How privatization increases inequality | Hacker News Reader

How privatization increases inequality

inthepublicinterest.org

127 pointsmerraksh198 comments

The problem with privatization is it often involves granting monopoly powers to a private company instead of opening up the market to private competition. This in some ways is even worse than leaving the entity under government control because there is an incentive to squeeze as much profit as possible out of the entity and no pressure from competition to keep the private entity honest. Privatization in itself is not a problem, and neither is inequality (in modest form, created by competition, not unfairly), but creating an environment where the quality of goods and services suffer for the consumer/citizen because those providing those goods and services don't have an incentive to do a good job.

> because those providing those goods and services don't have an incentive to do a good job

For me it's more like

because those providing those goods and services don't have the sufficient time and resources to do a good job.

It's someone behind me telling me that worse is better, good enough is fine and acquire instead of finish.

Put this way, the relationship where A squeezes B can still hold regardless of whether A is an single company, many companies or a whole industry. Examples abound.

Unleashing the market provides no magic bullet. This is especially true when there only 1 customer for the service and it's long term contract based.

In theory, when there is only one customer for the service, prices will be artificially low, not artificially high.

Assuming the supply is competitive sure ... Otherwise you're in the worse of both worlds.

But when you privatize a public utility you have many customers and a single provider - the exact opposite. Hence higher prices and/or worse service.

The top level comment was pointing out that privatization isn't necessarily the issue, it's that the government picks one company, and hands them a monopoly. That is what creates the situation you're describing. I have no idea why it's done this way (without devolving into pure cynicism). I guess maybe it's easier to administrate? And it allows the government to technically still own the utility, which they've just farmed out? Once you let a bunch of businesses take over, you're never really getting it back. The real answer is probably just: Laws.

As a clarification: You mean in the absence of a negotiated contract that allows the price gouging the government often gets handed in the deals it negotiates, yes?

Absolutely agree. Markets are great when they meet the conditions for proper competition; and privatisations frequently occurs in sectors that don't meet those conditions; e.g railways.

Markets are also problematic where customer feedback (money) is not rewarding quality increase (e.g. when teachers are rewarded when setting artificially good grades).

That's balanced by the fact that the certificate of learning will be valued less. If that doesn't happen, you should reconsider whether people are actually purchasing an education, even if that's what it looks like.

The balancing may work if you have a degree from a university known for inflated grades, but consider a system where your highschool degree of a certain type automatically qualifies you for university education. Grades do not matter anymore but the students with inflated grades may have had a worse preparation for higher education.

Edit: in my example the university could change from accepting all students with correct diploma to doing admission tests to resolve. I know nothing of the feasibility of this though.

Grades do not matter anymore but the students with inflated grades may have had a worse preparation for higher education.

Then people will choose their high school depending on whether they need that extra preparation, and those schools will have more students or be able to charge more.

Indeed the waiting lists for good schools are long. Depending on government the bad schools may cost the same though, and there may be enought students (parents) not knowledgeable enough to fully populate the other schools. Market opportunity there of course, if one can recruit enough good teachers.

cough enterprise software cough

Monopoly is granted by governments creating laws that prohibit smaller companies from competing on the free market.

Quality of goods and services suffer when there’s government protection placed on companies.

These are problems the government creates, not private enterprise.

.. no. The market is not always free or frictionless in its natural state. Especially for big network-based operations like railways. Railways are impossible in a "completely free" market without compulsory purchase. So they end up as at best heavily regulated entities and at worst the strange shell company system of the UK TOCs.

Markets are also not naturally free when customers can't sensibly opt out of the use of the service (water, arguably heathcare). Non-market systems may be built for the positive externalities on the rest of society which can't be captured by market pricing (education).

Railways is a completely arbitrary example. If they would be impossible (which i sincerely doubt) without government involvement, the free market would find alternatives. That’s the beauty of it. It’s how progress happens.

Education is not an externality, and should be handled by the free market, not the government. Public education is in a horrible state everywhere you go, precisely because it’s public.

It's unfortunate you're being downvoted here. The market for railways is not railroads and trains, it's transportation. People and goods will find the most efficient way to move around regardless of government involvement.

People and goods will find the most efficient, available way to move around. Regulation can sometimes make more efficient ways available where the market cannot.

(IMHO) Absolutely everything in that response is completely wrong:

1. Railways are a real and concrete example of wrongheaded privatisation.

2. More congested roads are not an alternative to efficient rail services.

3. The greatest technological innovations of our time from cancer drugs to satellites to the internet are spin-offs from government funded research. I could bore on all day about this...

4. A good education system is an externality in that society as a whole benefits from highly trained doctors, engineers and even in my view artists and poets. It is a profoundly social enterprise that we all have a stake in.

5. Public education maybe messed up in the US (I don't know it well) but it's doing just fine through much of Europe and the UK - or even in profoundly free market economies like Singapore. Indeed the UK in particular where the tensions in education exist over school placement and better/worse schools within the public system illustrate that educational variation is usually down to social status and economics - not public ownership.

3. The greatest technological innovations of our time from cancer drugs to satellites to the internet are spin-offs from government funded research. I could bore on all day about this...

Of course. The rich use the State to publicly fund research (socialize losses) which they then commercialize and profit from. Otherwise they'd have to actually pay for the research themselves.

You can build neither roads nor railways without either compulsory purchase or a single market entity which owns a significant chunk of all the land in the country. Otherwise you just get obstructed by holdouts and "nail houses".

To commit to private-only education would result in a country with a very large section of the population uneducated. It's also a massive waste of human potential. Sources? Most of pre-20th-Century Europe, and much of the less developed world.

You can build neither roads nor railways without either compulsory purchase or a single market entity which owns a significant chunk of all the land in the country. Otherwise you just get obstructed by holdouts and "nail houses".

So you'd either move around them or pay them enough. It'd be significantly more costly, but "impossible" seems like a stretch.

I'm not saying it'd be better, mind you; one can still be a staunch believer in the importance of the State. But to claim that the human species would stop transporting stuff if eminent domain was unavailable sounds to me as lack of imagination.

Man, you're so right and so wrong at the same time!

So spot on about railways example: the real problem to solve is transportation, not railways, and a different form of transport could replace railroads.

So spot off about education: it damn is an externality! Try living in two societies/regions with different average levels of education and see how it feels. Also try starting different kinds of businesses in places where the pople are on average more or less educated. Also try implementing things like pollution reduction strategies or crime fighting strategies for places/communities with varying levels of education!

Yeah, it does not always work in the most obvious ways: a college educated person will not always make a better decision than someone who dropped out of high school. But the high school dropout from an on-average well educated society will most of the time be more of a person you want to be around with / sell to / buy from / live on the same planet with, than anyone from a less educated one.

Replace "educated" with "science literate" for the clearest particularization of what I've just said, as other types of education have more variability in effects on people and are easier to "get wrong".

Education is a service. People want to become doctors and engineers, because that pays well. It’s profitable to become educated, thus it’s profitable to provide education. Parents will want to provide education for their children, just like they provide them with food, shelter, healthcare, or save money for them. Education, really is no different. I have no idea where this notion comes from that making education private means it stops exiting. Making education private provides competition in the market, and more choice for people seeking it.

What’s the correlation between crime fighting and education levels? What you seem to be suggesting is that people need to go through some sort of a brain-washing process in public schooling to be good members of society, which is scary.

Again, we can look at history or the less developed countries: people might want education, but not be able to afford it.

Same for food, healthcare, or shelter. With education there's more than enough incentive for private enterprise to provide it to invest in future workers.

