/sci/ - Science & Math

Because key infrastructure and it's benefits should be accessible to everyone and profit incentive by definition excludes some percentage of people who lack the money

And at least in the road ex. people will simply put more burden on public roads because they don't want to pay, defeating the whole purpose

>>3656442

I live in SA, and everyone here has been bitching about water prices more and more since SA Water got privatized. Though this is just one case, I welcome anyone that has similar experiences to share.

Privatization will be economically efficient in the presence of perfect competition when the good is not a pure public good and there are no externalities. If you understood all that, then you already have your answer. If not, it is time to start reading.

A government can't let a service which is super essential fall apart. A government can't just let cities go without power because a private company running the power plants fucked up their finances so much they had to shut down. The government is forced to give them large amounts of extra money to keep running.

Knowing this, and driven by a profit motive the companies will take huge financial risk since they can just demand money from the government if everything fucks up.

Privatisation introduces middlemen that seek to extract profit. Profit is the difference between the value of something and what people are charged. If managed competently, then a private enterprise will always offer products or services with a higher price/quality ratio than a public enterprise.

The problem is that public enterprises are mismanaged because there is a lack of economic incentive for the managers. That's a problem with the managers and the public who fail to motivate them, not the fact that its public.

Essential services such as electricity, water, hospitals, etc should not be privatised because there are no market forces to keep prices down. In most places there will be no competition and people will have no choice but to pay whatever price the private enterprise sets. A private enterprise's sole purpose is to generate profit so prices will rise and quality will drop.

The goal of a private corporation or company is not to provide the best service, it is to make a profit. You will either have to pay more for the same quality of infrastructure or pay less for shitty infrastructure for the CEO's to get their bonuses. A government, on the other hand, does not try to make a profit off of its citizens, and has the added guarantee of being accountable to public outrage.

>>3656442
depends on how it's implemented
often the government releases their monopoly to one company and calls it "privatization" when really it's just political payoff for the funding they received.
That isn't exactly the idea, but hey, politicians ruin everything.

This is excellent, moar. Why the fuck don't we have a /fin/ance or /eco/nomics board?

>>3656466
>Perfect competition
I'm guessing that would be the absence of monopolies and similar arrangements
>Externality
An outcome of some activity that is not paid by the activity-doer, i.e. pollution
>Pure public good
Never heard of that. Any chance you could explain?

>>3656495
> The goal of a private corporation or company is not to provide the best service, it is to make a profit.
This is irrelevant.
> You will either have to pay more for the same quality of infrastructure or pay less for shitty infrastructure for the CEO's to get their bonuses.
This is nonsense. There is nothing in the history of history that suggests that private firms necessarily supply lower-quality goods than public firms. In fact there is, generally, a ton of evidence to the contrary.

The profit motivation is large. In the presence of reasonable competition, quality does emerge. The price mechanism allows resources to be allocated correctly; without it, critical information about how to allocate resources is destroyed.

But it is hard to support privatization of roads on the basis of competition.

I don't support privatization of roads or similar infrastructure on the grounds that it would basically be handing a monopoly to the owner of whatever road you happen to need to drive on.
No competition in this scenario

>>3656536
Public goods are generally goods where it is extremely difficult or in fact impossible to exclude people from using it, like air or national defense.

> I'm guessing that would be the absence of monopolies and similar arrangements
Correct enough. One missing piece: ease of entry to the market for firms which would like to compete. In principle there are monopolies which lack monopoly power because if they exercised it a competitor would more or less immediately emerge.

> An outcome of some activity that is not paid by the activity-doer, i.e. pollution
Technically, outcomes where third parties are affected. E.g., A and B negotiate, but C is impacted, and was not part of the transaction.

i keep trying to type out a long post detailing the differences between the private and public sectors and the most desirable applications for each, but my keyboard keeps fucking up

> The goal of a private corporation or company is not to provide the best service, it is to make a profit.

>This is irrelevant.

