Comments on: public assets and infrastructure go private--and we pay

public assets and infrastructure go private--and we pay

amberglow — Sun, 29 Apr 2007 16:49:13 -0800

-- Why investors are clamoring to take over America's highways, bridges, and airports—and why the public should be nervous.--...a slew of Wall Street firms—Goldman, Morgan Stanley, the Carlyle Group, Citigroup, and many others—is piling into infrastructure ... Assets sold now could change hands many times over the next 50 years, with each new buyer feeling increasing pressure to make the deal work financially. It's hardly a stretch to imagine service suffering in such a scenario; already, the record in the U.S. has been spotty. ...

By: amberglow

amberglow — Sun, 29 Apr 2007 16:56:08 -0800

more here at Privatization.org (they're all for it) and more about water privatization here: Water for Profit: Contamination, riots, rate increases, scandals. From Atlanta to Manila, cities are confronting the true cost of water privatization.

By: amberglow

amberglow — Sun, 29 Apr 2007 16:57:26 -0800

from the Water article: ...Private water management is estimated to be a $200 billion business, and the World Bank -- which has encouraged governments to sell off their utilities to reduce public debt -- projects it could reach $1 trillion by 2021. Fortune has called water "one of the world's great business opportunities," noting that it "promises to be to the 21st century what oil was to the 20th." ...

By: carsonb

carsonb — Sun, 29 Apr 2007 16:59:45 -0800

Obligatory: Vista Road used to belong to the State of California and is now called Fairlanes, Inc. Rte. CSV-5. It's main competition used to be a U.S. highway and is now called Cruiseways, Inc. Rte. Cal-12....CVS-5 has better throughput, but Cal-12 has better pavement. That is typical—Fairlanes roads emphasize getting you there, for Type A drivers, and Cruiseways emphasize the enjoyment of the ride, for Type B drivers. The Deliverator is a Type A driver with rabies.

By: synaesthetichaze

synaesthetichaze — Sun, 29 Apr 2007 17:02:37 -0800

The entire world is starting to look a lot like Snow Crash lately, carsonb. Also, yet another fucking post that makes me SO proud to be a Pennsylvanian: yes, let's sell off every public resource and piece of infrastructure we have! Education! Roads! The air we breathe! EVERYTHING MUST GO.

By: acro

acro — Sun, 29 Apr 2007 17:10:26 -0800

Ongoing privatization news from Michigan

By: carsonb

carsonb — Sun, 29 Apr 2007 17:22:05 -0800

Maybe more/higher tolls will encourage public and shared transportation. I wonder if it would be worth it for these city managers to put the proceeds from infrastructure leases into transportation alternatives. It would be wonderfully ironic if we could sell all the roads to help America move away from driving gashog cars. Fat chance, I guess.

By: IronLizard

IronLizard — Sun, 29 Apr 2007 17:35:16 -0800

You would have to wonder about traffic laws that don't currently apply to private property. Perhaps they would require a private police force for these highways. Suddenly, there's even more incentive to hand out traffic tickets. Easements would also be more easily challenged when they're being handed to a for-profit company. All in all, this is probably a very bad thing.

By: amberglow

amberglow — Sun, 29 Apr 2007 17:39:25 -0800

Maybe more/higher tolls will encourage public and shared transportation. I can't see it--if the local governments can't afford to maintain infrastructure (which is aging and badly needs upgrading and shoring up all over the country), so they sell it off, how would any pay for public transit, unless those funds from privatizing are directly earmarked for public transit, which they never are now? And wouldn't that be a poison pill for these deals anyway? (which i would like, actually--if you require that the money made from privatizing goes to better public transit, fewer people would use the private roads and the investors wouldn't then be rushing to privatize, no?)

By: amberglow

amberglow — Sun, 29 Apr 2007 17:42:02 -0800

Perhaps they would require a private police force for these highways. That reminds me of Disney in FL (which owns vast areas of Orlando and all of Celebration, etc), and many if not most college campuses--there have been problems in all those places because of the way the private forces/cops/security/owners act and whether crime and other statistics ever get reported publicly and accurately, etc.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Sun, 29 Apr 2007 17:53:46 -0800

On the other hand, a road really ought to be able to pay for itself. If it can't--if it's not worth to the users what it cost to build--why was it built in the first place?

By: amberglow

amberglow — Sun, 29 Apr 2007 18:00:37 -0800

Why, Mr.? We already paid for all those roads and bridges and infrastructure and utilities, etc.

By: amberglow

amberglow — Sun, 29 Apr 2007 18:12:20 -0800

Governing Magazine: Unloading Assets--Cities and states are selling off bits and pieces of infrastructure. Is it a sweet deal or a mistake?

By: carsonb

carsonb — Sun, 29 Apr 2007 18:15:02 -0800

And wouldn't [these sales funding alternative transportations] be a poison pill for these deals anyway? That's perhaps the worst part about it. According to the article Wall Street (and apparently the rest of the world) is tripping over itself to buy this stuff up, to buy into the rolling stock that's choking the environment. Wouldn't it be great to turn that on its head and put the dough into getting people places and keeping the air clean? I think city governments are in a great position to make that kind of decision. Well, that's obviously not great from the investor's standpoint, then again my standpoint is Good environment for all mankind > growing wealth for a few. It would be supersweet if the good intentions stated for income generated by these deals could extend beyond social aid into environmental aid. a road really ought to be able to pay for itself This is the sort of ideal reality that Capitalism takes special pleasure in proving the opposite for profit. Infrastructure is in itself worth the cost of building, but why not turn a dime on it after that cost is paid?

By: stbalbach

stbalbach — Sun, 29 Apr 2007 18:16:17 -0800

And don't forget eminent domain, the "right" to take your house or property (for a fair market value) if its in the way of a road or building. If privatizing roads is a commercial success, the natural result will be the building of more private roads.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Sun, 29 Apr 2007 18:19:03 -0800

amberglow, if a road is able to pay for itself, that seems to imply that the road created or facilitated more economic activity than it consumed--it was a good investment. I'm not sure why we'd want to build a road that's a net drain on the economy. What's the point?

By: Falconetti

Falconetti — Sun, 29 Apr 2007 18:19:50 -0800

I am generally a fan of privatization and deregulation ventures, but there are basic public goods that should be run only by the government, water and roads being good examples. The problem with lots of advocates of privatization is that they don't know when to put the breaks on. Loosening the government stranglehold on aviation pricing through Reagan-era deregulation was a good thing. Taking a hands off approach when it come to the internet is a good thing. Shutting down roads that regular people use because a company that bought them doesn't make enough money off them is a bad thing.

By: Falconetti

Falconetti — Sun, 29 Apr 2007 18:22:40 -0800

There have also been real constitutional problems with people being able to exercise their constitutional rights, such as the twin freedoms of association and speech, on privately owned streets. The relevant case names are escaping me right now, though.

By: Pope Guilty

Pope Guilty — Sun, 29 Apr 2007 18:30:35 -0800

Loosening the government stranglehold on aviation pricing through Reagan-era deregulation was a good thing. What about the bailouts required to keep millions from losing their savings when the deregulated S&Ls did exactly what anyone paying even the slightest bit of attention knew they would do once the government stopped keeping an eye on them, or the playing with human lives that was possible thanks to the deregulation of energy concerns a la Enron (deliberately caused blackouts that resulted in dead old people, I'm looking at you)?

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Sun, 29 Apr 2007 18:33:12 -0800

Infrastructure is in itself worth the cost of building, but why not turn a dime on it after that cost is paid? I'm not sure how you can make such a general statement. Some infrastructure projects no doubt create much more value than they consume, but some no doubt don't. As things stand, there's little accountability on the part of the government to invest in infrastructure that will provide the most benefit for the least cost. There are huge, probably insurmountable, problems with completely deregulated privatization of roads (e.g. there probably isn't a property market in roads and I don't think there can be), but the system we have isn't ideal either. Because governments and human beings do things for reasons other than profit, you Libertarian asshole. Sure, but these things cost money all the same, and maybe it would be a better idea to buy them directly than indirectly. As things stand, we don't really know whether a particular public works project paid for itself or not, and if it couldn't, who received the benefits from it and how much those benefits cost. Direct subsidies are fine (e.g. paying for indigent persons' health care) because you know what you're buying and how much it costs. Indirect subsidies (e.g. unprofitable infrastructure) are more problematic.