The phrase "Education is not an externality" is so baffling to me. The education system is of course not an "externality"--those are two completely different classes of things. On the other hand, the process of education is definitely, definitely, definitely tied to externalities--along with infrastructure, it's the prime example of what an externality is, to the extent that I'm not sure you know what that word means. Do you not think an educated population has benefits not captured by the decisions of the market?

Railroads are not impossible...just unlikely. There are a handful of railroads that were built using entirely private negotiation.

https://en.wikipedia.org/wiki/Natural_monopoly

It is my opinion that many organizations that you would consider a "Natural Monopoly" can, by nature, only provide a fair service/cost without being optimized out by the free market.

The two examples provided in the wiki page are not what I'd consider to be concrete:

   - Electricity: Solar Panels will replace these companies when they provide a poor enough, or expensive enough, service
   - Water: Allow people to tap wells on their property. Put them in charge of their own water. You can also run your own septic tank.

Your examples aren't well thought out. Solar panels can't provide electricity at night, so you still need a network (for the time being - hopefully batteries change this sometime soon). Most properties don't have wells, especially in the cities, so you'll always need a functional water network. Networks result in natural monopolies, unless correctly controlled/legislated.

Batteries change this currently. Many people I know have solar installations.

And as for well taps, each building network can tap their own water.

This and there is another reason why privatization creates inequality. It is a proven method for the oligarchs to rob public assets. First they put their friends as key figures of a public company. These people let the company rot, so its price on the market goes down. Then the oligarchs buy it at a ridiculously low price.

They even made it with an entire country: Russia. And this is why they ( the western backed oligarchs ) are screaming against Putin ( and the oligarchs backed by him ) since then.

Another country where this was done almost successfully is Slovenia. But then the Great Financial Crisis happened and the "ridiculously low price" actually turned out to be too high as the companies started going bankrupt.

Privatization can be a problem depending on how much competition there will be, and how efficient existing arrangements are. Prices can only be squeezed so much.

Some people act as if unlimited competition will drive prices to zero, but it won't - it will just drive it asymptotically closer to the marginal cost of production, which isn't necessarily all that far away from what you pay today.

And on the way towards that limit, unpleasant things can happen. The benefits of "cheating" of all sorts, from reading the tender specification like a malicious genie to tax fraud and worse, grow higher the closer you get to the marginal cost of production boundary.

At some level of competition, the cost of policing - keeping actors honest - eclipses the savings.

And government control is no guarantee of low prices. Real estate in China would be one example, or oil prices would be good examples.

Real privatisation (meaning not a granted monopoly) is as close as we seem to be able to get to good prices, choice, and some incentive for these businesses to do well.

How that can be implemented in practice is often a tough question, mostly in the industries most complained about : phone, cell, internet. All of which has government or private monopolies in the chain, and in virtually every case those are the source of the complaints. But no worries: in Australia the NBN (the new government monopoly) is/was going to fix everything ! Of course, now the government is fucking with it and serious cracks are showing : it seems to create an unfair advantage for the incumbent telecom operator, who doesn't seem to be paying the same prices as everybody else ... (and of course it's the fault of party X, never mind that now both parties have messed with it)

> The problem with privatization is it often involves granting monopoly powers to a private company instead of opening up the market to private competition.

Private competition almost always ends in monopoly or trust anyway.

Private competition isn't a stable state. When two companies are competing, both are trying their best to put the other out of business. It should be no surprise at all when that eventually happens.

Monopoly, on the other hand, is a stable state--it takes extraordinary circumstances, usually government intervention, to overturn a monopoly. Even if a small competitor manages to eat a chunk of a monopoly, the monopoly company can simply buy them out in most cases. Giant corporations can even become unassailable by government, as their wealth allows them to lobby for laws that favor them.

The alternative is for corporations to form a sort of truce, where they don't touch each other's slightly different markets, effectively granting each other a monopoly in each other's areas. The clearest example of this is cable companies not laying cable in each other's territory, but there are plenty of other examples--Coke/Pepsi, IBM/Intel. This is also a stable configuration which is more sophisticated than a monopoly. The benefit to corporations is that it reduces their risk--having to overturn competitors means taking the risk of overplaying your hand--but there's no real benefit to consumers.

So ultimately, I'm not sure it makes sense to say that monopolies are the problem and not privatization. Privatization ends in monopoly.

This is entirely false, and there are stacks of economic literature spanning a 200 year timeframe and covering every economic ideology that have explored why it isn't like that, and surprise surprise there actually is a consensus. High barriers to entry are the cause of natural monopolies. And not every industry has high barriers to entry. And oligopolies and collusion have never been stable.

Ironically in simultaneous parallel to the 200 years of economic literature we have explaining why it isn't like that, we have 200 years of recorded history explaining why it is like that. When scientific theory and facts come into a disagreement, theory walks away defeated. But when economic theory and facts come into a disagreement, the opposite occurs -- the facts must be reinterpreted properly to fit the theory, of course, so economists may continue on as highly educated cheerleaders for wealthy capitalists. Oligopoly and collusion is nothing more than a succinct description of actual economic history.

Economic literature isn't just philosophical or theoretical, it is empirical as well. The only empirically falsifiable theory here is that monopoly is natural for all businesses. The world's oldest profession, prostitution, has never been run by companies the size of Standard Oil. Neither has wheat, sugar, electricity production, coal, iron, or copper. Only revisionist history would take such a limited view of the economic scope of the world. If monopoly were the economic end state of all industries, surely some of these old industries would have been monopolized by now...or at least they would have been before Anti-Trust law was a thing. Note that that has not ever happened.

A natural monopoly only exists in the face of high barriers to entry. Those barriers may be natural, or they may be political, but either way they must be high. Some may be high enough to only have a few competitors, but compete they must do. Collusion is mathematically and empirically unstable. In fact, the economic criteria for cartel success is a) how much profits increase, and b) how long they last. There would be no need for `b` as a success criteria if they were stable.

And there is a tendency towards (politically-created) monopoly because only monopolies can concentrate enough wealth to buy elections. Natural or political, the only way to do away with monopolies does not have to do with public/private, but with campaign finance reform.

> The world's oldest profession, prostitution, has never been run by companies the size of Standard Oil.

This is because of government intervention (it's illegal for Christ's sake).

> Neither has wheat, sugar, electricity production, coal, iron, or copper.

Wheat has been regulated forever.

Sugar--are you not aware of the corn lobby?

Electricity production: this is pretty well monopolized regionally.

Coal: not yet.

Iron: USS wasn't a good enough a monopoly for you?

> A natural monopoly only exists in the face of high barriers to entry. Those barriers may be natural, or they may be political, but either way they must be high. Some may be high enough to only have a few competitors, but compete they must do. Collusion is mathematically and empirically unstable. In fact, the economic criteria for cartel success is a) how much profits increase, and b) how long they last. There would be no need for `b` as a success criteria if they were stable.

What makes you think that a large company will not create high barriers to entry in their field? When a company reaches a size where they can lobby the government successfully the field ceases to be an even playing field.

> This is because of government intervention (it's illegal for Christ's sake).

In the US, of course. There are plenty of places where it is legal, but no monopolies have formed. Even before it was illegal, there was no monopolization. If the timeframe for inevitable monopolization is on the order of millenia, like it has yet to do with Prostitution, well then consider me unimpressed by the argument.

> Wheat has been regulated forever.

Forever? I'm pretty sure wheat farming predates the existence of the idea of government regulation. And yet, no monopolies. Ever.

> Electricity production: this is pretty well monopolized regionally.