How the FUCK is it irrelevant? How in the name of satan's jockstrap is the desire to maximise money in by raising prices and minimise money out cutting corners and hiring the lowest bidder to maintain critical infrastructure irrelevant to the pubic good? Fat cat bankers and CEOs will ALWAYS try to gouge the public coffers for as much as they can. History has shown us this repeatedly, even fucking Adam Smith spotted this hundreds of years ago:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation always ends in a conspiracy against the public."

One example I discussed was the privatisation of prisons in the States, saying how I felt a little uneasy about people profiting from someone else's incarceration. On the flip side, I suppose it may lessen the burden on the taxpayer to pay for said incarceration?

But what's the deal with privatising entities such as the police? Could this ever happen?

/sci can't into economics.
Don't try.
Go somewhere else to ask.
Most the answers I read are retarded.

>>3656634
> How in the name of satan's jockstrap is the desire to maximise money in by raising prices and minimise money out cutting corners and hiring the lowest bidder to maintain critical infrastructure irrelevant to the pubic good?
Prices cannot be arbitrarily high. Is your rent ten million dollars? Corners cannot be cut indefinitely. Perhaps you've heard of "liability"? And before you rip off your cock in anger, I don't think that roads should be privatized. But your arguments are just nonsense.

> adam smith
The study of markets have moved on since Smith. Citing him is as retarded as citing Marx.

>>3656634
fuck yeah civ 4 guilds

I gotta agree though, fuck excessive privatization. I'm in the US so no clue about utilities but privatization of things like roadways is just shit stupid. Yes, in a purely economic sense, assuming good faith that they won't cheat the state to raise profits, it might be more economically efficient in that everyone who can and does pay gets a better price and service but for things that are obviously public necessities that's just so much less significant than allowing everyone mostly equal access to the service.

>>3656681
It doesn't even make sense in theory. There's no mathematical theory which would support this. I'm sure there are some rhetorical ones from random libertarian-style fucks.

>>3656487

second this. we saw this in the 2008 market crash. government bailouts because "they where too big and important to fail".

of course the scenarios are different but function the same.

>>3656671
Scarce can be artificially created and this happens all through history and today, that's why in the perfect scenario, ALL products and services should be public, but let's start with the basic needs. Also, the profit motivation is bullshit, totally outdated.
Oh, and Marx theory has been introduced poorly so it's irrational to say that it's outdated, Keynes on the other hand...

>>3656671

>Prices cannot be arbitrarily high. Is your rent ten million dollars? Corners cannot be cut indefinitely. Perhaps you've heard of "liability"?

If I was being charged $150 a week for healthcare on a government program which was then privatised and the price went up to $180, I would have little choice to pay it or face financial ruin if I got injured.
A friend of mine is an artist living in Texas and she developed a strain injury in her hand from drawing. Her insurance company wouldn't pay for treatment, claiming it was 'pre-existing condition', which would be comical if it weren't so sad. She came to the UK as she has dual citizenship, got it treated on the NHS and flew back to the US in less than a month and it cost her less than a quarter what it would have in the US. Classic example of a company trying to duck out of moral obligation to heal people. A government program doesn't attempt to profit from its own people. It has a mandate, not shareholders.

> The study of markets have moved on since Smith. Citing him is as retarded as citing Marx.

Is that why its still required reading for 1st year economics students?

>>3656783
So you make a good case for why healthcare should be run by the government. But it seems you failed to actually indicate why this applies to the rest of the market.
>Is that why its still required reading for 1st year economics students?
They have a few more years after the first, yes?

>>3656781
> Keynes on the other hand...
What does Keynes have to do with this thread? Nothing. At all.

>>3656487
not at all food is essential but it would be in no danger of failing without subsidies, the problem with electricity is the government forces there to be no competition. The power not working is not an option for a power company it loses profits that way and would lose customers due to competition.

>Profit is the difference between the value of something and what people are charged.