By: jessamyn

jessamyn — Sun, 29 Apr 2007 18:40:25 -0800

[there is a MeTa thread about civility that you might want to read before calling people assholes, tia]

By: Pope Guilty

Pope Guilty — Sun, 29 Apr 2007 18:41:29 -0800

Some infrastructure projects no doubt create much more value than they consume, but some no doubt don't. And the one helps to pay for the other. If there's houses out in a rural area, should we calculate the taxes their owners pay before building a road out to serve them, in order to make sure we're getting their money's worth out of them? As things stand, there's little accountability on the part of the government to invest in infrastructure that will provide the most benefit for the least cost. After all, it's not like people in the government come up for election every year, two, four, or six, or anything like that. As things stand, we don't really know whether a particular public works project paid for itself or not, and if it couldn't, who received the benefits from it and how much those benefits cost. And god forbid that a public works project's worth be measured in anything beyond money.

By: Falconetti

Falconetti — Sun, 29 Apr 2007 18:44:36 -0800

What about the bailouts required to keep millions from losing their savings when the deregulated S&Ls did exactly what anyone paying even the slightest bit of attention knew they would do once the government stopped keeping an eye on them, or the playing with human lives that was possible thanks to the deregulation of energy concerns a la Enron (deliberately caused blackouts that resulted in dead old people, I'm looking at you)? What about them? That is why I didn't mention those as specific examples of what I thought were good things. I'm sympathetic to privatization and think it can be a good solution for governments in some situations, especially local and state governments, but I don't think it is a good in and of itself. I could list examples of when regulation and state control resulted in negative outcomes and ask you about those, but I don't want to attribute beliefs to you that I don't know you have.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Sun, 29 Apr 2007 18:56:38 -0800

And the one helps to pay for the other. If there's houses out in a rural area, should we calculate the taxes their owners pay before building a road out to serve them, in order to make sure we're getting their money's worth out of them? I don't see why not. If a rural road isn't able to pay for itself, then it basically amounts to a subsidy of people who want to live in rural areas. Maybe we want to pay people to help them live in rural areas, but surely there's a limit to how much we're willing to pay before we decide that our money would be better spent. The fact that other public infrastructure projects are profitable doesn't change the fact that unprofitable ones cost real money--money that could be spent on something else. I don't see anything wrong with being more deliberate about where we spend our money. After all, it's not like people in the government come up for election every year, two, four, or six, or anything like that. Sure they do, but governments don't typically operate public works projects in such a way that accounting for their costs and benefits is very feasible. Governments don't really have much reason to. And god forbid that a public works project's worth be measured in anything beyond money. It certainly costs money, money that could have been spent elsewhere. I'm not saying that unprofitable public works projects are never a good idea. I'm saying that the current lack of cost and benefit accounting makes it very difficult to tell whether such projects are a good idea or not. You're obviously very hostile to the idea of identify the costs and benefits associated with particular projects, and I don't really understand it. Surely it's better not to blindly throw our (limited) money at a problem?

By: JDHarper

JDHarper — Sun, 29 Apr 2007 18:57:35 -0800

I don't really see this as a bad thing. Generally, at least in my area, the private roads are well-maintained and are a pleasure to drive on. The state-maintained roads are a mess. Honestly, I would rather my town sell the properties to a company that would maintain the roads properly than to keep them and continue under-funding the infrastructure budget.

By: tgrundke

tgrundke — Sun, 29 Apr 2007 19:04:34 -0800

I'm not entirely against the idea, but there's a part of me that knows this could get bad, fast. It's all a big experiment at this point, and I'm willing to let it play out right now. Rest assured, I think that if these privatization plans become a major inconvenience, cost and/or problem, voters will have to take the reins and push back.

By: mesmerx

mesmerx — Sun, 29 Apr 2007 19:17:31 -0800

Simple: You always get what you deserve. You stuff around while you're young and do nothing but: drink, party and fun, fun, fun.... then when it's time to move away you'll have a average, scrub-n-run life to make a living. You balance while you're young, then you'll be more stable in adultary.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 19:20:28 -0800

"On the other hand, a road really ought to be able to pay for itself. If it can't--if it's not worth to the users what it cost to build--why was it built in the first place?" What are you arguing here? The ability to recoup in fees the use of a piece of infrastructure is a terrible metric for assessing its necessity. "amberglow, if a road is able to pay for itself, that seems to imply that the road created or facilitated more economic activity than it consumed--it was a good investment. I'm not sure why we'd want to build a road that's a net drain on the economy. What's the point?" Well, to serve other needs, chief. You do know that the government is around for more than facilitating business, right? Further, the ability to predict return based on infrastructure investment is pretty spotty. I mean, sure, we're all against Alaskan Bridge Socialism, but the interstates weren't built solely to promote Big Black's power of independent trucking. "As things stand, we don't really know whether a particular public works project paid for itself or not, and if it couldn't, who received the benefits from it and how much those benefits cost." But surely, then, you'd agree that increased transparency is really a better way to achieve the goal of knowing how much something cost, who received the benefits and whether it ultimately served a greater purpose (I'm going to ignore "paid for itself," because, again, it's a bad metric for public works). And really, yeah, we do know how much most public works projects cost and who benefited and etc. etc. Most of those things are a matter of public record and only take some reading of bills and following up on contracts. Reading local newspaper coverage is usually handy. "Sure they do, but governments don't typically operate public works projects in such a way that accounting for their costs and benefits is very feasible. Governments don't really have much reason to." Yeah, they do, frankly. When they don't, it's usually illegal, and makes for great stories for local papers. The problem is that usually, everyone figures out what a goddamned waste that road was five years after it's built. "You're obviously very hostile to the idea of identify the costs and benefits associated with particular projects, and I don't really understand it. Surely it's better not to blindly throw our (limited) money at a problem?" I think the hostility comes to the glib framing you're putting on the issue, frankly. Were this the real world, there'd be more impetus to find a common ground and work toward making sure that public money isn't squandered without endorsing privatization schemes, which you seem to be doing. But hey, ho, everyone loves the rhetorical device where they're the aggrieved victim of unreasonable attacks, ignorant of the context they're presenting their views in.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 19:21:17 -0800

Oh, and by the way kids— this is much closer to burgeoning fascism in America than any repressive anti-speech crap that the Bush administration does.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 19:22:29 -0800

And axe about half those "frankly"s, frankly.

By: five fresh fish

five fresh fish — Sun, 29 Apr 2007 19:27:01 -0800

It is time for modern governments to look after the best interests of their citizenry. Of the people, by the people, for the people, all that jazz. There are certain infrastructure requirements for the provision of a modern, just, civilized society. These all should be highly regulated by the people and highly available to the people. These services and physical plant are for everyone's use and benefit. The things I see as requiring government provision and control: healthcare and health standards; welfare/unemployment insurance and workplace standards; education and educational standards; housing security and housing/tenancy standards; policing and a judicial system. These are the things that are the foundation of Maslow's hierarchy of needs. You can't have a civilized society if they're not being met! These foundational requirements need to be in the purview of a strict government monopoly with high levels of public input and public documentation. They do not even need to operate at a profit: their value to society is not measured in dollars. There's a next-level of essentials involved in the provision of those basic services; as importantly, these essentials are required by everyone who participates in our modern society. These include water, electricity, roads, telephone and (because we are "modern") internet. And I'll throw in basic auto and home insurance: no need for anyone to make fuck-you profits from a basic sensible precaution against becoming a burden on society. IMO the best way to provide this next layer of essentials is through a publically-regulated monopoly. Said regulations include pricing, quality of service, coverage, etcetera, and are developed through high levels of public input and expert advice and analysis. The monopoly gets rock-solid profits for all eternity, the public gets rock-solid services, society gets rock-solid guarantees of improvements and development. Reference examples: ICBC, BC Hydro (1990), BC Tel (1970). All under held very accountable by the public, all providing(-ed) exceptional service, all making very good money. Everything else we have in society is, IMO, icing on the cake; something to encourage us to work for a better life. I'm good with private competition on the free market for most everything else. The playing field is enormous. It doesn't hurt -- and helps a lot -- to keep one small corner of it in the public's best interests.

By: five fresh fish

five fresh fish — Sun, 29 Apr 2007 19:31:55 -0800

note that I'm not saying all these services have to be at the highest level, nor that they can not see competition. F'rinstance, at this level of internet 'essentiality', I'd be fine if the only guarantee of free internet access is at the nearest library or public government office.