Distribution is pretty well monopolized (hey, what do you know...an industry with high barriers to entry!). Production, not even close.

> Sugar--are you not aware of the corn lobby?

You're still just talking about the special case of the US. Open your eyes.

> Iron: USS wasn't a good enough a monopoly for you?

US Steel wasn't even a monopoly in the US (it peaked at 67% of the US market)...nowhere close to a monopoly world wide.

> What makes you think that a large company will not create high barriers to entry in their field? When a company reaches a size where they can lobby the government successfully the field ceases to be an even playing field.

So what you're saying is that non-natural Monopolies are the end state of government intervention. I agree. Natural monopolies can exist due to or in spite of government intervention.

You're setting an unreasonably high bar for what you're willing to define as a monopoly.

Yes, most of my examples aren't global, but that's largely a function of regulation: the US is the only country with permissive enough economic policy to allow spontaneous monopolies and a large enough economy to be worth creating a monopoly in.

As for historical monopolies on the order of millennia: the modern corporation hasn't existed for millennia and indeed societal, technological, and infrastructural advancement was necessary before we could reach a point where a large scale monopoly was possible. It's hard to run a monopoly by carrier pigeon.

>> What makes you think that a large company will not create high barriers to entry in their field? When a company reaches a size where they can lobby the government successfully the field ceases to be an even playing field.

> So what you're saying is that non-natural Monopolies are the end state of government intervention.

It's ironic that in your excitement when you thought you had caught me in a mistake, you simply missed my point and failed to respond to it.

Given your general tactics in this debate have been rude and childish, I'm not going to continue debating with you further, but here's a question for you to ponder: in your hypothetical unregulated corporate free market, what prevents large corporations from changing the market so that it's no longer a free market?

> You're setting an unreasonably high bar for what you're willing to define as a monopoly

No I'm not. A monopoly by definition requires no competition, and monopolistic profits are not possible with competition. They could possibly occur with cartels in markets with high barriers to entry, but cartels are unstable because the markets benefit cartel-breaking behavior more than they benefit cartel behavior.

I find it absolutely rational of you to not want to discuss any further. It's the natural end state of stubborn ignorance. I've already demonstrated that not all markets end in monopoly, but only those with high barriers to entry. If any reader wants more examples, they can google the term Commodity.

> This is entirely false, and there are stacks of economic literature spanning a 200 year timeframe and covering every economic ideology that have explored why it isn't like that, and surprise surprise there actually is a consensus.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it." -- Upton Sinclair

> "It is difficult to get a man to understand something, when his salary depends upon his not understanding it." -- Upton Sinclair

Ah, so you're in the "reject science" camp. Gotcha.

To clarify for anyone who might be confused like saosebastiao about what I'm saying: the consensus saosebastiao is claiming exists is exactly what you would expect from economists who are trying to make money for themselves.

It's additionally worth noting that a) there is not a consensus, and b) consensus is not part of the scientific method.

There is a consensus, and in social sciences like economics, consensus absolutely matters because universal truths do not exist.

And no, the incentives of academic economists are not aligned with industry like is claimed. If that were true, the majority of academic economists would not be Keynesian welfare-state supporting democrats like they currently are in the US.

> Private competition almost always ends in monopoly or trust [truce? oligopoly?] anyway.

Doesn't seem so to me. As far as I can tell, all real life monopolies or oligopolies only exist because of intervention by the police state. The canonical examples that come to mind would be Microsoft (only possible because of copyright, a monopoly granted by the police state) and Standard Oil (only possible because of mining concessions, a near monopoly granted by the police state).

Here in Germany, Deutsche Bahn (the rail operator) had a practical monopoly on long distance travel, all thanks to a special law granted by the police state. Said law has been repealed by the EU a few years ago (2009 or so), and the competition from long distance buses is fierce now.

Can you name any monopoly that ever existed and wasn't created by the police state effectively granting it?

(For this argument, it doesn't matter if these police state granted monopolies are a good thing in some sense. I don't think so, but the point is really that competition works unless it is artificially restricted.)

> other examples--Coke/Pepsi, IBM/Intel.

How does Coke/Pepsi even come close? I see quite a number of caffeinated sugary soft drinks on the market (all equally disgusting). IBM/Intel? Well, IBM had something resembling a monopoly in the mainframe era. I wasn't around back then, but most computers were probably sold to the police state. Intel has had a near monopoly on desktop computers for the past 25 years or so, but only because Microsoft DOS/Windows wouldn't run on anything else, so this is actually an extension of the Microsoft monopoly mentioned above.

I'm not sure about the cable companies. Theoretically, is anyone allowed to run a cable from A to B? If no, you can only ever have one cable provider in a given region, again, thanks to artificial rules made by the police state.

I'm genuinely curious about any examples of monopolies that developed in a free market.

> Here in Germany, Deutsche Bahn (the rail operator) had a practical monopoly on long distance travel, all thanks to a special law granted by the police state. Said law has been repealed by the EU a few years ago (2009 or so), and the competition from long distance buses is fierce now.

Competition within the rail industry? I doubt it.

I'd be extraordinarily surprised if any other rail operator arises in Germany--the only way I can see this happening is if a larger rail operator from another country enters Germany. This is a pretty strong example of a monopoly.

> I see quite a number of caffeinated sugary soft drinks on the market (all equally disgusting).

Look at who bottles them. The vast majority are bottled by either Coca Cola or Pepsi.

There's been a surge of attempts at "craft" sodas lately, but most have had little success or been bought by one of the giants.

> I'm genuinely curious about any examples of monopolies that developed in a free market.

See above.

Here in Germany the soda market isn't such a mono-culture, e.g. in my home state the best-selling cola-type drink is made by a local company. Sure, you can get Coca Cola and Pepsi nearly everywhere, but every large supermarket chain has their own brand (made by a variety of companies) and the cool brands aren't the ones owned by multinationals.

> Competition within the rail industry? I doubt it.

Not within the rail industry---ownership of the track network makes that impractical. I'm saying DB was protected from other modes of transportation, which ensured their monopoly. The service being sold is not rail transportation, it's transportation.

> The vast majority are bottled by either Coca Cola or Pepsi.

Looking from Germany, there are Vita-cola, Afri-cola, Fritz-kola. All independent from Coke or Pepsi, and that's only the colas I can think of. All sorts of lemonades serve the same market.

> See above

What?! Deutsche Bahn is a (near) monopoly precisely because of support from the police state, Coke/Pepsi is not a monopoly, not even close. Neither of these are examples of a monopoly that developed in a free market!

This is not convincing.

1) As to user fees. Most public infrastructure in the US is dramatically underfunded. Public transport, road, and water systems are a major cause of the multi-trillion infrastructure spending backlog we have (according to the American Society of Civil Engineers). We pay far too little for services like water, which precludes municipal water utilities from upgrading infrastructure. Governments often privatize when that situation becomes untenable, because they don't want to be the one that raised water rates on grandma.

2) As to wages, I'm supportive of income equality. But unionized public sector jobs are a misallocation of resources. If we want to subsidize a particular kind of job at the public expense, why not start with the lowest income folks first, instead of relatively well off public sector workers?

Public services in the US are a disaster, and most of it is not privatized. It's not privatization that drove Chicago to the brink of bankruptcy. It's not privatization that left the DC Metro in shambles. It's not privatization that left Atlanta with ancient sewers that dump raw sewage into the Chattahoochee river. And ironically, it's the poor that suffer. Rich people can send their kids to private school - bypassing the failing inner city systems that often spend far more money than neighboring suburban ones. Rich people can take Ubers everyday and avoid subways that are delayed and shut down due to years of diverting money from maintenance to pensions and benefits.