LOL, people still believe in the labor theory of value, fuck /sci/ is filled with commies

>That's a problem with the managers and the public who fail to motivate them, not the fact that its public.

No the reason is because there is no competition in the public sector, it is a monopoly and because of this you aren't held to the standards of consumers. You must buy what they give you, where competition brings innovation and price decreases a monopoly brings stagnation.

>>3656634
> The goal of a private consumer is not to provide is too pay as little as possible for a good for as much as they can get and also to profit as much as possible

http://www.youtube.com/watch?v=eYTgwzHU6xg

>>3656813

Want more examples? Ok.

Imagine that the highways are privatised. Toll booths are installed at every on ramp and exit so people pay for what they use. Sounds good right? Well...

Lets say the company that runs the highways retains 30% of the revenue for profit (about average). So, actual SPENDING on the highways is only 70% of what it was. The company then has to try and maintain the road with much less capital than before. Do you really imagine that the government is so wasteful that 30% of its budget for things like this just vanishes? (In the UK, overhead costs and 'waste' account for roughly 5% of the difference between spending and result)

When ever you replace a government run program with a private one that has to make a profit, unless prices rise then there is AWAYS less money spent on the project, there can't NOT be unless there was incredible waste beforehand.

Profits siphon money off from the actual target. Governments do not try to profit off their own spending, it simply can't be done as they would be trying to profit off themselves. Whenever there is privatisation, there is an extra buffer of middlemen that also try to make a profit. For every stage between initial capital and end result, more money is creamed off through 'consulting firms', advertising, managerial bonuses, corporate profit and taxes.

Should everything be government run? Of course not, governments are beholden to political demands and do not always allocate things efficiently. However when it comes to public goods, such as roads, healthcare, railways, environmental monitoring, prisons etc etc, privatisation invariably leads to a loss of capital delivered to the end project.

>>3656783
>A government program doesn't attempt to profit from its own people. It has a mandate, not shareholders.

It's called votes, and once again you can't explain why the profit motive works everywhere else except medicine. I however will inform you. It is due to the FDA, AMA, Medicare and Medicaid. It is not the thought that counts, it is results and that is what the free enterprise does it gets results.

The arguments against profit off of medicine can be applied to anything, super markets could charge you an infinite amount of money to keep you alive.

http://www.youtube.com/watch?v=S-Gv75borX0

>>3656947
You forget competition and voluntary choice by consumers who will like a corporation want to spend as little money as possible for the most value will always bring prices down. All your assertions are not based in reality. The reason the roads aren't private is because they are inherently monopolistic.

>>3656947
> Want more examples? Ok. Imagine that the highways are privatised.
Oh christ I give up. I have already said roads should not be privatized.

>>3656671
>Prices cannot be arbitrarily high.

Bottled water.

>>3657030
>>3656947

I think some of the 947 post has some funny phrasing I wouldnt agree with. Even if I agree over all that roads should be public.

I guess, I believe that roads provide an immense public benefit that arent taking into account by the owners of the roads. I think this is like an externality problem.

I remember I heard about an enormous bridge built in france. And they signed a contract with the government that said its going to be a toll bridge but only for 90 years, and the toll is contractually agreed on.

The problem with high ways isnt so much who owns them, but the fact that a private individual will want to charge prices that will be more costly on society than if the government made it. You can easily have private companies build, create, and manage roads, but have some regulation as to how they get paid and how much.

>>3657090

How is the price of bottled water arbitrarily high?

Britain tried nationalized industry once.

It sucked.

>>3657030
>>3656990

>Implying companies d not manipulate the market to keep barriers to entrance high whilst simply lying about their activities.

Want an example? Raitrack was formed from the privatisation of British Rail with the express purpose that it should be more efficient than a government administrated rail network.

LOLGUESSWHATHAPPENED

The Hatfield rail crash killed 4 people and injured 70 when the rails basically disintegrated under the train as the maintenance hadn't been done, despite paperwork issued by the company a year before saying it had.

