Privatization or Economic Liberation

[ajpirzada]

This entire example is based upon this simple assumption. Let's remove government control on deforestation and take the tree indoors.

Let's assume a society where government doesn't do anything. People cut down trees, trees run out to the point where the private benefit of owning a tree far outweighs public benefit. Now what?
Private companies start marketing trees upto the point where cost of tree equals private benefit. Back to equilibrium without the use of government and it's inefficiencies.

Indeed but then you are imposing by construction that private benefit is always equal to social benefit since no other person benefits from it. And this is empirically invalid. Trees are not planted indoors in most cases. Factories emit pollutants into the atmosphere. Street lights provide light to many who do not intend to pay for it. Toll tax cannot be collected on every single road for all practical purposes. etc etc... Unless all this stops happening, your assertion is not empirically supported.

 

[Faiez]

Indeed but then you are imposing by construction that private benefit is always equal to social benefit since no other person benefits from it. And this is empirically invalid. Trees are not planted indoors in most cases. Factories emit pollutants into the atmosphere. Street lights provide light to many who do not intend to pay for it. Toll tax cannot be collected on every single road for all practical purposes. etc etc... Unless all this stops happening, your assertion is not empirically supported.

Actually, these new examples you're are giving are pretty easy to counter. That tree thing was difficult, I don't really have a free-market alternative that can preserve forests (but that's just me, go to some hardcore free market people, and they'll know better).

Okay, so let's get into a world with no government. All cities are built privately. There are residential towns and there are industrial towns. Residential towns provide real estate to live in. They compete on basis of planning and infrastructure (that's where street lighting and roads come in and maybe even mass transit), you want to live in a place that has street lighting and a place where people can actually go and meet you(obviously ). Roads are either built privately or cost for roads connecting cities is perhaps shared by individual cities, they'll negotiate (You want to live in a city that is well connected to others and charges low toll or perhaps the toll in adjusted into the price of real estate and other maintenance fees). Now lets talk about factories. No one wants to live near factories due to pollutants. In case an industrial town is built near a residential one, residential town values will go down. To counter that, the residential town operator will either make sure it owns enough land around it to protect its residents or offer to pay the industrial town to implement pollution control measures if there's enough demand for an industrial town close by without the pollution.

Result : Industrial towns maintain the most comfortable distance (for residents) from residential towns. The tree thing can be applied here as well perhaps, you want to live in a place with trees.

For atmosphere, you can always have non-profit and even for-profit organizations working on that. They'll create awareness and setup a brand "environment blah blah approved" stamp. It's an entire industry based merely on convincing people that if they were to buy products with their stamp, the environment will be saved. I suppose similar organizations for trees could also exist.

And so on.....

A real life example of a private town/city is of Bahria Town in Lahore. They have built a wonderful society. And if there is more competition, this will only improve. Can a government do the same ? Yes, of course it can. But seriously can it ? No.

 

[ajpirzada]

Actually, these new examples you're are giving are pretty easy to counter. That tree thing was difficult, I don't really have a free-market alternative that can preserve forests (but that's just me, go to some hardcore free market people, and they'll know better).

Okay, so let's get into a world with no government. All cities are built privately. There are residential towns and there are industrial towns. Residential towns provide real estate to live in. They compete on basis of planning and infrastructure (that's where street lighting and roads come in and maybe even mass transit), you want to live in a place that has street lighting and a place where people can actually go and meet you(obviously ). Roads are either built privately or cost for roads connecting cities is perhaps shared by individual cities, they'll negotiate (You want to live in a city that is well connected to others and charges low toll or perhaps the toll in adjusted into the price of real estate and other maintenance fees). Now lets talk about factories. No one wants to live near factories due to pollutants. In case an industrial town is built near a residential one, residential town values will go down. To counter that, the residential town operator will either make sure it owns enough land around it to protect its residents or offer to pay the industrial town to implement pollution control measures if there's enough demand for an industrial town close by without the pollution.

Result : Industrial towns maintain the most comfortable distance (for residents) from residential towns. The tree thing can be applied here as well perhaps, you want to live in a place with trees.

For atmosphere, you can always have non-profit and even for-profit organizations working on that. They'll create awareness and setup a brand "environment blah blah approved" stamp. It's an entire industry based merely on convincing people that if they were to buy products with their stamp, the environment will be saved. I suppose similar organizations for trees could also exist.

And so on.....

A real life example of a private town/city is of Bahria Town in Lahore. They have built a wonderful society. And if there is more competition, this will only improve. Can a government do the same ? Yes, of course it can. But seriously can it ? No.

Lets take your example further. Now Bahria town has replaced the government in terms of charging the bahria town citizens (in lump sum) for various services which Bahria town provides. In the absence of any government, Bahria town management has become the government for all practical purposes. Why is this so? Bec the fundamental problem still exists. There are services with social benefit (cost) greater than private benefit (cost). You charge the households (think of taxes) and use the revenue to provide services (think of public services). Again note another similarity vis-a-vis government. Presumably (im not sure) households are charged according to the size of the house. However, bahria town services (parks, streets, lights etc etc) are availed by all the Bahria town citizens equally.


Perhaps the free market stuff you are referring to is to do with markets work efficiently without any government regulation. This assertion is much more extreme than public provision of public goods vs. private provision of public goods. ?

 

[Faiez]

Lets take your example further. Now Bahria town has replaced the government in terms of charging the bahria town citizens (in lump sum) for various services which Bahria town provides. In the absence of any government, Bahria town management has become the government for all practical purposes. Why is this so? Bec the fundamental problem still exists. There are services with social benefit (cost) greater than private benefit (cost). You charge the households (think of taxes) and use the revenue to provide services (think of public services). Again note another similarity vis-a-vis government. Presumably (im not sure) households are charged according to the size of the house. However, bahria town services (parks, streets, lights etc etc) are availed by all the Bahria town citizens equally.


Perhaps the free market stuff you are referring to is to do with markets work efficiently without any government regulation. This assertion is much more extreme than public provision of public goods vs. private provision of public goods. ?

Well, in the case of government providing a public good, there is just one supplier (or very small number of suppliers) and consumers get a lack of choice and there's simply a lack of competition in the market. Whereas a free market (no government) gives you as much competition as is needed.

I'm just saying that small government is always better. And no government would be best.

 

[ajpirzada]

Well, in the case of government providing a public good, there is just one supplier (or very small number of suppliers) and consumers get a lack of choice and there's simply a lack of competition in the market. Whereas a free market (no government) gives you as much competition as is needed.

I'm just saying that small government is always better. And no government would be best.

The issue remains. The role of govt cannot be eliminated for many reasons. One of it is what we are already discussing: provision of public goods. I agree that wherever such public goods can be provided by the private sector, govt should let the private sector provide it. Nonetheless, the fact remains that lump sum taxes/charges are necessary in order to provide adequate quantity of public goods to the community under consideration. It doesnt matter whether you call the entity undertaking this task 'a government' or 'xyz.' My emphasis on lump sum taxes is intentional since i want to highlight the point that private benefit cannot be made equal to social benefit when we talk about public goods etc.

Another of the many possible reasons is incomplete markets. Lets talk about environment again. Today's decisions have implications for future generations. However, since future generations are not present today, they do not take part in the market which leaves the market incomplete. And just because market is incomplete, the market outcome will not be optimal. Governments can effectively take part in the market as overseeing the interests of this absent generation.

Then there are other business cycle reasons for which government must take play a role in the economy... but this will get too long.

Clarification: I do not intend to say that government should be involved in doing businesses. Instead my point is about government's role in providing services and regulating the markets etc