Privatisation

SupaNova2

Markets don't need to be truly free or perfectly competitive, they only need to be better.

Scofflaw

SupaNova2 wrote: »

If you include economists who argue for and against I would guess those using perfect competition models are dominant. If you only talk about those advocating for privatization, I have no idea.

Those who don't assume perfect competition most likely identify themselves as classical or austrian economists. If you want to know more about who does and does not assume perfect competition, read Rothbard's Competiton and the Economists, and this Hayek extract.

Actually, that sort of answers the question. if most who don't assume perfect competition would identify as Austrian economists, then the people governments are listening to are probably assuming perfect competition, because Austrian economics isn't mainstream.

This isn't a theoretical argument about whether Austrian or mainstream economics is better, it's a discussion about privatisation. If Austrian economics isn't used by governments in determining the likely benefits of privatisation, it's of no relevance here.

cordially,
Scofflaw

SupaNova2

Scofflaw wrote: »

if most who don't assume perfect competition would identify as Austrian economists, then the people governments are listening to are probably assuming perfect competition.

No, not necessarily. Some may have a model assuming perfect competition, some may not. Those who use models are just as aware that markets can't be and don't need to be perfect in the real world and the their prescription does not depend on models that don't model the real world.

Scofflaw

SupaNova2 wrote: »

No, not necessarily. Some may have a model assuming perfect competition, some may not. Those who use models are just as aware that markets can't be and don't need to be perfect in the real world and the their prescription does not depend on models that don't model the real world.

That's certainly a comforting assertion, but would it not be better to back up the assertion with evidence?

cordially,
Scofflaw

SupaNova2

Scofflaw wrote: »

That's certainly a comforting assertion, but would it not be better to back up the assertion with evidence?

cordially,
Scofflaw

Is their evidence to the contrary. Evidence that economists really believe these models model the real world, and that these models are the sole basis for their prescription?

Scofflaw

SupaNova2 wrote: »

Is their evidence to the contrary. Evidence that economists really believe these models model the real world, and that these models are the sole basis for their prescription?

Well, personally I would say the entire field of economics, and in particular its recent history of practical application, more or less points exactly that way. But what you're asking isn't really very provable that way round, since it lends itself to an almost infinite amount of goalpost-shifting.

You clearly believe that privatised services offer some superior outcomes over state supplied services. Presumably you base that belief on something concrete. All I'm asking for is to be let in on that concrete evidence, which can hardly be too much to ask, surely?

cordially,
Scofflaw

SupaNova2

Scofflaw wrote: »

You clearly believe that privatised services offer some superior outcomes over state supplied services. Presumably you base that belief on something concrete. All I'm asking for is to be let in on that concrete evidence, which can hardly be too much to ask, surely?

Can I ask the same of you? Start with at least stating your position, at least I have manged that. Do you believe state run services offer some superior outcomes over privatized services?

Scofflaw

SupaNova2 wrote: »

Can I ask the same of you? Start with at least stating your position, at least I have manged that. Do you believe state run services offer some superior outcomes over privatized services?

I don't really have an overall position, at least in terms of pro/anti. I support privatisation where it seems likely to offer better outcomes, state-run services where those appear to offer better outcomes. I'm not opposed to or supportive of either method in itself.

So, in direct answer to the question, yes, I believe there are cases where state run services can offer superior outcomes over privatised services. There's certainly no intrinsic reason why not.

cordially,
Scofflaw

SupaNova2

I also don't have an overall position in terms of being only pro or anti. I'm clearly mostly on one side of the debate though, supporting privatization and markets in most cases as it seems to produces better outcomes in most cases.

Valmont

Karl Stein wrote: »

Often a 'monopoly' is the only way to ensure a degree of efficiency that the profit motive cannot.

What motive does a monopoly have to ensure any degree of efficiency beyond lining their own pockets?

Karl Stein wrote:

Or how about multiple road companies running roads parallel to each other in competition? The notion is absurd.

It is absurd, and no private road system that I am aware of has ever turned out in this way.

Permabear

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SupaNova2

In my experience the perfect market ideal is more often brought up by a Krugman or a Stiglitz for that very reason, the market cannot be perfect according to the ideal therefore government should do x or y. They then use it as a tactical strawman saying the other side assumes perfect markets that can't exist therefore their argument is null.

This thread is a reflection of that, no-one on the side of privatization mentioned this ideal as a basis for their view, yet they were told they were assuming it and therefore there argument is based on 'fantasy'.

benway

Permabear wrote: »

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Are you suggesting that trained economists who enter the Bureaucratic World of Government either forget part of their training or adopt a different approach to those who practice their trade in the Bureaucratic World of Private Enterprise?