The Potter's Bar rail crash killed 7 people as the points of the rails hadn't been maintained. Jarvis, the sub-contractor initially claimed that the points had been sabotaged (lol) but actually it turned out that that shoddy work and simple hubris (despite a warning from a rail worker saying that he had seen 'lethal vibrations' on the track the week before).

In both cases, the workers who were supposed to be doing the maintenance were poorly trained and badly supervised, if at all. (Training workers is expensive y'know!)

I can't give examples from the US as I don't live there but there are probably many that the companies responsible for hired law firms to intimidate the local media into downplaying or simply not reporting at all. Inb4 tin foil hat: if you think that sort of shit doesn't happen, you're bloody naive.

>>3657090
Not arbitrarily high, people demand bottled water so companies make bottled water. People buy it because the price isn't arbitrarily high, its no different then buying organic because they don't use pesticides.

>>3657117
Let's assume that the wiki article's numbers are correct for a second.
http://en.wikipedia.org/wiki/Bottled_water#Bottled_water_versus_tap_water
bottled water costs range between $0.25 and $2 per bottle, while tap water costs less than a penny.

That is anywhere between a 2500-20000% mark up.

That may actually be worse than the mark up on drugs.

>>3657117
If there were no public (socialist) option for getting water it could be made arbitrarily high because people need it to live.

>>3657157
Then why isn't food socialized, yet it is cheap.

>>3657147
People pay what they've been lead to believe is a good price, it doesn't mean the price isn't arbitrary.

By your rational snake-oil sales men are the model businessmen.

>>3657149
But... they don't need to buy it. They could just use tapwater.

???

What the hell are you implying?

>>3657149

The price of the water is only one of many costs incurred when it comes to making and distributing water. I have no idea what the costs are, but I dont think its a simple process to bottle and distribute all over the world.

People dont complain about the "arbitrary prices" of bottled soda, even though they share almost exactly the same costs, with the exception of sugary flavoring.

>>3657157
No, they couldn't.

>>3657169
Cheap relative to what?

>>3657182
I'm sure a lot of people will just decide to die.

>>3657177
They can now if they're not retarded enough to believe the claims made in the bottled water advertising. HOWEVER that is ONLY because the public option is available.

>>3657144
Lol it was a non profit that was shielded from liability by the government. Once again the government distorts incentives and shit goes bad. It was never truly privatized, in a free market companies are liable for damages. It was a government.private hybrid like a fannie mae or a freddie mac.

>>3657157

I dont know where you live, but, I live close to a lot of water fountains. I get free water when I go out to eat, and I get very cheap water when I am at home.

Private companies dont have some monopoly on the supply of water. They have to compete with all the alternatives I face. I think some people buy bottled water for the convenience, even though I agree that the convenience is largely an a very pricey illusion. One that is very wasteful and irresponsible at that.

>>3657203
The thing keeping them from a monopoly on water is the socialist policies of the government.

>>3657206
You're right, if we weren't paying for tap water, we'd be paying for bottled water. That doesn't imply water would be priced arbitrarily high. Other necessities that aren't priced arbitrarily high: food, housing, air.

>>3657194
it isn't arbitrarily high whatever that means, yet it is a necessity.

>>3657174

I think we should clarify that all prices are arbitrary.

>>3657216
>air
Another thing the American Libertarian party wants to privatize by the way.

>>3657213

I was referring to bottled water companies by the way. Bottled water companies wont ever have a monopoly on water.

Who were you referring to?

>>3657213
Lasting monopolies are created by the government and not by market forces.

>>3657220
Not what I asked, you claim that it is cheap but cheap is a relative expression.

>>3657225
>mfw you really believe that

>>3657225
monopolies are created by consumers.

>>3657280
He is technically correct however a public monopoly is quite a different beast from a private monopoly.

What about space aliens? Maybe space aliens make monopolies.

>>3657280

Not the same guy, but this is clearly true... Monopolies rarely come about in the free market, only in situations where a natural monopoly occurs.