if a public option doesn't already exist — subsidizing a public option until it attains dominant network effects.
        eru 3y ago
        I'm in general in favour of cutting regulations down. Especially industry specific regulations. (Eg banking should be regulated the same way as manufacturing of shoes.) Yes, barriers to entry should be lowered, too. A particularly fruitful way to get more competition is to invite established foreign companies to set up shop locally. I don't understand why you would want to pick a winner, the 'public option' and subsidize it? We don't even know for sure whether the industry we are looking at is actually a 'natural monopoly' until such a monopoly develops. So I would leave them alone. However, when such a monopoly develops, then you _might_ (might!) want to break out regulations. (Basically whatever makes your 'public option' the 'public' option are the kinds of regulations you just might want to break out.) The biggest useful 'regulation' I can think of is one we already mentioned: auction off the natural monopoly.
        ETH_start 3y ago
- __loam 3y ago
  It seems obvious that governments can run things at a loss in situations where market failures might occur under private ownership.
  - eru 3y ago
    If you auction off the right / obligation to run the public option, the private sector can run this just fine. You'd want to allowed negative bids (ie you get paid to run the thing to cover losses), and the bid closest to positive infinity wins.

eru 3y ago

You are mixing up two concerns. (1) In standard economics the way to exploit a monopoly is by supplying less to customers than what a competitive market would provide. That enables you to charge more. There are at least two ways to get around that: you can try extensive regulation, or you can auction off the right to run the 'natural monopoly'. A competitive auction open to all comers will naturally capture whatever extra revenue exploitation of the monopoly could bring. (You can also mix and match.) (2) The second concern is about who should own the entity that provides the service in question. You claim that it should not be the private sector, but don't bring any arguments for it. (The arguments you do bring are applicable to the first concern.)

ETH_start 3y ago
Charging for the right to run a natural monopoly is the ideal way to do it in my opinion, but only so with markets where there is a strict natural barrier to market entry for parties other than the monopolist, which doesn't apply to utilities. It works with land, where if one person owns a plot of land, another person can't own it, which is why a land value tax is so efficient. With utilities, you could only charge for the right to run the monopoly if the government artificially prevents market entry, which is a bad idea IMHO, for all sorts of reasons. Better to have a public option, and a right by anyone to provide their own private option.
- eru 3y ago
  > With utilities, you could only charge for the right to run the monopoly if the government artificially prevents market entry, which is a bad idea IMHO, for all sorts of reasons. Better to have a public option, and a right by anyone to provide their own private option. You can have that right, and still auction off the right / obligation to run the public option.
  - ETH_start 3y ago
    True, you could create a public option, subsidize it until achieves dominant network effects that makes the option the market standard, and then auction off the right to run it.
    - eru 3y ago
      Well, I'm assuming the public option already exists and is heavily regulated, and we are talking about how to improve on that situation. If there's no public option already existing, I wouldn't give any subsidies etc.
      - ETH_start 3y ago
        I'm advocating abolishing all regulations, including on those that prevent market entry by private actors, and then — if a public option doesn't already exist — subsidizing a public option until it attains dominant network effects.
        eru 3y ago
        I'm in general in favour of cutting regulations down. Especially industry specific regulations. (Eg banking should be regulated the same way as manufacturing of shoes.) Yes, barriers to entry should be lowered, too. A particularly fruitful way to get more competition is to invite established foreign companies to set up shop locally. I don't understand why you would want to pick a winner, the 'public option' and subsidize it? We don't even know for sure whether the industry we are looking at is actually a 'natural monopoly' until such a monopoly develops. So I would leave them alone. However, when such a monopoly develops, then you _might_ (might!) want to break out regulations. (Basically whatever makes your 'public option' the 'public' option are the kinds of regulations you just might want to break out.) The biggest useful 'regulation' I can think of is one we already mentioned: auction off the natural monopoly.
        ETH_start 3y ago
__loam 3y ago
It seems obvious that governments can run things at a loss in situations where market failures might occur under private ownership.
- eru 3y ago
  If you auction off the right / obligation to run the public option, the private sector can run this just fine. You'd want to allowed negative bids (ie you get paid to run the thing to cover losses), and the bid closest to positive infinity wins.