The argument of the article seems that privatization is making it worse, not better

How do you think “income equality” is a good idea in a society where some people work harder than others. I can’t comprehend this common mentality.

I'd be pretty happy if wages were proportional to how hard people worked. I.e. the executive working 80-hour weeks gets paid twice as much as the line worker working 40.

What about skill, responsibility, etc? Also, working hard is not necessarily working on the things that are important. Do not confuse activity with progress. The private sector is much better at allocating capital than the public sector.

> skill

Only to the extent that its the product of effort rather than innate factors.

So somebody that takes 5 hours to complete a task that I can do in 1 should be paid the same?

Wouldn't this lead to people trying to take longer in completing tasks and making things seem "harder" than they are?

I'm sensitive to the potential for gaming -- all systems can be gamed. But look at the big picture. The average guy putting in an honest day's work is never going to be an engineer at Google, no matter how hard he tries. Those who are getting paid $300k at Google are largely being compensated not for the hours they put in, but the fact that they were born with a certain level of intellectual ability and aptitude. Surely you can recognize the unfairness of compensating people dramatically different based on qualities they have no control over?

It also incentivises the google engineer to be as productive as they possibly can, assuming that salaries are indicative of marginal utility.

Otherwise the engineer could spend his brain power on his own hobby projects while mowing grass for income.

Wouldn't it then be unfair to pay the best person the same as the worst person? The incentive there is clear: Be the worst person and save your energy for something else. If your outcome is the same regardless of your effort, then you remove the desire to strive. That eventually leads to stagnation and collapse.

If we actually care about fairness, we should focus on social mobility and doing our best to create equality of opportunity. A lot of this begins with fixing public schools (in the US at least).

By those criteria, isn't "effort" an innate factor? After all, people only have so much control over things like stamina and motivation.

More reason for income equality. Studies show that things like impulse control have a significant innate component too.

On the contrary, more reason for income inequality. If we are concerned for the future population, that low-time preference people with good impulse control are payed more shouldn't trouble us.

Whence come this desire to destructively level everyone?

It's the classic efficiency vs justice tradeoff. IMO the best way to approach it is the "socialism below, capitalism above" approach combining a strong tax-funded UBI with a free-market, low-regulation (except environmental regulation) economy and a cultural move from individual ownership to collective but capitalist ownership (e.g. own REITs instead of homes, shares in Uber/GM instead of cars).

The economic madness of considering only the time worked, and not the importance of the work, is obvious.

Abolish nature: then life will be fair.

We all, presumably, enjoy being human, and not animal. Man would not have come into existence if intelligence was not incentivized. The unusually smart and apt engineer, receiving a higher salary than the average or below average person, is less disincentivized to reproduce. If we were to equalize incentive for all the groups, smart and dumb, patient or impatient, we'd be equalizing their rate of reproduction, and forcing more incapable, experientially limited people into existence.

Wolves had no choice between being born carnivorous or herbivorous. When they attack our sheep, we kill them regardless.

The fairness you suggest is madness.

Not sure many would believe in literal income equality... suspect where people use that term they mean a mixture of (a) a cooling of executive pay & similar, and (b) structural changes to reduce the cumulative advantage high levels of wealth have in securing future income, e.g. lobbying, tax avoidance, access to education.

Income is absolutely not proportional to harder work at all, not sure what is your point.

His point, I think, is more general: there is a strong underlying assumption that inequality is inherently bad.

This assumption is often lacking in nuance, even for a progressive like myself. Excessive inequality is undoubtedly bad. Debating quality vs quantity is a very different beast indeed.

To be fair, people might mean "excessive income inequality" and just shorten it to "income inequality", but I've found this to be less and less true in recent years.

Your argument boils down to "public service is awful". The article simply states that privatizing is simply making things worse.

Privatizing is not the solution. You said yourself: "We pay far too little for services like water". Well, yeah. Stop paying so damn little for your infrastructure then.

Your critique of public service is that it is unable to function with so little ressource. I don't see that as a failure from the public service itself, but from the society that should be making it work.

And I mean society, not government. It's too easy to fault the big bad government for being unable to do it. That's the taxpayers that are in the end voting for populists that will pledge to reduce spending and taxes to unrealistic levels, breaking public services, preparing the terrain for privatization and selling to their friends.

Anyway.

That's not what he says at all. In fact the points he makes are quite good. Maybe actually read the comment you reply to first?

> I don't see that as a failure from the public service itself, but from the society that should be making it work.

One of the strongest critiques of the public sector is the perverse incentives it creates, including things like irrationally underfunding valuable resources.

Dismissing that critique offhand is to misunderstand how strong the argument is.

> Stop paying so damn little for your infrastructure then.

That's very difficult when the services are public and prices are politicized. Nobody wants to campaign on raising water and sewer rates, no matter how desperately that is needed.

Do keep in mind that the ASCE isn't exactly a disinterested party. Infrastructure spending == hiring a bunch of ASCE members. Maybe we should ask SPEEA members if Boeing should retire the 737 and 747 designs and replace them with something better.

The battle between "new deal era problem solving" and "market based privatization" is a distraction from the actual reality that government comes up with all the plans, public or public/private, and corruption in both is widespread.

The only way we will improve upon the quality of solutions is to have a zero tolerance policy for corrupt officials, regardless of which "side" of this "battle" they claim to be passionate about.

Is it any surprise that in a country with significant government corruption such arrangements would also be corrupt? New Deal programs like Social Security have been raided by corrupt politicians, the PBGC is not actuarially sound, most of the military's budget is un-accounted for. This is corruption at the Trillion dollar scale and has nothing to do with the fake ideological war between public sector ideologues and free market ideologues.

There are several relevant layers, few of which are exposed to democratic or market pressure/discipline:

- Making the determination that a service is necessary

- Deciding on the characteristics of the service.

- Creating a playing field for private sector participants to compete

- Revising the requirements and playing field to keep quality and value high (democratic or market-based)

- Creating transparency requirements for firms and government agencies participating in public/private partnerships.

- Assessing the outcomes and reconsidering all of the above based on results.

In our system, each of these breaks down. I can't think of a single example that has succeeded in all of the above areas.

Notably, privatization has been used by officials to avoid transparency requirements in recent wars. Chances are this is a major objective of privatization schemes. Officials from both major political parties have set up privatized email servers recently to avoid transparency/accountability.

>Creating a playing field for private sector participants to compete

I know a guy whose job is to negotiate contracts for supplies used by the Fire Dept. in his municipality (or state, I can't remember). We were on a Skype call once, and he was telling me about a contract he was for a particular thing and how much they paid for it, and I thought: "That seems high". So I took 10 minutes to do a search on it and found another reputable company offering the same good for a little more than half the price. His response was: "Well they should have showed up and bid on the contract." Between his apathy, and the way the law works, there was no interest in going and getting a better deal, or even doing basic market research to use in negotiating the price. I wanted to strangle him.

And it's all to do with laws and incentive structure. I'd like to think that in most businesses if you came up with a way to cut in half the cost on an essential item (I think this was the coats and pants they wear when going into a burning building), you would at least get accolades and have a strong case to be made on your performance review. In the public sector, it's all the same.

>Between his apathy

Apathy? What if this other company has no interest or capacity to deal in a strict supply contract?

And then you complain about negotiating the price in a bidding system? "OK, we accept your bid at this price. Now let's talk about reducing the price."

Come on, if you're going to use a personal anecdote to convince people at least have a good one.

