A Solution to the Economic Problem

Its another case of social benefits considerably exceeding private benefits. The idea that we can use contestable markets to achieve anything close to optimality was free market economics in full dream world

 

As they often do with mass transit, I just wonder if rail was the right solution, or the right now solution.

I'm assuming you mean for transit and other public goods, in which case I agree for the most part. Though I'm admittedly skeptical about the ability to improve upon the result based upon the scenarios I've already mentioned. Hong Kong's system is a public-private system that's been the benchmark for most of the world. Same thing in Singapore, again, I'm not expert on the UK system, but there's clearly more to the story than the privatization.

 

I don't see what. I suppose you could go with the style of privatisation, with the rail stock originally going to one company (Railtrack) and then services franchised out to specific companies

 

You may be right, maybe privatization was a bad fit for the UK, it hasn't been elsewhere though. Also your suggestion sounds oddly familiar to propositions I've seen for splicing up internet service, with the primary carriers still owning the trunk lines but leasing out the last mile.

 

Wasn't implying perfect anything. Was implying that a clearly defined contract can be managed by the private sector with the citizenry as watchdogs. Again, if government is incapable of higher efficiency, then everything is a moot point. And again, the management of public programs needs to be done at the lowest government levels. Accountability is achieved with scrutiny of performance and stiff penalties for failure...

 

Once we have imperfect contracting we're in a whole different ball game. We see that with how contracting problems leads to firms deliberately avoiding the market. Firms can control the assorted problems created (influence costs, agency costs etc) through very particular hierarchy. One often doesn't have that with regulation. One frequently has a system simply incapable of controlling price and quantity problems

 

Everything in the world is imperfect? It can't be all or nothing. Government uses contractors for myriad reasons, including building roads, maintaining roads, building bridges, maintaining bridges. It cannot be rocket science to go one step further and have government contract a 50-mile stretch of road?

Can't speak for your side of the pond but the USA government is bloated...it's a pig! It's too big to manage! If it's too big to manage then it is also unaccountable and unpredictable. Everything that can be pushed down to lower level governments should be done. Things like roads, bridges, airports, parks, recreational areas, prisons, etc. should be managed at the state and local levels. Where applicable, let the feds provide policy and funding, but leave the day-to-day to the levels of government nearest the activities...

 

But its not about 'everything'. Its about the consequences of imperfect contracting. In such circumstances the firm will often deliberately avoid the market. That makes a mockery of the 'private best' argument as that argument is inherently based on the invisible hand, with the price mechanism encouraging allocative efficiency. Once we refer to these imperfections the consequences can be drastic (e.g. 'contracting out', as governments attempt to reduce short term costs, have led to all sorts of health & safety 'issues'). Those attempting to dismiss such issues essentially have to be utopian over the effectiveness of regulation (regulation which will always be half-hearted because of asymmetric information problems)

 

You're living in the past. If we truly wanted to implement this type of government change then it requires we learn how to do things better. We can't just declare all ideas moot because our current performances are dismal. Of course there's imperfect contracting...there's imperfect everything...but should this keep us from moving to the next steps? Some contractors can have 100% of their interests in these government contracts or only a portion of their business...this would be their choice and who cares as long as we receive acceptable performance. Whether government provides it's own services or contracts these services, the same regulations stay in place. This is not about Utopian; it's about taking baby-steps to do things differently which allows government to downsize it's direct costs and get out of the day-to-day of project management which should be done at the lowest government levels...

 

Living in the past? That would be you and your concerted effort to ignore institutionalism and how it has impacted on your understanding of public-private activity. The consequences are also being felt now (e.g. The structural problems created by contracting out in the NHS; franchising problems in the rail network; regulation failures in the utility industries)

 

Everything in BOLD above...past...past...past...past...past

The reason I ignore the past is because there is NOTHING we can do about the past.

Is what we are doing TODAY acceptable...yes/no? Yes...then we can play golf all day. No...then we need to change something in order to create a more 'acceptable' situation.

If we are incapable of doing any better that we did in the past, and we realize we MUST make changes for the future, then we might as well roll over and just play dead...

 

A poor attempt! Everything mentioned are current problems (and problems reflecting imperfect contracting). Try and respond with something that makes sense!