By: kliuless

kliuless — Sun, 29 Apr 2007 19:33:50 -0800

it hasn't worked out so well in australia... i guess the US is in so much debt right now that it has to keep hocking pieces of itself to maintain its standard of living, which is fine as long as US assets remain desireable and continue to appreciate, and are replenished! but if, like real estate, other investable assets tumble you're left selling the family jewels -- roads, bridges, national parks (what would yosemite go for? disney could buy it :) etc. -- then, indeed, you'd be witnessing the hollowing out of america... btw, they're privatising lotteries too...

By: amberglow

amberglow — Sun, 29 Apr 2007 19:36:59 -0800

the monopoly thing is very apt here---when a bridge or tunnel is privatized, it's not like there are other options nearby that you can just switch to. When water is privatized, you can't go to another company and get it--you're stuck. Most public infrastructure is made up of monopolies, and instead of creating alternatives, private companies and investors are simply buying up the only games in town for the most part, and their aim is not service but profit.

By: amberglow

amberglow — Sun, 29 Apr 2007 19:41:45 -0800

the focus used to be on deregulation and competition to public utilities and services, but now it's all about simply buying up the existing things. So instead of becoming a competitor to ConEd, you buy ConEd itself?

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Sun, 29 Apr 2007 19:42:10 -0800

What are you arguing here? The ability to recoup in fees the use of a piece of infrastructure is a terrible metric for assessing its necessity. No, it's really not. In what sense is a piece of infrastructure "necessary" if the benefits that flow from its construction are insufficient to cover its cost? There's a reason I didn't say "recoup in fees." I said "pay for itself," which I understand simply as providing benefits to cover the costs. A piece of infrastructure that couldn't recoup its cost in fees is a redistributive subsidy, but it may still be able to "pay for itself" in the broader sense if the benefits of the subsidy are worth their cost. Yeah, they do, frankly. When they don't, it's usually illegal, and makes for great stories for local papers. Costs are certainly accounted for, but the government's pre-construction estimate of benefits is inherently suspect, because the governmental decision makers have little personal stake in the profitability of the enterprise. They often have a far larger stake in seeing the project undertaken for other political reasons. Were this the real world, there'd be more impetus to find a common ground and work toward making sure that public money isn't squandered without endorsing privatization schemes, which you seem to be doing. I don't even understand this remark. Discussing the benefits of privatization is inherently unrealistic? No one in the real world endorses privatization?

By: amberglow

amberglow — Sun, 29 Apr 2007 19:44:22 -0800

By: Pope Guilty

Pope Guilty — Sun, 29 Apr 2007 19:47:11 -0800

Also, these public projects and works and things are our property, no? They were built with our money for our benefit. Why are they allowed to be sold or leased for 100 years at all? What's our say in it all? For much the same reason we're never going to see the super-duper fiber optic connections we all paid for.

By: five fresh fish

five fresh fish — Sun, 29 Apr 2007 19:47:54 -0800

One thing that bugs hell out of me: whenever a public service in BC is privatised, do I see a reduction in my tax load? No! In fact, it often goes up at the same time service quality goes down. That really grates.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Sun, 29 Apr 2007 19:48:28 -0800

Also, these public projects and works and things are our property, no? They were built with our money for our benefit. Why are they allowed to be sold or leased for 100 years at all? What's our say in it all? The same say we have in everything else the government does? Obviously if public assets are being sold to private entities for less than they're worth (understood extremely broadly), that's a huge problem.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 20:07:47 -0800

"No, it's really not. In what sense is a piece of infrastructure "necessary" if the benefits that flow from its construction are insufficient to cover its cost? There's a reason I didn't say "recoup in fees." I said "pay for itself," which I understand simply as providing benefits to cover the costs. A piece of infrastructure that couldn't recoup its cost in fees is a redistributive subsidy, but it may still be able to "pay for itself" in the broader sense if the benefits of the subsidy are worth their cost." Again, it is. First off, we're talking about toll roads, so "recoup in fees" is relevant. Second off, "providing benefits that pay for the costs" is too fucking nebulous and subjective to be worth examining. See: Ted Stevens' bridge to nowhere. So, your metric is meaningless at best and rapaciously misguided at worst. A better question would be "Does this serve the public good as much as an equal expenditure elsewhere," assuming that you're not a Norquist bathtub-drowner. "Costs are certainly accounted for, but the government's pre-construction estimate of benefits is inherently suspect, because the governmental decision makers have little personal stake in the profitability of the enterprise. They often have a far larger stake in seeing the project undertaken for other political reasons." Well, yes. Which is why oversight and transparency are required. And voting is necessary, should you decide that inefficiency is your personal tipping issue (I might vote for someone prone to be all wasteful with the earmarks, like John Conyers, if I liked his view on the war). "I don't even understand this remark. Discussing the benefits of privatization is inherently unrealistic? No one in the real world endorses privatization?" Were this not the internet, there'd be more motivation to not just dismiss you as a shallow Libertarian jackass and work to find commonalities (like the aforementioned transparency and accountability). There are things that you're saying that I agree with, but I find your presentation blinkered, unreflective, and generally antithetical to the notion of a common good.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 20:18:32 -0800

(Oh, to clarify the Ted Stevens Bridge comment— Stevens' bridge is justified by TVA Keynesian employment investment, not in actually having the bridge do anything. It's a sop to constituents, but, especially in conjunction with the vote trading that had to occur to get it, it could be argued that the bridge was an essentially meaningless part of a larger system that did ultimately benefit the American people enough to justify the construction. I happen to disagree, but I disagree because I believe that money could be better spent, not because the bridge provided no benefit).

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Sun, 29 Apr 2007 20:19:53 -0800

Second off, "providing benefits that pay for the costs" is too fucking nebulous and subjective to be worth examining... A better question would be "Does this serve the public good as much as an equal expenditure elsewhere." That's actually the same question. The fact you can't see this makes this discussion pointless. Your cripplingly narrow viewpoint and reactive arrogance aren't helping either.

By: geoff.

geoff. — Sun, 29 Apr 2007 20:19:54 -0800

As someone with experience in large government contracts: in case this wasn't apparent they, are incredibly, incredibly corrupt. It is not Nigeria corrupt, in fact it probably is kind of like most insider trading violations, wrong but there's no way anyone can prove it. Until bids are done anonymously and with heavy oversight I won't consider privatization of anything government a good thing. I am not against he idea, but the ways the deals are done are very "you rub my back, I rub yours." Sorry If I'm being redundant (I haven't read most of the other comments).

By: dirigibleman

dirigibleman — Sun, 29 Apr 2007 20:40:07 -0800

Generally, at least in my area, the private roads are well-maintained and are a pleasure to drive on. On the other hand the road past my mother's house, which was effectively "leased" to the local coal mine, wasn't even paved until the mine went out of business and reverted back to state control. And if you know anything about PA roads, you know that "they were worse than PennDOT" is a very damning statement.

By: kliuless

kliuless — Sun, 29 Apr 2007 20:44:41 -0800

when assessing what belongs in the private or public sphere (or public-private partnerships -- like municipal wi-fi?), i think there's generally two considerations: whether or not it's a natural monopoly and whether or not it's a public good (also see the "Technological" Prerequisites of the Market Economy) even then tho the provisioning of public goods need not only be the purview of the gov't per se! one might then consider natural capitalism :P

By: serazin

serazin — Sun, 29 Apr 2007 20:47:49 -0800

Thanks for posting this amberglow.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 20:54:56 -0800

"That's actually the same question. The fact you can't see this makes this discussion pointless. Your cripplingly narrow viewpoint and reactive arrogance aren't helping either." No, it isn't. Here's why— By framing it as a question of costs versus benefits with regard to one specific project, you're ignoring the question of priorities and thrusting the project into a realm where the de facto consideration will be monetary, rather than priority based. Your framing, like I said above, is the disagreement, not the underlying argument about governmental waste. And, like I said, were this a real discussion about public policy, there would be a motivation to work toward a compromise. Instead, and I find it laughable that you're trotting out some sort of dudgeon over narrow viewpoints and arrogance, it's far more rewarding to condescend to someone who's out of his depth and making an earnest case without an appreciation of why others find it objectionable. (Full disclosure— my framing, that of priorities rather than subjective benefit, assumes that the money is to be spent, rather than returned to the public for individual determination. I'd attach caveat riders about public good, etc. etc., but it's a legitimate criticism, based on a valuing of private property over public good. I tend to lean the other way when it comes to liberalism versus equality).