Thank you for reading the story and completely missing the point while proving it. You seem to assume he would respond how you would respond. He didn't. He had never heard of the company because he had never looked. When I told him about it, he didn't care. When I told him they were possibly over paying, he didn't care. It was trivially easy for me to come up with that info and he had never cared to look at it before and he didn't care to use it when I told him about it. He didn't say any of the things you said. He didn't say anything even close to that. He had no intention of negotiating the price with the company then were likely to settle on. He was apathetic.

*edit: You also seem to have completely overlooked the part where I said it was a combination of his apathy and the way the law works. The two are coincident. Seeking out companies for contracts is risky business as it can trigger collusion / corruption investigations (according to him).

I just want to point out nationalization/existing public services also increase inequality in quite similar ways.

1. Traffic fines are still public. Still regressive.

2. Social Security is still public and still has a cap on taxes for > 6 figure incomes.

3. Wage cuts (granted I think this gets worse when privatized) and benefits cuts are dealt to public employees all the time. Look at the many underfunded local pensions/city budgets and how they've chosen to respond.

4. Private interests into parks and charters schools etc. This also happens to be an opportunity to give extra attention to the needs of poor individuals and families, and people of color. There is a debate ongoing, but many charter schools in poor neighborhoods have better funding/facilities than a would-be public school there. This is not close to perfect or a panacea, but it has potential, attacking charter schools without nuanced research is imprudent.

This is a controversial topic. I am not taking sides. There are many complex/taboo issues and few working solutions so far. Glad it is being discussed.

2. Social Security has a cap on tax because there is a cap on the payout. Edit: that said, this does increase inequality because the money put into Social Security does very poorly compared to private sector investing. The six figure salary person can instead invest in something better than social security.

Re: 1. Traffic fines are progressive in Switzerland (or at least not regressive), because they're issued as percentage of income.

Simple thought experiment.

There are plenty of markets that are mostly private. All have some regulation, but some markets are mostly left alone.

Let's pick one. How about pickles?

If my local government wanted each of it's citizens to have a jar of pickles, what would be the best way to do that?

I'd argue that a gift card to Amazon for pickles handed out is probably the easiest way. They don't get into the produce business, they don't get into the warehousing or distribution business, they just hand out gift cards. Somebody else -- who is really good at that other stuff, by the way, handles the rest.

This is what every enterprise learns: stick to what you do best. Let everybody else to do the same.

So obviously strict product movement and provisioning, such as municipal water and electric services, are solved problems. There is no value added here based on who is doing what.

Social services, on the other hand, is a mess of nuance and policy. It's not a solved, commoditized problem, so it doesn't make sense to have somebody else do it. If your local government does their social services well, it's something they've been tweaking for quite some time.

We don't need to continue the thought experiment any further. "privitization increases inequality" is far too broad of a statement, since easy examples are found both supporting it and opposing it. Some further narrowing of terms is required for this to have enough meaning to discuss.

But you have one fundamental flaw in your otherwise compelling idea.

> If my local government wanted each of it's citizens to have a jar of pickles, what would be the best way to do that?

The government want's everyone to have a jar of pickles. For what reason ever. They might increase inteligence on the long run? Contrived, but let's go on.

If you provide gift cards, some will buy a jar of pickles. Some will buy a game for a gaming console. Some will buy dog food.

You see the problem? The idea is or was that everybody should get a jar of pickles but now everybody get's what he wants. For most of the time getting what you wan't is good but be frank: You seldom get what you want because for the bigger part of it you do not know what you want. It's advertisment and clever selling strategies which make you think you need something.

So the government policy was to get a jar of pickles, planted by local farmers. Instead you buy a game produced in !?!?. Target missed.

You touch on a really deep problem. One that poisons political discussion.

People vote for outcomes. Politicians make up various programs and policies promising these outcomes.

This is why my pickle example was purposely contrived: it's a thing. You get it or you don't. There is a clear success criteria.

We have a lot of things in the world like pickles. I don't go to the store looking for pickles and come back with a game. I want it, they have it, I push a button, now I have it.

But once you start selling me feelings? There's no end to it. This is like hiring consultants without clear deliverables, timelines, or accountability. You're always going to get something, but most of the time it's just regurgitated policy promising to fix things you have been talking about that need fixing. I want it, they don't have it (it might not exist in this universe), I push a button, and now I have a bunch of reasons why it didn't work and why I need to push 7 more buttons to get what I actually wanted.

I really don't want to go there in the current political climate. There are far too many button-sellers and people desperately wanting all sorts of ill-defined and perhaps ephemeral things. So all I've got is pickles. If you understand why pickles work one way and social services work another? Then we can move one step forward and continue the analysis. Quite frankly a lot of people won't be able to take that first step. (I guess if I believed I could push a button and get something really awesome, I wouldn't want to take that first step either.)

vouchers don't work over the long haul. look at education prices have skyrockets. health care skyrockets. I think you need "normalized pricing" were the government pays X% based on income. So, that hospitals cost 3 times as much as doctors visits but if your really poor maybe its $9 instead of $3 or something.

or as in your pickle example the government doesn't contract with 1 pickle company and you only get that pickle choice.

Vouchers do not work for things that you have to have, are only purchased from a limited number of suppliers, and there is no feedback mechanism in place.

Contrast my pickle story with another scenario: the local government announces that everybody must keep a jar of a certain kind of pickles at home. To facilitate that, vouchers will be provided to purchase these pickles from a vendor/distributor.

Can you imagine how that'd work out? I can. Pickles would soon be costing 100 bucks a jar. And they'd contain one pickle if you were lucky.

> I'd argue that a gift card to Amazon for pickles handed out is probably the easiest way. They don't get into the produce business, they don't get into the warehousing or distribution business, they just hand out gift cards. Somebody else -- who is really good at that other stuff, by the way, handles the rest.

I'd argue that if you did that, one hedge fund would buy up all of the pickle producers, fund a bunch of research saying that children needed at least 3 pickles a day, buy a bunch of lobbyists to insist that the government provide at least 20 pickles a week for each poor child (to allow them to compete fairly with their pickle-rich brethren), and then raise the price of pickles to $20 a piece.

Government cheese is the counterexample.

edit: explicitly; Government wants all people to have cheese. Government decides what qualities it wants that cheese to have, government goes to cheesemakers and asks for that cheese while figuring out how much it would cost to go into the cheesemaking itself. If any number of cheesemakers can provide cheese to the standard for less than the government can produce cheese, they are all given contracts to produce cheese. If they do not, the government produces cheese. The government gives cheese to people. Depending on how well cheese can be warehoused, government uses the timing of cheese purchases to support private cheesemaker production capacity when cheese market is weak.

> Increased socioeconomic and racial segregation

I think progressive black activists are supporting racial segregation. One university even offers segregated housing.

How is that progressive?

Ask them, I have no right to speak for marginalized groups.

Ask who? "Some activists"?

it's called double speak. it's a tad ironic, isn't it?

It's called "twisting words" or "quoting out of context".

If you read the rest of the thread you'll find the alleged example of this was a dorm where students who felt isolated (because they were in a significant minority in classes in their majors) could have a place to feel that they weren't so isolated and did in fact have a community on the campus, and wasn't even off-limits to other groups -- anyone could apply to live there!

Dorms with themes -- around majors, around social activities, around social groups, even around, yes, racial or ethnic identities -- are not new, not unusual and not "segregration".

But of course putting it that way doesn't let someone spin it as "those goshdurned SJWs are the real segregationists", so you won't hear that interpretation from the people who repeatedly bring it up as an "example".

