The Case For Privatisation

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Tom Rogers
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The Case For Privatisation

Post by Tom Rogers » Fri Jun 15, 2018 2:35 am

Last edited by Tom Rogers on Fri Jun 29, 2018 2:16 am, edited 5 times in total.

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Re: The Case For Privatisation

Post by Merlin » Fri Jun 15, 2018 3:30 am

I agree with the general idea, that the very nature of certain services make them poor candidates for privatisation.

I would add though that many of these same services can be to a good extent unbundled, separating the “problematic” part of the service (the one that causes the externalities) from the “private” part but this requires a lot of creative thinking. Absent this, it is rather easy to make a mess of a privatisation drive.

An example would be the privatisation of a rail line. The “problematic” part is the fact that the rail service itself does not make enough money to cover its costs, but creates value through increasing the value of properties in the two cities it links. Privatising the line (or, even worse, separating the line itself and the train operator into two different companies) would induce the acquirer to neglect maintenance and just milk the system for what its worth until its too derelict to use. A better solution is to sell of the line, rail stock and stations at either end, allowing the acquirer to cash in some of the value of the line. A relatively minor change (sell the station and development rights to nearby lands vs. just sell the line) would make the difference.

Selling the water corporation? Do so with a guarantee to a given quantity of water to each household paid form the treasury. Above that quantity the meter starts to run. Now the purchaser is free to charge market rates without the fear of protests (this still leaves the issue of the monopoly price of water given a single supplier).

But yeah, just selling the thing is rarely a good idea, for it ends up entangling the state even more than before as well as tarnishing the name of the market. Case in point: the UK.

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Re: The Case For Privatisation

Post by Physiocrat » Fri Jun 15, 2018 1:58 pm

I'm with your thrust Tom. Any privatisations need to mean zero government interference whatsoever to be meaningful. The "privatisation" on the railways was a complete and utter joke. It is obvious that under natural market conditions trains would be a vertically integrated service not split between stations, track and rolling stock. I also though happen to think that left to market trains on the whole simply wouldn't exist. They are just far too expensive to run. Metro systems with huge numbers like the London Underground may make financial sense but Penzance to Edinburgh I think not.

Given my Rothbardian approach to monopoly I don't think a single water supplier would be a problem. If it was then as you say, water reclamation etc is perfectly viable especially in the UK.

Something else to remember with privatisation, if the government is your major customer, you are not in the private sector.
The atoms tell the atoms so, for I never was or will but atoms forevermore be.

Yours sincerely,


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