By: amberglow

amberglow — Sun, 29 Apr 2007 21:11:19 -0800

None of these things were built to be profitable--they were all built to provide a public service or fulfill a public need. They were seen (and still are seen) to have clear and tangible benefits (safe drinking water, drainage and sewage treatment, access/transit for goods and services and people, etc), and we didn't subject them to any cost/benefit analysis. We built them because they were needed. They're all still needed.

By: amberglow

amberglow — Sun, 29 Apr 2007 21:13:15 -0800

Mr. President, would it be ok in your view for Stevens, after making sure he got the public money he wanted for that bridge, immediately turned around and sold it off? Why or why not?

By: voltairemodern

voltairemodern — Sun, 29 Apr 2007 21:29:27 -0800

Thanks, amberglow, for giving me nightmares. Damn. Privatization of basic services/utilities scares the hell out of me, perhaps disproportionately so.

By: chinston

chinston — Sun, 29 Apr 2007 21:36:32 -0800

amberglow, I'm curious: are you o.k. with airlines being privately owned (albeit heavily regulated), or would you prefer those to be state-owned and state-run as a public service? After all, they serve many of the same functions as interstate highways. In case it needs to be said: I'm not being disingenuous; I'm honestly curious as to what your intuitions are on this, and why.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 21:54:13 -0800

"They were seen (and still are seen) to have clear and tangible benefits (safe drinking water, drainage and sewage treatment, access/transit for goods and services and people, etc), and we didn't subject them to any cost/benefit analysis. We built them because they were needed. They're all still needed." Well, yeah, but a cost/benefit analysis does still need to be done— it's on cost:benefit that Ted Stevens' bridge fails. The argument I had with Steve was that he when he wasn't arguing for the language of privatization, he was employing a largely meaningless overly-broad metric for deciding what was and wasn't a benefit. Cost:benefit analysis is why even though we might be safer with road patrols of all the townships around here, the county is working to cut them (or rather, requiring the townships to pay the county for them or allowing them to be cut). Assuming that there are limited resources, you do need some method of assessing what to do with your resources. What I'm arguing is that economics is the wrong language to set the primary rubrics in— a monument may never draw in the money required to build it, or it may not draw in as much as a road, but rememberence or public identity or even local glory may be enough of a "benefit" to justify the expense. And, ideally, these questions are answered in a broad, democratic sense (which is why transparency is important— people have to make informed choices).

By: amberglow

amberglow — Sun, 29 Apr 2007 21:58:27 -0800

chinston, airports should be publicly owned and run in my view, but businesses that use them shouldn't be--just like highways. There's only one interstate highway system--it's a monopoly and vitally needed for food and other goods as well as our transportation. There are many airlines and they in toto are not at all as essential to ourselves or the economy, and they are not the only nor the most effective way to get food to us or anything else. It's like asking whether trucking companies should all be publicly owned, i think. The essential infrastructure--highways, airports, bridges, rails, power lines, water lines, sewage drains, etc--should be public. The things that use them don't always have to be, usually.

By: Kwantsar

Kwantsar — Sun, 29 Apr 2007 22:14:27 -0800

The main reason that these Macquarie-style privatizations seem so stupid (and have a slight odor about them) to me is that I can't conceive of a reason that "society" or government would impute a higher discount rate than the capital markets. So that leaves us with agency costs (whether we want to pay them over time via incompetent government, or up-front with rigged bidding) and maintenance costs. And if it's maintenance costs, I'd think that a semi-honest, semi-competent administrator could outsource that at zero NPV. I could do without the hand-wringing that usually accompanies threads like these. Perhaps a legitimate financial microeconomist could explain the discount rate issue a little better. And, amberglow, it's funny that you cite rails in your last entry-- the only example where the government owns many of the carriages, but little of the long-lived infrastructure itself. It's nearly the opposite of the unprivatized highway system.

By: Kwantsar

Kwantsar — Sun, 29 Apr 2007 22:15:20 -0800

Oh. And see also.

By: reeddavid

reeddavid — Sun, 29 Apr 2007 23:15:34 -0800

By: reeddavid

reeddavid — Sun, 29 Apr 2007 23:18:48 -0800

On self-financing roads: Someone has to pay for every road, and it makes sense for the user cost to be paid by the user. Would you like to pay higher property taxes in order to finance a bridge that you rarely use? If I use the bridge every day to get to and from work, it would make more sense for me to pay a toll each trip. Unless, of course, subsidizing my bridge with your property tax would serve to increase the value of your property. No one expects free electricity; we pay for the amount we use. This encourages efficient behavior such as turning off the heat when no one is home. This concept should be applied to roads. "Free" access to roads isn't actually free, it just means that those who impose the costs don't have to pay them. This results in over-use of the road and it causes congestion. Have you ever participated in "Free Cone Day" at Ben & Jerry's? The ice cream is free, but you have to stand in line for an hour because now everyone wants some. If Starbucks didn't accept payment for coffee, that morning caffeine would cost an hour of your life. "Excuse me, I have a meeting in 45 minutes, can I just pay $3 to get that coffee now?" "I'm sorry sir, the coffee's not for sale. You'll have to wait in line." That is exactly how our "free" roads work. I might find it worthwhile to enter a congested road, maybe It only takes 10 minutes longer than normal. But by entering the road I increase the level of congestion for everyone. Suppose it takes the other 1,000 people on the road just 6 more seconds to get where they're going because of me. That means I just imposed a social cost of 140 additional minutes of traffic delay, but I only realized 10 minutes of that delay. If there was a congestion toll charged during peak hours, many of the less valuable trips would get shifted to off-peak times and congestion-free travel could be available to anyone willing to pay. With "free" roads it's impossible to buy congestion-free travel, no matter how much it might be worth to you to get where you're going more quickly (late for job interview or daycare, Grandma's flight arrived early, etc). Another benefit to paying with a toll instead of with traffic delay is that tolls can be used to finance roads. Time spent in traffic just disappears.

By: klangklangston

klangklangston — Sun, 29 Apr 2007 23:35:50 -0800

Reeddavid— Yes, free access can lead to overuse. However, we as a society decide that there are certain things that everyone deserves equal access to. So yeah, that means that some people pay more in than they get out in terms of use, and some people pay less. That's the cost of having a public good, and the reason that efficiency should not necessarily be the primary determiner of public policy. There are certain areas of the public sphere that demand egalitarian treatment, even if it means a personal disadvantage. It's sad that people seem to have forgotten that.

By: Kwantsar

Kwantsar — Mon, 30 Apr 2007 00:23:01 -0800

Kwanstar, I think part of the answer to your question is that private finance firms can borrow money over longer periods of time than most state governments. If the state could sell 50-75 year bonds to finance these projects, they might want to keep the long-term toll revenue stream for themselves. However, state-issued bonds typically have limits that are much shorter, limiting the amount that can be borrowed against expected toll revenue. Not buying it. Even at a low k and a high-ish g, the vast majority of even a 75-year annuity is realized in the first thirty years. States issue 30-year revenue bonds all the time*. And due to the tax deductibility of said bonds, their explicit financing costs are lower than those of infrastructure funds. If states can float 30-year hospital bonds below 5%, I'm sure they can float 30-year road bonds under 5%. This isn't Mexico.

By: Pope Guilty

Pope Guilty — Mon, 30 Apr 2007 01:12:15 -0800

Someone has to pay for every road, and it makes sense for the user cost to be paid by the user. Would you like to pay higher property taxes in order to finance a bridge that you rarely use? If I use the bridge every day to get to and from work, it would make more sense for me to pay a toll each trip. Unless, of course, subsidizing my bridge with your property tax would serve to increase the value of your property. What, seriously? That bridge also makes it easier for those people to drive into town, spend money, get jobs, and engage in the sort of economic activity that allegedly benefits everyone. I guess that's what gets me about the "I'll never drive down that road!" argument- maybe not, but you'll employ someone who needs that road to get to work, or you'll buy things from people who do, or be served by them- not to mention the goods that can be transported on that road. The notion that because a specific person doesn't drive their vehicle over a particular road means they don't benefit from it is patently absurd- you might as well argue that since you don't send any packages overseas, you don't benefit from intercontinental shipping.