You're mistaken...

my 2 cents: If you going to make that controversial of a statement you could at least link to something to back it up.

> Cal State LA joins UConn, UC Davis and Berkeley in offering segregated housing dedicated to black

> Black Student Union issued a set of demands in response to what its members contend are frequent “racist attacks” on campus, such as “racially insensitive remarks” and “microaggressions”

http://www.thecollegefix.com/post/28906/

Note that the housing is open to everyone. Here's a more charitable explanation:

That’s one reason another institution, the University of Connecticut, earlier this year announced a living community specifically for black men. Erik Hines, an assistant professor who was set to serve as a faculty advisor to residents, told The Atlantic at the time that the space was in part an attempt to address the fact that black men graduate from college at a lower rate than many of their peers. While graduation rates for white, Latino, and Asian students, as well as black women, are in the 70s and 80s at the school, graduation rates for black men are in the 50s. The school pointed out that young men of all backgrounds will be permitted to apply to the living community, and that the housing isn’t meant to exclude anyone, but to provide a safe space for students who may feel detached from the university community more broadly. The community is an attempt, Hines said, to give black students who may be in majors with just one or two other black students a chance to connect with other people who may feel isolated and may also feel burdened with representing the black community as a whole.

from http://www.theatlantic.com/education/archive/2016/08/finding...

I can provide much more links; BLM wants separate government, budget, no police intervention... I think we all get it.

---

> To carve out a safe space on campus where black students can get support from people who look like them and share similar backgrounds

> That’s one reason another institution, the University of Connecticut, earlier this year announced a living community specifically for black men.... the school pointed out that young men of all backgrounds will be permitted to apply to the living community,

I think this is just a word-game and schools are backpedaling to remove ugly word 'segregation'. But in reality 99.9% people in those safe-spaces will be black.

It is nice they do something for men, but it will not help unless underlying sexism is solved.

>I can provide much more links;

Please do.

>BLM wants separate government, budget, no police intervention

I can't find any official BLM source that makes this statement or anything similar.

>I think we all get it.

You "get" what you went in search of in the first place.

About page: "...goes beyond the narrow nationalism that can be prevalent within Black communities, which merely call on Black people to love Black, live Black and buy Black"

you've created an awfully scary world for yourself

I dont live in america.

So...why do you think you have enough context about their messages to condemn them?

Usually economic 'equality' is at the expense of wealth creation. So you almost always end up in a situation where everyone's equally as poor.

Or everyone's equally as rich, or well served. The purpose of a public transportation service should be to serve the whole city, not to run just the profitable courses.

Bingo. Postal services were usually priced such that the high volume central routes would subsidize the more remote ones.

Yes, because our post office is doing great in comparison with its private competition these days.

How much of that is because of gutting by the people in charge?

I seem to recall that British Railways was privatized basically by having politicians cut funding, then claim privatization would fix the problems that underfunding was producing...

If you actually look at the data though, the railways are actually better. They're more likely to be on time, and have higher customer satisfaction.

Yes, when you ask people "and how are things apart from the eye watering, wallet haemorrhaging, income annihilating cost?" they're mildly positive about the railways.

Mildly.

Thats because that what it costs to get it up scratch. Taxes distribute the burden across everyone, and can be politically hard to get through.

Privatization puts the burden on the people who use it.

Check your facts. They were and still are massively subsidized. Supplying the profit margins of the train operating companies were made the burden of people who use it.

Actually, British passengers seem to be the second-most happy railway users within EU. [0]

I'm from the happiest country of railway users (Finland), and I can tell you that also here, lots of people complain about the national railway service, both about reliability, speed and price. ([1] is a joke on announcements of VR, the train operator, about four seasonal outages in train service due to spring, summer, autumns and winter (clockwise).)

And the (government-owned) railway company here offers train travel that is more expensive than in Britain (just checked my most recent trip, 37 € is the cheapest fare for a 250 km distance that is equivalent to London-Manchester).

[0] http://ec.europa.eu/public_opinion/flash/fl_382a_sum_en.pdf

[1] http://www.riemurasia.net/kuva/Juna-kulkee/176387

The words "price" and "cost" do not appear once in the cited document on public opinion about national railway services.

Do you not wonder why they didn't ask?

Nor did you point us to actual data on the prices.

There is a quick comparison:

http://budgettraveller.org/uk-trains-cheap/

And a more thorough one, but a bit old (2009):

http://d3cez36w5wymxj.cloudfront.net/migrated/fares__ticketi...

The point with UK train travel is that

1) commuting to London is expensive (not that surprising considering how congested it is) and

2) if you book in advance, travel is cheaper than in comparable European countries. If you purchase ticket in the train, it is more expensive.

>Nor did you point us to actual data on the prices.

I live it. Take it from me: the fact that somebody could try and judge how people felt about our train service and "forget" to ask about prices is kind of like hearing somebody say that Guantanamo is not so bad because the weather's nice.

I don't even travel on trains much these days because it's so expensive - I check on the odd occasion but I usually I go by coach, horrible though it is. The dominant coach operating company has recognized this and bumped up their prices too.

>There is a quick comparison

This quick comparison points out that if you are willing to travel when nobody else is travelling you can fix your travel plans twelve weeks in advance then you can get a fare I would describe as "sort of reasonable".

If you do the same kind of wrangling to get a flight you can end up flying half way across europe for 10 pounds. That 19 pound ticket to the airport still isn't exactly cheap, it's just not, well...

You might note that author of that article used the exact same phrase I did to describe prices the rest of the time: eye watering.

The best part is that many of those "cheap fares" are only there because the regulators force the operating companies to show them (they would be gone in an instant if there weren't a legal requirement for them to exist) and they are often very well concealed and useless for most people's needs. If privatization weren't being kept on a very, very, very long leash it might be even worse.

>The point with UK train travel is that

Is that it is privatized and the rail operating companies are ripping us off blind. End of story.

>if you book in advance

You can get a flight for 10 pounds and still end up spending twice that on your train to the airport, booked just as far in advance. Yay?

We can easily find just the same complaints about train fares over here, where the service is handled by a government monopoly. I can fly to Italy for a cheaper price than taking a train across the country.

But for Britain, here's actual regulator data:

http://orr.gov.uk/__data/assets/pdf_file/0018/21591/rail-far...

That "actual" data has no 'actual' prices and is only about the difference from the previous year.

This compares actual prices with the rest of Europe (from 2009, but still relevant): http://www.telegraph.co.uk/finance/newsbysector/transport/46...

Is 4x higher prices a reasonable reflection of the higher cost of doing business in the UK or simply price gouging? What do you think?

But hey, as your report points out people are relatively happy with the level of information provision by station staff. So it's fine.

Since we go to cherry-picking, yes, it could be that 4x price difference reflects rather well the cost structure differences between London's commuter region and that of Bucharest or Ljubljana.

What would help this discussion would be to see stats of how fares, delays/cancellations and customer service satisfaction have developed since 1990.

Not everyone agrees that privatisation was so bad. Wikipedia:

Former Associated Society of Locomotive Engineers and Firemen general secretary Lew Adams moved to work for Virgin Trains, and said on a 2004 radio phone-in program: "All the time it was in the public sector, all we got were cuts, cuts, cuts. And today there are more members in the trade union, more train drivers, and more trains running. The reality is that it worked, we’ve protected jobs, and we got more jobs."

At least the popularity of train travel has increased: the number of passenger kilometres has nearly doubled in Britain between 2000 and 2014 (from 38.2 billion km to 62.4 billion km).

https://www.gov.uk/government/uploads/system/uploads/attachm...