Permabear wrote: »

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Yet, if the big bad State happens to be the monopolistic dominant industry player, this is ipso facto A Bad Thing, no?

Valmont wrote: »

What motive does a monopoly have to ensure any degree of efficiency beyond lining their own pockets?

The state and state bodies have legislative and constitutional fetters on their actions, directly enforcable by citizens against them, that can and do influence their conduct. Your statement is really only applicable to private monopolies.

SupaNova2 wrote: »

I'm clearly mostly on one side of the debate though, supporting privatization and markets in most cases as it seems to produces better outcomes in most cases.

As I said, the evidential basis for this is far from clear. I am not suggesting that there may not be particular contexts where privatisation may be a boon, but I think the specifics of each case should be carefully scrutinised.

Taking the example of the privatisation of prisons, the inadequacies of a “comparative efficiency” approach come to the fore. The potential for conflicts of interests is obvious, exemplified by the "cash for kids" case, where judges were found to be receiving kickbacks in return for keeping private juvenile detention centres full. Per criminologist Malcolm Feely: "privatisation is fostered by entrepreneurs who do much more than provide alternative sources of services: they create demand for and then supply new forms of social control." The concomitant rise of private prisons and mass incarceration in the US is notable, as are the difficulties inherent in "downsizing the carceral state" where private actors have become heavily involved. The Corrections Corporation of America, of all sources, hit the nail on the head in their 2005 annual report:

Our growth is generally dependent upon our ability to obtain new contracts to develop and manage new correctional and detention facilities...
... The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.

Even leaving aside these objections, providers like the Corrections Corporation of America have hardly covered tnemselves in glory with regard to cost savings or standards of service, even where private prisons refuse to take on the costs associated with dealing with "higher risk" prisoners.

This may be a bit of a digression, but as an occasional criminologist it's one of the areas that I'm most familiar with and I think it neatly illustrates the kinds of issues that arise in assigning key government functions to unaccountable private actors, as well as in gauging "efficiency" by way of economic productivity metrics only. It seems to me that the profit motive and competition cannot be taken to inherently lead to more efficient outcomes by any ordinary measure of the word - "marketization" can just as easily pull in precisely the opposite direction.

Permabear

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Permabear

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Karl Stein

Valmont wrote: »

What motive does a monopoly have to ensure any degree of efficiency beyond lining their own pockets?

State monopolies are useful for doing grand projects like national electrification, drinking water infrastructure, sewerage systems, highways/motorways, space launch technology, public health systems, mass vaccinatio, education systems etc.

It is absurd, and no private road system that I am aware of has ever turned out in this way.

As I said above for there to anything approaching competition there would be a number of roads running parallel to each other so motorists could choose the best value which, as we both agree, would be absurd.

benway

Permabear wrote: »

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Like the Chicago boys?

Trained economists are a very vocal and influential (arguably unduly so) part of the regulatory and policy community within government. Certainly, in the US, the government is the largest employer of economists, no reason to suspect that the position is any different here.

I'm unclear as to how and why the work of economists in government represents a misunderstanding of macroeconomics, as opposed to their counterparts in the private sector. The current "economic collapse" would seem to illustrate that both cohorts are equally capable of gross errors.

Permabear

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benway

Permabear wrote: »

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I suggest you have a look at the career of a certain Larry Summers for one.

In this country, one example I can think of off the top of my head is in the debate leading to the enactment of the 2002 Competition Act - economists (of varying shades) were prominent in what Mary Harney called the, "most thoroughgoing and extensive ever carried out into competition in this country or possibly anywhere".

Of course, the end product was consistent Minister's political leanings, but there are those who would treat Harneyism and "sound economics" as synonymous.

Whereas, presumably, for example, the kinds of policy directions inspired by Nobel winners like Stiglitz and Krugman are not "sound economics".

The point: "sound economics" are in the eye of the beholder. And I'm personally of the view that economics, even more so than most of the social sciences, is politics by any other name. One of the late, lamented, Tony Benn's more astute observations:

“It was presented scientifically. But than they always present it scientifically. As being the only way of doing it; ‘there is no alternative’. And this gripped people. But at the same time you must never forget that politics, and thus economics, is in the pursuit of an interest. And an ideology. And if the scientist helps you with the ideology you use it, if he does not you disregard it. So the conflict between, as it were, Friedman and Keynes, was a political conflict. It wasn’t really two people solemnly assessing the different values of two sets of ideas. One benefited one group, the other benefited another.”