By: elpapacito

elpapacito — Mon, 30 Apr 2007 02:26:24 -0800

The notion that because a specific person doesn't drive their vehicle over a particular road means they don't benefit from it is patently absurd Sorry it is not "absurd", it is "very unlikely". Imagine a road in the desert connecting two little towns with little economies ; what are the chances of you or anybody else benefiting from it somehow ? I can't say that they are zero, as it would mean there isn't --any-- chance at all..and demonstrating that means knowing what will happen in the future with absolute certainity. Yet I could try to assess the likelyhood of you getting any benefit , based on past history of use of the road. It is an approximation and I certainly could be wrong, but that would be a rational approach to the problem. Similarly, say that I owned most of the streets that you must travel to reach workplace daily. I could ask you for a little token daily fee..you would hardly notice, but multiply it for millions (at least in cities) Obviously that would be renting you the street..at some point in time you would certainly decide that it is better to buy the street...but you don't have millions, nor would like to take the maintenance cost and the risk of people not paying you. As a limited liability company I could just extract as much revenue as possible from the street, lobby politicians with the sea of money and then declare incompetence and fail..after stealing billions and leaving enormous costs to be taken by the next owner...which is likely to be a State...which means that Joe Schmuch will have to pave the road again for $1/hour , which he will do because he needs the street to go work. ----- As for the distribution of costs, it is difficult to assess who is actually benefiting from a single road ..and probably more difficult to assess how much one is benefiting from the existence of the whole road system. Yet if one stops for obsessing on financial consideration and notice that the mere presence of roads + cars allows the movement of goods and competences from point to point in a reduced time, it would immediately be clear that a _system_ of roads , combined with other _systems_ produce benefits.

"Free" access to roads isn't actually free, it just means that those who impose the costs don't have to pay them. This results in over-use of the road and it causes congestion.

That's the classic tragedy of commons. Actually paying would just discourage people who don't have money or that can't compensate the cost as a writeoff ; yet compensating it with writeoff would lead to reduction of taxation and therefore reduced financing for new roads, which would to a degree reduce congestion. A privatization of the road would be even worse for the users as the road owners have no incentive to build new expensive roads..they can just raise tolls to saturation of the road and car users have no choice, but to use roads...as building their own would be practically impossible. Actually the abuse of the common road is self-limiting..when the road is saturated people will slowly, but surely try to reduce movement on that road, turning for instance to mass transporation. Or maybe the most sane thing would be to reduce the actual movement needed....with intellectual jobs, the actual need to haul ass from point 1 to 2 on a daily basis shouldn't be that high.

By: amberglow

amberglow — Mon, 30 Apr 2007 03:47:59 -0800

Another benefit to paying with a toll instead of with traffic delay is that tolls can be used to finance roads. Time spent in traffic just disappears. But with privatization, there's no way to ensure that at all--with public toll roads we know that's the case, at least in part--the money's not going to an investment group that demands a healthy return on investment, or for a better profit margin for shareholders, etc, but to support and maintain local and state roads and policing, etc. There's also plenty of lines and congestion at toll roads and bridges and tunnels even now--many don't have the option of taking a free route in many places across the country without adding hours to their trips, which costs us all in pollution, local congestion, etc.

By: reeddavid

reeddavid — Mon, 30 Apr 2007 05:14:52 -0800

"The notion that because a specific person doesn't drive their vehicle over a particular road means they don't benefit from it is patently absurd- you might as well argue that since you don't send any packages overseas, you don't benefit from intercontinental shipping." I do benefit from intercontinental shipping even though I don't personally send packages overseas. But I want to pay for intercontinental shipping when I buy the imported bicycle or TV, not when I pay property tax or renew my drivers license. The more direct the connection between user and cost, the less distortion there is to incentives. Certainly I might benefit from the bridge if my plumber used it, for example. I want my plumber to include the cost of bridge tolls in the price of plumbing service. No need for you to subsidize my plumber's transportation, I'll decide whether it's worth the cost to have him come to my house.

By: Artful Codger

Artful Codger — Mon, 30 Apr 2007 07:23:31 -0800

Privatization of public assets is bad. Especially, if like roads, the asset represents essentially a monopoly. Highways aren't built in multiples. If a highway is privatized and there's a toll, you usually have to go miles out of your way to find one that's not a toll road. Airlines are different from roads - there are a number of suppliers competing for your business, so you're not stuck with one supplier. Private companies serve only their shareholders. These aren't the people you want as stewards of the public good. Private energy management will always produce an Enron. Or witness the poor maintenance of the power company in Ohio (I think) that led to the big blackout in Aug 2003. Look at the poor shape of the private railroads and the numerous derailments. Selling off assets is a kneejerk reaction of governments who have been underfunded due to the era of tax reduction and deregulation. I have no problem with private companies competing for contracts to build, maintain or run something, but the control should remain in public hands. A non-profit company with arms-length distance from the government would be acceptable. Infrastructure like roads are legacies (not just liabilities) left to us by our ancestors and are physical manifestations of the freedom we so often brag about - in this case the freedom to move about, to settle where you want to. This country's infrastructure wasn't built to produce yet another set of things to buy and sell.

By: adipocere

adipocere — Mon, 30 Apr 2007 08:32:25 -0800

Well, we have privatized our war - how's our waste there? Pretty high? Haliburton just has millions (or was it billions) just go ... missing? A privatized infrastructure immediately becomes a for-profit monopoly. I don't know if anyone can argue with that. I don't have a second set of power lines or cable to which I can switch; although SatTVs are making inroads, you still can't get another set of cable). Infrastructures are monopolistic by their nature, but once you add in the "for profit" bit ... I'm in St. Louis. We've had some issues lately with our privatized electric. Blah blah blah, cutting costs, blah blah blah, tree trimming not that important, blah blah blah, almost a week without power in winter. With a privatized infrastructure, the infrastructure-maintaining organization is now beholden to shareholders and the board of trustees, rather than to the citizens it serves. I don't see any arguments that will refute that. I don't see the corporations handing out free stock to all citizens, either. So, let's see ... we've got a public good here, but instead of serving the public, it serves the bottom line (shareholders and board of trustees), and you have no way to escape but move. Nope, not palatable. Why is it all of these libertarian fantasies converge towards some fantastic greedhead owning 99% of everything, and everyone else can shut up or move?

By: lupus_yonderboy

lupus_yonderboy — Mon, 30 Apr 2007 08:58:49 -0800

"providing benefits that pay for the costs" is too fucking nebulous and subjective to be worth examining." I'm sorry -- I'm a bleeding heart liberal here but I have to take exception to your statement completely. You have to examine the costs and benefits to everything you are doing with the government -- certainly it's difficult but it is essential to prevent your being ripped off time and time again. Unless you have some sort of basis for evaluation of the government's performance, you get things like the military-industrial complex. If people actually worked through the accounting of where their tax money went in, say, the Pentagon, I think they'd be astonished at the vast waste and the huge barrels of money being stuffed into people's pockets. The fact is that the value *intangible* being delivered by the Pentagon is not being delivered to us. A real-world evaluation of the goods and services being provided to us by military contractors would overnight slash their budget by some enormous percentage. In the same way, you might say, "Is it worth $3 a person for a million people to have this fun party and art? Heck, yeah!" but you might say, "Hmm, it's not worth $2000 a person for 100,000 rich people to have a football stadium." If you don't get to analyze the actual benefits to the People due to each action of the government, you will be robbed blind by them for the rest of your life. In the case of selling the roads, any form of cost-benefit analysis would show that in fact *the people are being dramatically ripped off and are selling their prized possessions at bargain-basement prices*. I can imagine that later, more enlightened governments, would simply and unilaterally reverse these rip-off deals as profoundly dishonest. By framing it as a question of costs versus benefits with regard to one specific project, you're ignoring the question of priorities and thrusting the project into a realm where the de facto consideration will be monetary, rather than priority based. By making all your decision-making subjective, you allow things like the current government. "Priority-based" -- what does this mean? My "priorities" might be different than yours -- how do we dicker? Money is the universal form of exchange -- it's the universal medium of work. If everything is converted into intangibles on one side and money on the other it lets you compare apples and oranges and pomegranates and fish and buildings for that matter. There's nothing wrong with saying, eg, "The life of our kids is worth a lot to us so we're willing to spend $10,000,000 in this feature to save an expected 0.1 children's lives over the lifespan of this park." 1 kid's life == $100,000,000. ridiculous? -- but there's an intangible there too. As long as it's in the open, we know what we're getting. (Right now, we're paying the $100,000,000 to kill a hundred kids -- I think if people completely and viscerally understood what the US's military decisions were doing to kids (and at what great financial cost to the taxpayers), 95% of them would completely cut the military off.) It's fine to "have your priorities" but unless you can *quantize* them you are going to have an eternal debate, and you'll never be able to make a decision on any basis other than emotionality and empty rhetoric.