>Since we go to cherry-picking, yes, it could be that 4x price difference reflects rather well the cost structure differences between London's commuter region and that of Bucharest or Ljubljana.

It might, yes, which is why the ~12x (not sure of the exact difference but it's an order of magnitude for sure) difference in average price between London and Bucharest train prices is so outrageous.

>Not everyone agrees that privatisation was so bad.

No, the people who profited from it don't.

>Former Associated Society of Locomotive Engineers and Firemen general secretary Lew Adams moved to work for Virgin Trains, and said on a 2004 radio phone-in program: "All the time it was in the public sector, all we got were cuts, cuts, cuts. And today there are more members in the trade union, more train drivers, and more trains running. The reality is that it worked, we’ve protected jobs, and we got more jobs."

This is all part of the privatization playbook - #1 defund public services, #2 say "aren't things shit? privatization will fix this!" #3 privatize. It's happening right now with the USPS. It happened to the UK post office a few years ago.

Once privatized you've got a licence to price gouge.

>At least the popularity of train travel has increased: the number of passenger kilometres has nearly doubled in Britain between 2000 and 2014

People commute longer and from further away due to rising house prices. It's not like people are suddenly bigger fans of getting on a train these days and getting up at 5 in the morning to go to work.

Your always going to get issues with cuts, financial issues in the public sector. It's very political, and will always be at the whim of the political parties.

It's quite hard to argue for more spending.

It's an advantage of being in the private sector.

It's not an advantage of being in the private sector at all. If the TOCs weren't being regulated they'd cut as much if not more than the public sector while jacking up prices at the same time. This is pretty much what happened during the Californian electricity crisis (brownouts!).

It's not hard to argue for more spending to the public. The public want that. It's hard because the political system is rigged against politicians who do so (for an example see all of the dirty tricks campaigns levied against Corbyn).

Rising house prices are not really a reason for longer commutes, except on individual level. They both are symptoms of the same thing: population growth exceeds rate at which new housing is being built. And the reason for housing not being built at the pace of population growth is zoning: there's no land where you can legally build. It's a politically created problem.

But having 69 % growth of train travel during a 15-year period where population growth was 10 % seems to indicate that the service has scaled well. Sure, train commute may not be fun but at least it makes it possible to have a job.

>Rising house prices are not really a reason for longer commutes, except on individual level.

Individuals acting en masse are no longer just individuals. There's no rational reason why people wouldn't respond to prices.

>They both are symptoms of the same thing: population growth

They are symptoms of four things:

* Population growth

* A political decision to drive up the price of housing (described as "the wealth effect" by central bankers).

* Wealth inequality - when Roman Abramovich occupies a house in central London he takes up 30-60x as much space as the average person.

* A political decision to give favorable tax treatment to land ownership leading it to be treated as an asset of a similar class to gold. Meaning it is hoarded. Meaning row upon row of empty new build housing in central London.

* Defunding local councils (Happened under Thatcher) meaning they couldn't afford to and eventually stopped building council housing.

The forces that created these conditions were neither impersonal or inevitable. They were the result of a succession of more and more right wing governments (both Labour and the Tories) implementing deliberate policy.

Zoning is only part of the problem. It's the most promoted problem because it gets in the way of land developers turning a profit. They don't give a shit about wealth inequality or the "wealth effect" and they'd prefer land kept it's favored tax treatment so they can effectively keep selling bars of gold to foreign investors.

I am astonished by there being row upon row of empty new build housing in central London. Care to show where those are?

Overall, I have hard time believing wealth inequality has significant impact on how many people can live in city centers. The number of housing units has a significant impact. Roman Abramovich and Prince Whoever may have more space than they need, but overall impact of the space taken by the very wealthy is small. Their negative impact is probably larger in the jobs that they offer, which then attract new people to move in. And as you can see, London, like many major cities, has population growth.

Assuming jobs and other pull factors remain the same, distributing wealth differently would just mean that different people compete of the same housing, but still there are not more houses. House prices going up helps the problem in that there is more incentive to build new houses (and more tax revenue from property taxes).

Regarding tax treatment, I expect you would favour a Land Value Tax, and there you've got me with you, along with both leftists and neoliberals.

>I am astonished by there being row upon row of empty new build housing in central London. Care to show where those are?

Feast your eyes:

https://www.theguardian.com/society/2016/may/24/revealed-for...

This isn't the only one it's just the famous symbolic one. I've walked past tons of others. Some neighborhoods have basically emptied out because the property owners are mostly or entirely absent. I remember Mayfair and Sloane Sqaure are noticeably much less busy these days than 10 or 20 years ago.

>Roman Abramovich and Prince Whoever may have more space than they need, but overall impact of the space taken by the very wealthy is small.

It's not small at all. While the wealthy get bigger and bigger spaces the middle classes are squeezed into smaller and smaller spaces. I live in a room in a house because I can't justify the cost of a whole flat. Many more people these days share rooms. Meanwhile the wealthy have townhouses that could easily be split into 4 flats for 4 families and the ultra-wealthy have enormous mansions that could house 50 or 100 people and often live in them two weeks a year. The most extreme example - Buckingham Palace - occupies enough space to house maybe 5,000 people (in skyrises).

Anybody who wants to buy (most people don't want to rent for the rest of their lives) is forced further and further out. Hence trains became more "popular".

>Their negative impact is probably larger in the jobs that they offer

Please. Nobody believes that "job creator" schtick over here. For every Elon Musk creating jobs there's about 1,000 Philip Greens destroying jobs.

>And as you can see, London, like many major cities, has population growth.

The price rise in the centre cannot solely be accounted for by the rise in the number of polish and Romanian cleaners. They have taken to sharing rooms on the outskirts rather than occupying mansions next to Hyde Park.

>Assuming jobs and other pull factors remain the same, distributing wealth differently would just mean that different people compete of the same housing

It means different people compete for the same space. It would mean fewer mansions that could house 100 people (they would be converted) and fewer people sharing rooms and much, much less unoccupied housing.

>House prices going up helps the problem in that there is more incentive to build new houses

It actually doesn't help that much currently. As you can see St George's Wharf was basically turned into the equivalent of unused bars of gold housing almost nobody.

>(and more tax revenue from property taxes).

Property taxes are part of the problem. They are kept very, very low. If they were raised the tendency to treat property like gold would go down. Fewer empty properties.

>Regarding tax treatment, I expect you would favour a Land Value Tax, and there you've got me with you, along with both leftists and neoliberals.

Leftists yes. Neoliberals no. Blair & Blairites and the Tories and the rest of the neoliberal establishment have never advocated for it and never will. Corbyn has. Not coincidentally the establishment want to see Corbyn's head on a spike.

Actually it is in many countries. Sending a package from Germany to Austria via UPS takes longer than a package from Japan via Japan/Austrian state posts, despite customs inspection in the middle. More reliable, too.

UPS is not particularly strong on international shipping. Is your example because those post offices are actually more efficient, or because there are bureaucratic roadblocks slowing down UPS (a U.S. based carrier)?

> or because there are bureaucratic roadblocks slowing down UPS (a U.S. based carrier)?

No, the market is fully deregulated. GLS (Dutch) isn't any better either.

Actually, they are. They perform a public good while not consuming public dollars. Oh, you didn't know that they self funded?

https://about.usps.com/who-we-are/postal-facts/top-10-things...

Not quite. Read my other comment above in this thread. When you have the US Government locked in as a customer, and that customer continues to rely on you for the majority of their communication instead of moving to electronic communications, you are relying on taxpayer dollars to pay for those stamps that fund your operations.