Scofflaw

SupaNova2 wrote: »

In my experience the perfect market ideal is more often brought up by a Krugman or a Stiglitz for that very reason, the market cannot be perfect according to the ideal therefore government should do x or y. They then use it as a tactical strawman saying the other side assumes perfect markets that can't exist therefore their argument is null.

This thread is a reflection of that, no-one on the side of privatization mentioned this ideal as a basis for their view, yet they were told they were assuming it and therefore there argument is based on 'fantasy'.

No-one on the "privatisation side" appears to have provided evidence of the building in of market imperfections to the analysis of the potential or real benefits of privatisation.

cordially,
Scofflaw

Scofflaw

Permabear wrote: »

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Which suggests that a defence of privatisation on economic grounds is potentially very shaky, if the reasons for it are actually political. Or is it a terrifically happy accident that something so eminently excellent on economic grounds just happens to be equally supportable on political grounds?

cordially,
Scofflaw

Scofflaw

Karl Stein wrote: »

As I said above for there to anything approaching competition there would be a number of roads running parallel to each other so motorists could choose the best value which, as we both agree, would be absurd.

Not really. Competition can be for road maintenance or improvement rather than on the basis of alternative routes.

A completely open market for road-building would indeed be one where companies built and maintained their own competing road networks. That such a market would be a deeply flawed one is recognised in the state's inevitable intervention.

Mind you, with Ireland's extremely dense network of rural roads, there would be in some places the theoretical possibility of an open market based on alternative routes, at least for non-residents.

cordially,
Scofflaw

Permabear

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SupaNova2

benway wrote: »

Taking the example of the privatisation of prisons, the inadequacies of a “comparative efficiency” approach come to the fore. The potential for conflicts of interests is obvious, exemplified by the "cash for kids" case, where judges were found to be receiving kickbacks in return for keeping private juvenile detention centres full.

I don't disagree on potential conflict of interest. Prisons benefit from strict drug laws and a high prison population, dentists benefit from a higher population of people with teeth problems, doctors benefit from a higher population of unhealthy people etc etc. But to imply that private prisons are responsible for the comparably high prison population in the US is wrong.

Permabear

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benway

SupaNova2 wrote: »

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I'm not suggesting that corrections privatisation is the sole reason for the advent of mass incarceration, at least in the early years, but it was undeniably a major factor. Now that private operators have become entrenched, the Corrections Corporation of America runs a massive and well-documented lobbying operation, aimed at influencing policy in a direction favourable to the interests of the company, but not the nation. All very, "What's good for the Syndicate, is good for the country".

Permabear wrote: »

Pointing to one influential economist does not answer the question about the influence of economists on public policy more broadly.

How could I forget Alan Greenspan? A "sound economist" if ever there was one, and surely one of the single most influential figures of the past quarter century?

Permabear wrote: »

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Worth having a look at the various reports prepared by Fórfas and the like and the submissions taken in the preparation of Mata Harney's Great Report.

Permabear wrote: »

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No screwier than praxeology, tbh.

Permabear wrote: »

At least you acknowledge that you regard an economic theory as "sound" only when it dovetails with your political beliefs.

Grabbing the wrong end of the stick there, I think, on a number of levels. As a (albeit slightly lukewarm) Foucauldian, I'm of the view that most if not all discursive formations are political to a greater or lesser degree.

This is doubly so in discourses based on a priori reasoning, including all formalised economic discourses that I'm aware of, "sound" or otherwise. Each system rests on basic assumptions about how human beings ought to behave or how society ought to be ordered, be it homo economicus or "the fundamental axiom of action, [and its] few subsidiary axioms".

While I have no doubt that you sincerely believe in the objective truth of your position, and I fully respect this, with the greatest of respect, there's a level of sloganeering going on here, here and here that would make even the most devout Socialist Worker blush.

I'm not seeing in this thread that the empirical case for privatisation in any and all instances has been established with any degree of cogency, even if, as you say, it can be "justified on economic grounds", or more correctly "justified based on the a priori discursive framework carefully constructed by certain schools of economics in pursuance of a certain interest". Not much different to an apparatchik claiming that Soviet state socialism was "justified on economic grounds".

Certainly, there is evidence that private ownership and operation may be suitable in certain sectors - the example of the Turkish cement industry for one - and if you can make out a cogent empirically-grounded case for the innate superiority of privatisation, I'm all ears. But it seems to me, at this point, that in reality the privatisation debate comes down to a set of value judgments as to the legitimate role of the state and the proper distribution of power and wealth in society.

Permabear

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Permabear

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ardmacha

Permabear wrote:

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If anything it is quite the opposite, even relatively competant parts of the public service are invariably characterised as "bloated" and "inefficient" by people who know nothing about them, while the bankers and the like that ruined the economy are excused.

Permabear

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