By: IronLizard

IronLizard — Mon, 30 Apr 2007 09:34:18 -0800

Looks like someone figured out what else to cut to keep the military budget from being touched.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Mon, 30 Apr 2007 09:40:21 -0800

That's actually the same question.
No, it isn't. Here's why— By framing it as a question of costs versus benefits with regard to one specific project, you're ignoring the question of priorities and thrusting the project into a realm where the de facto consideration will be monetary, rather than priority based. No, I'm actually correct. If you're still not seeing this, consider the choice between spending money on a particular project versus not spending money at all. Consider further that this choice is implicit in any decision between multiple projects, since we always have the choice of not actually doing any of them. Your analysis is completely off. Either you're saying the question should be "should we prioritize project A or project B, both with a budget of $5 billion," in which case you're fundamentally asking the same question I am, or your question is "should we prioritize project A or project B," in which case you still haven't answered whether we should do either. You can't dodge this last "fucking nebulous" question just by ignoring it.

By: anotherpanacea

anotherpanacea — Mon, 30 Apr 2007 10:07:53 -0800

cf. the Bridge to Nowhere.

By: Smedleyman

Smedleyman — Mon, 30 Apr 2007 11:43:33 -0800

I’m missing the: “and then we lower taxes!” part of the equation here. There is a natural reduncancy in the amount of money you can save on swapping a government run business with a for-profit organization. Efficiency here is limited by the amount of oversight required. F’rinstance - fire departments. People want a good deal of handle on systems that could save their lives, so the (potential) cost savings are outweighed by the amount of oversight required - even if it’s subjective (or even foolish) - by people using it. So, are we going to tax the profit made on the roads? How much do we need to tax them? If they’re private property what are the constitutional rights on them (e.g your 1st amendment rights or if your state has certain firearms laws and the people who own the roads disagree with those) - lots of unseen red tape here. I dunno, might be worth a shot as an experiment. But it seems like a useless extra layer. Philosophically I’m all for smaller government. I don’t think that this would help that. At some point on such a large infrastructure you will have government involvement. And I’d disagree with entrusting any vital common in private hands - you’ve got the one-shot prisoner’s dilemma risk there where if they screw you right they could make enough money on it to make it worth while.

By: zoogleplex

zoogleplex — Mon, 30 Apr 2007 11:44:31 -0800

"If a rural road isn't able to pay for itself, then it basically amounts to a subsidy of people who want to live in rural areas. Maybe we want to pay people to help them live in rural areas, but surely there's a limit to how much we're willing to pay before we decide that our money would be better spent." Wow, that just rolled me over laughing, Mr. President etc... You might want to take a look in your refrigerator and kitchen cabinets, as well as on your dinner table and in the place where you got your lunch today, and reconsider your perception of the value of rural roads. I mean, you like to eat, right?

By: zoogleplex

zoogleplex — Mon, 30 Apr 2007 11:50:32 -0800

"Why is it all of these libertarian fantasies converge towards some fantastic greedhead owning 99% of everything, and everyone else can shut up or move?" Good question. Better question is what is the blind spot in the thinking process that results in being unable to conceive that this would happen. I have a few ideas, but they're beyond the scope of this thread. Did nobody actually learn how royalist/aristocratic feudalism functioned in its day? Did everyone miss that part of the story of Robin Hood? Sounds like people are actually volunteering and lobbying for becoming tenant serfs.

By: klangklangston

klangklangston — Mon, 30 Apr 2007 11:53:12 -0800

"I'm sorry -- I'm a bleeding heart liberal here but I have to take exception to your statement completely. You have to examine the costs and benefits to everything you are doing with the government -- certainly it's difficult but it is essential to prevent your being ripped off time and time again." Both you and Prez Steve need to take that brief moment out of your day to read what I'm actually saying— My disagreement is that he's framing it as "benefits that PAY for the costs." It's the framing that I object to, not to considering costs against benefits. I also think that the quatitization leads to the wrong set of values being applied. "Unless you have some sort of basis for evaluation of the government's performance, you get things like the military-industrial complex." When I started talking about transparency, did you think I was on about overhead projectors? "By making all your decision-making subjective, you allow things like the current government. "Priority-based" -- what does this mean? My "priorities" might be different than yours -- how do we dicker?" If only there was some sort of way to distribute the decision making to the public... Or even, if somehow a system would evolve where representatives would somehow work to balance national priorities with local priorities. I think I might call it a "representative democracy" or a "Republic," were I feeling saucy. By taking a larger sample, provided ample information, we should be able to assess a national set of priorities. The subjectivity of any one individual's decision gets ameliorated by a vast participatory discussion. And we dicker by supporting your hog jowls subsidy in return for your support of biodiesel, despite the fact that neither of those things may be in the immediate interest of the constituents. "Money is the universal form of exchange -- it's the universal medium of work. If everything is converted into intangibles on one side and money on the other it lets you compare apples and oranges and pomegranates and fish and buildings for that matter." Except that, again, by quantitizing, there is a distortion in the valuation of public goods. Money is an abstraction of goods, but the map isn't the territory, y'know? A symbolic representation is a tool, but even with money there is a subjective quality to its evaluation and privileging it as more than a handy tool in policy discussions leads to just as many false and emotional choices. The whole "A million here and a million there, and soon we're talking real money" thing. "It's fine to "have your priorities" but unless you can *quantize* them you are going to have an eternal debate, and you'll never be able to make a decision on any basis other than emotionality and empty rhetoric." Wrong. For example, look at the debate over stem-cell funding. It's easy to come to a decision one way or another without ever quatitizing anything in a real manner (because if we accept the idea that we're quantitizing by weighing life against healing or anything else, we've abstracted "quantitizing" back to being an essentially meaningless stand-in for "decision making."). On issues such as this, or funding to provide access to abortion clinics or whatever else, reasonable people may differ. It is only upon deciding between reasonable alternatives that a cost:benefit analysis should be used. Or, to go back to your argument over the cost of a kid's life, there's still a subjective discussion— treating it as fait accompli that a kid's life is worth $100k, or whatever, is still both linked to that instance and to the morality of the people making the decision. Which is why, and I hate to keep hammering this, but it's important to have a knowledgeable and engaged public, which will mitigate individual subjectivity. "No, I'm actually correct. If you're still not seeing this, consider the choice between spending money on a particular project versus not spending money at all. Consider further that this choice is implicit in any decision between multiple projects, since we always have the choice of not actually doing any of them." No, you're actually illiterate. The FRAMING of PAY is still a distortion away from deciding whether something is in the public interest, then deciding the best way to do it. If you insist on nattering on, go back and read what I wrote. Otherwise, it's not an argument, it's just contradiction. So if you'd like me to answer you, go back and read where I already did.

By: five fresh fish

five fresh fish — Mon, 30 Apr 2007 13:59:02 -0800

What klangklangston said. Green-tinted glasses are not the One True Way of viewing the world. Indeed, they're just WalMart sunglasses, while klangston is talking about optometrist-prescribed lenses. Two wholly different ways of valuing things. You're going on about cost and fashion; he's talking about how to correct your presbyopia. Now that's how to get mileage out of a metaphor.

By: amberglow

amberglow — Mon, 30 Apr 2007 14:00:13 -0800

klang, don't different considerations have to be first and foremost when talking about heavily and continually used already built infrastructure? Roads must be maintained. Bridges too. They already exist, are essential in many vital ways, and must be taken care of, one way or another. You can't decide not to repair potholes anymore because it's too expensive. You can't eliminate safety inspections on bridges and tunnels and rails, etc. ...

By: amberglow

amberglow — Mon, 30 Apr 2007 14:03:27 -0800

nor does privatization really remove the govt's responsibility for safety and legal compliance and liability, etc, i don't think. What it does remove tho, is direct oversight and control.

By: amberglow

amberglow — Mon, 30 Apr 2007 14:05:54 -0800

What are the mechanisms for contract canceling if maintenance or other things aren't met? What are the conditions of all these deals? etc.... Take that freeway collapse thing in Oakland--it's where 3 freeways meet to become the Bay Bridge. Imagine all 4 of those things in different and private hands--What would happen? What would be required to happen?

