kernow

[quote="Paul Birch"][quote="kernow"]And I thought I was naive, you obviouly haven't read my posting "British Farming Must Not Be Allowed To Die" 9/6/05

Paul Birch

Obviously you haven't bothered to read your own thread, in which I argued rationally and at considerable length for a free market in food production - an opinion you solicited then completely ignored. You're doing the same thing now - ignoring inconvenient evidence and any analyses that challenge your position - wriggling and squirming to avoid having to give any real answers. If you don't want a substantive debate, please don't start threads that seem to call for one.

Hereward the Wake

I think water and electricity should be nationalised.

In countrys where electricity is nationalised they can consider more enviromental factors rather than just profits. For example in France they have much more electricity generated by relatively clean nuclear power.

You cannot have a free market in water. Who is responsible for paying for improvements in the quality of water supply?

Bellatrix

I don't mind, as long as the people who provide it are good looking.

Number of economic models to pick from, know which one I prefer.

*apologies, but my head is frying and in my lunch hour I am looking for something lighthearted to do*

Paul Birch

Of course you can. Why would you think you can't? It is true that the market for tap water is unlikely to be highly competitive locally, and in most areas will probably remain a near monopoly, but in a free market even natural monopolies must serve their customers well, or lose their position. Quite different from regulatory monopolies, which almost never give their captives honest or efficient service.

As in any other business: initially it's those who invest in it; ultimately it's their customers. Customers will pay a premium for what they consider higher quality (but only as much as the extra is worth to them). That's why supermarkets sell water.

Paul Birch

In a free market under the rule of law, negative externalities must be paid for, and positive externalities tend to be internalised; the process of Pareto optimisation takes all significant factors INTO phpbb_consideration. Pecuniary gain is merely the proxy for whatever human beings value.

When production decisions are made politically instead of economically - by governments instead of the market - they will more often than not be the wrong decisions. Perhaps in France the nuclear mix happens to have come out about right (or perhaps there's still too much or too little nuclear power there). Well, not even governments can get everything wrong all the time! Even so, we can be sure that it costs far more to produce than it should. More typical are the Blair government's infatuation with wind-power, with all its inadequacies and negative environmental impacts - or the ghastly mess California has made of its electricity industry, through absurd policies and interventionist regulations that have made the construction of new power plants, especially nuclear plants, all but inconceivable (its economy survives, albeit with power cuts and brownouts, only by importing electricity from states with less government interference in the market).

Nowadays, with fascism (corporativism or syndicalism) the dominant ideology, governments usually prefer to keep a token market rather than run a fully socialist nationalised industry; that way they can blame "the market" or "multi-national corporations" or anybody but themselves for failures that are actually the result of government interference and over-regulation. The process of finding private scapegoats and extending bureaucratic control - telling the specially selected, licensed or franchised firms what they can charge, what services they have to supply, what they have to spend, how they must spend it, etcetera, etcetera - is what is disingenuously called "de-regulation".

Tom Commis

This isn't a point of principle but there was an item on Northwest Tonight (BBC) about roads deteriorating due to the frequency with which they are dug up by the now numerous utilities.
Furthermore the work carried out by subcontractors has been questioned and several road fatalities blamed on sub-standard work.
I have two observations to make about this:

1. All this work being carried out without synchronisation between different companies adds to congestion and detracts from the quality of life of road users and incurs a cost to the economy.

2. In order to prevent shoddy work the government would need to increase the number of supervising bodies and their staff, in other words the unregulated free market would require more regulation than the nationalised services.

I really don't think this question is as simple as the free market = good services.

Tom Wilde

I reckon I'm with kernow and Hereward on this one, despite my general antipathy to nationalisation.

Precisely

So far as I can see, the only realistic way that inept water companies enjoying a local monopoly can lose that position is through state intervention. There is no free-market mechanism through which this can take place short of somebody building up a complete parallel water-supply infrastructure, which obviously would involve digging up every single road in the region.

The only other way to do it would be to separate water purification from water distribution - you could have competition in the former while making distribution (ie the maintenance of the network of pipes and pumping stations) the responsibility of a separate monopoly. This is rather like what happened with the railways. But that is still a monopoly and still requires either government ownership or government regulation.

When it comes to the water industry, I really can't see this free market you are talking about. Where is it?

Paul Birch

This has always been so. It is actually rather better now than it used to be because private contractors at least make some effort to minimise the time the road is up, where council workmen often did the opposite. In a genuine free market utilities would pay the full costs of congestion and road damage, as well as the market rate for renting their routes, so they would operate much more efficiently. It would pay them to cooperate with other companies to minimise those costs.

In a state bureaucracy cost-saving cooperation between departments almost never happens - it's just not in the empire-building rival departments' interest. Wasting money makes them more powerful, not less. The incentives are perverse, the results predictable.

There is no need for government supervision here at all. It would do far more harm than good. In a free market under the rule of law (which unfortunately we don't have) if a company damages other property it must pay. If its work is shoddy it will go bust. Trying to replace common law liability with state regulation increases costs, reduces efficiency, decreases quality, discourages innovation, harms others and promotes irresponsibility.

Paul Birch

Water supply does not have to be through the mains; water tankers are another option, which become viable if a monopoly tries to overcharge, or fails to provide an adequate service. It would cost very little to start such a service. There are many parts of the world in which this is how most clean water is supplied.

Furthermore, one does not have to build a whole new network in order to compete; one can build a bit at a time, gradually eating away at the erstwhile monopoly. This is particularly easy where the territories of competitors meet; they can easily spread out INTO phpbb_neighbouring areas. It costs very little more to maintain redundant networks because the peak capacity of each can be correspondingly less.

That is certainly one approach, which would almost certainly be employed in a free market. Except that there can be more than one distribution network, even covering the same area. And even where there is only a single network it does not have to have monopoly power; it could, for example, be owned jointly by the competing supply companies, under a covenant that it will not discriminate between those companies in distributing their water.

There are so many options, and in a free market the players have the right incentives to find the best arrangements, even if we can't be sure exactly what they will turn out to be. In a regulated regime they don't, so we can be sure they won't.