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Mon, 30 Apr 2007 14:54:03 -0800

You might want to take a look in your refrigerator and kitchen cabinets, as well as on your dinner table and in the place where you got your lunch today, and reconsider your perception of the value of rural roads. Conceptually, there's no reason the cost of a road used to transport food shouldn't be capitalized into the price of the food. If the food is consequently more expensive than people are willing to pay, it wasn't a good place to grow food to begin with. No, you're actually illiterate. The FRAMING of PAY is still a distortion away from deciding whether something is in the public interest, then deciding the best way to do it. If you insist on nattering on, go back and read what I wrote. Otherwise, it's not an argument, it's just contradiction. You don't seem very smart. Deciding whether doing something is in the public interest inevitably involves looking at the effects of not doing it. In the case of public works projects, the benefits of not doing them are largely dollar-denominated (e.g. foregone costs). Fundamentally, when deciding between two mutually exclusive choices, one should try to pick the "better" choice. When one of the mutually exclusive choices is dollar-denominated, this is called deciding whether to "buy" or "sell" something. People do this all the time. They decide that forgoing a $5 expense is worth being deprived of a widget--that is, they decide that a widget is not worth $5 to them. In every set of choices involving a public works project, one of the choices will be substantially dollar-denominated--the choice to abstain from the projects altogether (the abstention choice). It's simply not possible to reasonably determine whether a project is in the public interest without concluding that one of the non-dollar-denominated choices (e.g. build the road) is better than the dollar-denominated abstention choice. You insist you can do this, but you're just wrong. An analysis that does not consider the abstention choice is simply irrational. This should be obvious. There's no way to know whether something is in the public interest without knowing how much it will cost.

By: amberglow

amberglow — Mon, 30 Apr 2007 15:32:47 -0800

... Private enterprise doesn't run monopolies cheaper than public enterprise; because it requires profit, it runs them more expensively. Privatizing works when it introduces competition to a market -- real competition with enough competitors that an oligopoly doesn't form. If you need to cross a bridge, you need to cross a bridge -- you can't swim. The prime rule of privatizing is that you never, ever, give away a monopoly. ...

By: klangklangston

klangklangston — Mon, 30 Apr 2007 15:51:51 -0800

"You can't decide not to repair potholes anymore because it's too expensive." Dude, you've clearly never been to Michigan. "You don't seem very smart." And, again, you're fucking illiterate. "There's no way to know whether something is in the public interest without knowing how much it will cost." This is why I don't take your grapeshot about intelligence very seriously. The answer to "Let's kill all the Jews" is not "What kind of bids are we getting?" To head off the immediate rebuttal, here rendered by my muppet version of you: "Well, yes, but we must consider the terrible cost of killing those Jews, both morally and economically." The economic question is irrelevant, and to argue that killing all the Jews is wrong because of the cost in Jews is to incorrectly frame the discussion. That's what I'm objecting to, and what you seem incapable of grasping no matter how many times I place it in your hand. I mean, CHRIST, I put "pay" in fucking BOLD and BLINK. You can decide that the Holocaust was wrong before knowing how much boxcars went for in 1940s Berlin. As for the rest of your folderol, you can go back up and reread the comments where I already addressed those points.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Mon, 30 Apr 2007 15:53:09 -0800

You're comparing the holocaust to a public works project? Like I said, you don't seem very smart.

By: klangklangston

klangklangston — Mon, 30 Apr 2007 16:33:50 -0800

What, you think that the Holocaust was paid for with private money? The Holocaust WAS a "public works" project that was wrong on its face, irrespective of the cost. Which is why I used it as a rhetorical example. Which you would have realized, had you not been born a moron.

By: zoogleplex

zoogleplex — Mon, 30 Apr 2007 17:03:31 -0800

"If the food is consequently more expensive than people are willing to pay, it wasn't a good place to grow food to begin with." Yeah, because you can grow lots and lots of nutritious food on just any old plot of land anywhere!! Why would anyone grow it in a place that's far from where the people who eat it live??! Sir, I respectfully put to you that your perception of basic human ecology and economy is dreadfully skewed by your existence in an historically anomalous cheap-energy driven technological society. I invite you to broaden your horizons through study and experience. And believe me, the transport distance cost is built into the price of food. It's just that that transport has been ridiculously cheap for the last oh, 80 years or so. "There's no way to know whether something is in the public interest without knowing how much it will cost." Consider: making the New Orleans levees capable of handling a Cat 5 hurricane was deemed too expensive for the potential risk, so it was never done. The cost of that mistake has been mostly measured in currency other than dollars; things like human lives lost, human misery, regional and national psychological effects of losing a thriving, vital city, loss of face for a President, his administration and his party, to name only a few. You seem kind of obsessed with counting green pieces of paper. Not everything can be measured with them. Clearly, the cost of building up the levees appropriately was pitifully miniscule, in retrospect, and would have been a good investment. Figuring out the dollar cost isn't enough to tell you how much a decision will really cost you.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Mon, 30 Apr 2007 17:06:22 -0800

You used it as a rhetorical example because you're an idiot. I agree that the holocaust was wrong on its face, irrespective of the cost, but your ridiculous analogy is inapplicable because we're not talking about projects that are wrong on their face. We're talking about projects that are desirable on their face. Your amazing insight is that when we don't want to do something anyway, we don't concern ourselves with how much it would cost to do it before we decide not to do it. The fact that you weren't able to recognize how inappropriate your analogy was indicates that you quite simply lack the understanding necessary to have this conversation.

By: JPD

JPD — Mon, 30 Apr 2007 17:12:05 -0800

I don't know if any of you have looked at the transaction terms for most of these deals, but there is so much leverage involved that the operators margin for safety is very small. They also have a big mismatch between the tenor of the funding and the amortization of the debt (most of the deals assume 30 year amortization schedules but are funded with 10 year bullet maturities - so in 2016 if the debt markets are not in good form the guys who own the Indiana toll road are fucked). I think that is the disaster waiting to happen. The guys doing these deals are crazy. Moral Hazard risk is huge - "Ill be retired when the refinancing comes around" As such you would think you would want states to sell their overvalued assets, but I have seen papers which show that privatizing roads and other network utilities is economically inefficient (making the assumption publically run utilities can be as well run as private utiltities). For example the formerly nationalized Electricite de France's willingness to sell power at a cost below what it needs to earn a breakeven economic profit actually had a net postive impact on the French govts accounts. It has permitted French industry to be more profitable bringing in more taxes, and for higher employment rates which decrease benefit payments. This alone means privatizing toll roads etc. is a dumb idea. Add on top of that the shakiness of the ongoing regulation, and the issues just compound themselves.

By: JPD

JPD — Mon, 30 Apr 2007 17:13:23 -0800

Oh and also whom do you think is advising the states on the other side of the table? the same banks that have infrasturture funds. People seem to forget that even Adam Smith said somethings are best provided by the state and not by the markets.

By: Tuatara

Tuatara — Mon, 30 Apr 2007 17:16:39 -0800

An ambulance driver navigating a rural road network so he can get a critical patient to the hospital using the shortest route possible probably wouldn't give a fuck about your $5 widgets Steve.

By: klangklangston

klangklangston — Mon, 30 Apr 2007 17:19:21 -0800

"We're talking about projects that are desirable on their face." Steve, keep lying like that and you're going to be appointed by the Bush administration— "There's no way to know whether something is in the public interest without knowing how much it will cost." I knew that you were too stupid to read my comments; I didn't realize you were too stupid to read what you yourself had written. "The fact that you weren't able to recognize how inappropriate your analogy was indicates that you quite simply lack the understanding necessary to have this conversation." Then you're going to have to demonstrate that, Steve. You can't just declare me an idiot by fiat and award yourself the trophy. Here's another quick example— When drawing up the Constitution, did the framers first say "Boy, how much will a Supreme Court cost?" or did they determine that the public good was served by having a Supreme Court first, then decide how to impliment the Supreme Court, and finally figure out how to fund a Supreme Court? Again, Steve, I quote you: "There's no way to know whether something is in the public interest without knowing how much it will cost." That's demonstrably false, both in the positive and negative, Steve. As for determining between two viable alternatives regarding the same project, and noting (as I did here in a comment that you were either unwilling or unable to read) that this includes a bias away from doing nothing (having already established that a goal is in the public good), cost:benefit analysis can be a helpful tool. I know that it's hard to understand a cogent argument when you're vaccilating between tossing out insults and huffing gas, Steve, but at least I make an effort to read your wet bombast.

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Mon, 30 Apr 2007 17:22:35 -0800

Yeah, because you can grow lots and lots of nutritious food on just any old plot of land anywhere!! Why would anyone grow it in a place that's far from where the people who eat it live??! Slow down and think for a moment. Your example of food grown in rural areas is not even slightly problematic for what I'm saying. If food growers are charged a fee for the construction and upkeep of the road they use to transport food from their rural farms, they will incorporate this fee into the price of the food. If people think this is a fair price for the food, then all is well and good. If the food is now more expensive than people are willing to pay, and there is cheaper food available, then that probably wasn't a good place to grow food to begin with. Finally, if the food is too expensive for the poorest people to afford, and there is no cheaper food available, we could reduce the price of food by subsidizing the road, it's true. A better option, though, would be direct food subsidies, which would target the aid at precisely the people who needed it. Consider: making the New Orleans levees capable of handling a Cat 5 hurricane was deemed too expensive for the potential risk, so it was never done. In hindsight, obviously strengthening the levees would've been a good idea. Taking a ex post perspective would be fallacious, though. Given what could've been known before Katrina, I have no idea whether strengthening the levees was a good idea, because I don't know what risks were knowable ex ante. Not every risk can be protected against, because it costs money, and we don't have unlimited money. The cost of that mistake has been mostly measured in currency other than dollars; things like human lives lost, human misery, regional and national psychological effects of losing a thriving, vital city, loss of face for a President, his administration and his party, to name only a few. You seem kind of obsessed with counting green pieces of paper. Not everything can be measured with them. Preventing all of those negative effects would've cost money, though. That's what you're not understanding. We don't have an infinite amount of money. We can't do every worthwhile project. We can't protect against every risk. We can't save every life. We simply can't afford it. That's why it's important to try to figure how to use the limited money we have to do the most good possible.

By: klangklangston

klangklangston — Mon, 30 Apr 2007 17:24:18 -0800

"People seem to forget that even Adam Smith said somethings are best provided by the state and not by the markets." Not only that, his argument for freedom of markets assumed that the actors would all be regulated by a Presbyterian morality. The market and economic framing are fantastic tools for some things (including predicting behavior), but are not a panacea and it is in the best interest of America to remind people of this. (Just like how the business of government is not business).

By: Mr. President Dr. Steve Elvis America

Mr. President Dr. Steve Elvis America — Mon, 30 Apr 2007 17:28:20 -0800

klangklangston, I'm done with you. I was trying to talk about projects like roads and bridges, but you're all over the place (holocaust, supreme court, who knows what will be next). You clearly haven't understood a word I've said, and you're not interested in understanding. You'd rather pull things out of context and apply them to circumstances that weren't within the scope of the discussion when I made my remarks. From what I gather, you think that's clever somehow. I'm just not interested in seeing how you'll veer of course next, and frankly you have nothing to add to this discussion because your grasp of economics is so weak.

By: klangklangston

klangklangston — Mon, 30 Apr 2007 17:39:56 -0800

Steve, that's a terribly ungracious way of saying that you're wrong. You're also making the mistake of supposing that because I disagree with what you're saying that I don't understand it— I understand it just fine. It just happens that when you say things like "There's no way to know whether something is in the public interest without knowing how much it will cost," you happen to be wrong. I've demonstrated a way that something can clearly not be in the public interest without discussing the economic costs, and a way that something can be within the public interest without discussing costs. You haven't taken the brief moment to look back and what I'd written, realize what I am and am not arguing, and ajdust your argument, but have rather gone blithering with snide remarks about being "clever." Well, fuck you, Steve-o, since I've only stated it about fifteen times. Five Fresh Fish seems to understand. Zoogleplex seems to understand. Amberglow seems to understand. JPD seems to understand. Everyone seems to understand that when I say "The cost to benefit framing of public policy does not necessarily represent the best or only way of determining public good, and I disagree with you framing it as such," that's exactly what I mean. So hey, if you're done with me, more power to you. And if you're not bright enough to pull together the fairly simple analogies offered here, maybe you should rethink deriding others. If everyone else gets it but you, Steve, it might just be that you're an idiot, not the last genius on MetaFilter.

By: zoogleplex

zoogleplex — Mon, 30 Apr 2007 17:58:01 -0800

"We don't have an infinite amount of money." HA, hahahahahahahaha.... heh heh... that's funny. Well, not really, but let's be sure of our terminology here - "money" and "currency" these days seem to be interchangeable in the vernacular. We actually DO have an infinite amount of currency, but currency is not money - and money is only a counter for other things. What you really want to get across is that we don't have an infinite amount of energy and resources to do things. "We can't do every worthwhile project. We can't protect against every risk. We can't save every life. We simply can't afford it." Of course not, but conversely it is often worthwhile to take protective actions which result in an up-front financial loss. This is something that a business rarely does, but that government handles nicely, because government (in theory) also counts value apart from currency and profit. I notice nobody's working out a plan for how to protect New York City (or the whole Eastern Seaboard, really) from a 5-meter rise in the mean sea level. I'd bet someone's risk analysis says that wouldn't be worth doing, huh? Most of the folks in "power" don't even recognize the conditions that are going to make that happen. I'm thinking that one's gonna be shown to be poor thinking in hindsight, too. "I'm just not interested in seeing how you'll veer of course next, and frankly you have nothing to add to this discussion because your grasp of economics is so weak." Economics != energy/resource allocation reality, especially nowadays here in the US, where the currency has become decoupled from the actual material costs of things. Again, I invite you to broaden your horizons past textbooks and niche theories. Privatizing roads and highways is a very, very bad idea. Since you're clearly someone who never read up on feudal aristocracies, let me just lay the final result out to you: the owners of the roads wind up owning everyone who uses or whose lives indirectly depend on use of the roads. Is your family sufficiently wealthy for you to avoid being owned? Also, given the possibilities JPD laid out for failure, another likely outcome is that the private road owners will fail and go bankrupt, requiring We the People to buy back the roads we paid for in the first place. Sound like good economic practice to you?

By: five fresh fish

five fresh fish — Mon, 30 Apr 2007 18:07:23 -0800

Dollar-signs are a simplistic, naïve way of evaluating all the world.

By: anotherpanacea

anotherpanacea — Tue, 01 May 2007 07:38:59 -0800

I'm not sure why you all are giving Steve etc. such a hard time. He's not a fascist, and I think he's making some pretty cogent and careful arguments in the face of some major bombast and rudeness. Frankly, asking that we evaluate the costs of public works against their benefits is exactly what makes a government a good one; when we don't do that, we go to war in Iraq and spend more money than we'll make in oil and kill more people than we could save with lower oil prices. We build $315 million bridges in Alaska to a town with a population of 50. We give no-bid contracts to wasteful corporations with friends in high places. These are decisions about money in which the costs outweigh the benefits. They're bad government, and you know it. Dollars aren't everything, but they're not nothing, either. Ultimately, the best arguments against privatization are COST BENEFIT arguments. We're only talking about money in those situations, not lives, so you win the argument in one of two ways: (1) the costs outweigh the benefits, or (2) the distribution of benefits is inherently unfair or unjust, punishing the poor or some other less advantaged group. Since governments are selling already existing infrastructure, the second point is not valid; they can always create new infrastructure to solve distributional problems. Ah, but the first point is the rub; selling roads is economically inefficient in most of the cases suggested, the structure of the deals will simply delay costs and stick us with the bill again later. THIS IS EXACTLY STEVE'S POINT. Gah.

By: lupus_yonderboy

lupus_yonderboy — Tue, 01 May 2007 12:37:12 -0800

"It's fine to "have your priorities" but unless you can *quantize* them you are going to have an eternal debate, and you'll never be able to make a decision on any basis other than emotionality and empty rhetoric." Wrong. For example, look at the debate over stem-cell funding. It's easy to come to a decision one way or another without ever quatitizing anything in a real manner I don't have time to respond to your massive and massively ill-conceived rant -- it seems like every sentence has some logical error, starting with the first one (how could one come to a decision over any form of funding without actually quantizing anything?) Government without measurable, verifiable metrics is just an excuse to steal from the people.

By: klangklangston

klangklangston — Tue, 01 May 2007 12:43:16 -0800

"I don't have time to respond to your massive and massively ill-conceived rant -- it seems like every sentence has some logical error, starting with the first one (how could one come to a decision over any form of funding without actually quantizing anything?)" How could you come to a decision on stem-cell funding without quantizing anything? Well, say you consider yourself pro-life, and believe that using embryos as a source for the stem cells is morally wrong. You can decide to oppose stem cell funding no matter the cost without quatitizing anything. So, yeah, it's probably a good idea that you didn't waste your time, considering that you're wrong.