Given that it would cost the US government more if they used UPS or FedEx to do their shipping, I don't see why that's a problem.

Given that electronic mail is an order of magnitude cheaper and more efficient, it would drive the US Government to adopt it much more widely than it is used today. Your assumption that UPS or FedEx prices would remain fixed if they were to compete for additional business from the US Government isn't necessarily true either.

15 years ago we were shipping vast quantities of our devices worldwide via 'Priority Airmail'. This is regular postal mail. The business died down and I started shipping Priority Airmail last year again for a new product.

I notice in some countries quality of delivery has dropped dramatically, worse reliability and transit times. The UK for example. I talked with a customer who acknowledged my feeling and said the workers were demotivated by the restructuring which seems to last for over a decade.

In The Netherlands, our former national postal service PostNL is treating its workforce in the most egregious ways of all former monopolies.

Consequently I found the Russian postal service to be fast and reliable, especially considering the vast distances serviced.

15 years ago, there was some corruption in Africa, South/Middle America.

Not any more.

Your comment is interesting, because it points out the fact that quality does vary over time, for all types of goods and services. I think this is one of the strongest arguments for creating an environment where healthy competition exists.

The reason being that if a business/organization declines in quality, competition always exists to step in and serve those whom the organization previously served. When you have government controlled monopolies, private competition is literally killed off because the private competition's tax dollars typically go to subsidize the government entity serving the same customers. This keeps prices low, but it does nothing to address the quality of the services being provided, which oftentimes degrades over time (this is partially why most Fortune 500 companies weren't on the list 20 years ago).

When the government steps in and serves a group of people in the marketplace, there is rarely a mechanism to give consumers an alternative should the government entity fail to provide adequate service.

But, is a service that is better/cheaper for 50% of the people and not available or too expensive for the rest a better outcome? For most things sure, for others that's why government programs exist.

It is the race to the bottom which is driving the quality down.

It's a race to the point where the consumer is willing to pay more for better quality. At that point, the costlier alternatives survive and the low cost provider exits the market.

I can stuff a few papers in an envelope, scribble something resembling an address on the outside along with a few coins worth of stamps and leave it to be picked up without prior notification to be delivered anywhere in the country only a few days later. Maybe longer if I was particularly bad at writing the address.

This is practically a super power.

Yes, because our post office is doing great in comparison with its private competition these days.

It is! The US Postal Service is required to operate under rules designed to financially destroy it (never mind that private shipping services often use USPS behind the scenes -- privatization would lower costs by making them, um, do more work and have to invest in more of their own infrastructure), and still manages to to keep working well.

Make UPS or FedEx or DHL operate under even a rough facsimile of things like the USPS pension-funding requirements, and they'd issue you a tracking number for their bankruptcy proceedings.

I don't know what world you're living in but I have a side business selling on eBay and my fiance runs an Etsy store and the Post Office's service is head-and-shoulders above that of private carriers. I suspect you don't have any experience in this area and based on your other posting you seem ideologically motivated.

In practical terms, USPS package shipping rates are typically 1/2 to 1/3 of those of an equivalent service from a private carrier. It's often cheaper to send something via USPS 2-day than via UPS/Fedex ground service. Their bulk rates are even cheaper - Media Mail is usually the only cost-effective way to ship textbooks for example. And Fedex/UPS simply have no service that competes with first-class or second-class mail.

In fact USPS's service is so effective that UPS and Fedex actually piggyback on their service to save money. Fedex and UPS will get the mailpiece to the local post office and the post office will handle the last-mile delivery. This is called SmartPost service and I can tell you from experience that the private carrier's involvement significantly worsens the quality of service. It often spends multiple weeks in the hands of the private carrier and I've noticed significantly more damage to mailpieces with it. They also provide subpar customer support on these packages, you cannot refuse delivery or do other basic postal operations with these packages. The opinion of the private carriers essentially seems to be that the blame will fall on the postal service so quality of service is irrelevant.

Nobody is perfect, and all carriers are subject to variation in the quality of the last-mile delivery. If your USPS or UPS or FedEx guy is particularly terrible then you will get damaged packages.

Yes, I do have a strong belief that environments that allow private individuals the freedom to experiment/innovate and compete with one another produce massively better outcomes. However, my comment about the USPS was based on a series of stories in the news over the past several years about their financial difficulties and the closing of numerous Post Offices in small towns across the country.

Keep in mind the USPS has locked in one massive customer that continues to rely on post mail instead of electronic communication for virtually everything - the U.S. Government. So while yes, the USPS may produce better outcomes for the last-mile delivery, it is most likely being subsidized by the U.S. Government using their services to communicate virtually everything to 330 million U.S. Citizens. In that regard, UPS and Fedex are saving money off the back of taxpayers when they use the USPS to deliver packages to homes beyond their most profitable routes.

I thought the reason for the massive debt solely related to the unfair pre-funding mandate of retirement benefits enacted by Congress.

IMO the purpose of public projects and services is almost always good, it's the implementation that is often the problem (so much so that when hearing about a new public project I think first about how it is likely to get screwed).

Every so often this ends up with "everyone's equally as rich, but some are more equally rich than others".

No, usually the opposite.

Greatest period of equality: 1950s

Greatest period of growth: 1950s

Greatest periods of inequality: 2010s/1930s

Guess what?

>Guess what?

Correlation doesn't imply causation?

The 1950s growth may have nothing to do with equality. A big boost from the end of WW2 likely helped: by setting a lower base during WW2; by pent up demand; by Europe rebuilding needs, etc.

And there was much more government intervention in the 1950s than now: GI bill in the US, similar programs in Europe, much stricter stock market regulations, heavy government subsidies to all economies (e.g. Marshall plan), financed by much higher taxes …

The larger consumer demand was largely due to higher levels of disposable income which was in turn largely due to higher levels of income equality.

By most measures we are much richer in aggregate these days but since the wealth trickled up and the working/middle classes struggle to fund the basics (housing, education, food, etc.), discretionary spending is much lower.

Yet still the neoclassical myth that there's a trade off between inequality and wealth creation persists.

Funny, then, how economists at the end of World War II thought they were headed for a very deep recession as the war machine spun down and rebuilding began.

So? They were clearly wrong, as they didn't have the opportunity to see the future.

It is massively unfair to make comparisons to the 1950's. Basically, the USA was the only developed country with infrastructure that had not been bombed to rubble in WWII. In addition, China and India were undeveloped and just recovering from foreign occupation / colonialism. There was basically no competition for American manufacturing.

Also, if you look at inequality, you have to differentiate domestic vs global inequality. The domestic inequality is higher now, but global inequality was much higher in the 1950s.

The idea that inequality goes up with growth and growth goes down with equality was cited without a shred of supporting evidence.

I presented two examples that indicated (although did not prove) that the opposite could happen.

How is that massively unfair exactly?

There might have been no competition for American manufacturing but that didn't automatically mean that the American middle class had to come into existence and be imbued with since unsurpassed spending power. If there were no Marshall Plan it's not like there would have been demand for American products and services either in spite of them being the sole manufacturing superpower - since other countries couldn't afford them.

The decisions that imbued the middle class with spending power and gave money to Europe/Japan that enabled them to buy American products were deliberate political decisions that led not only to greater levels of equality, but greater levels of growth through higher demand.

Don't forget that in the 1950s the US was legally (or quasi-legally) excluding huge portions of the population from the workforce. Women were only allowed to work in the "pink ghetto" (nurse, teacher, secretary) and African-Americans were locked out of high-paying union positions on the East Coast.

> Usually...

Generalisations aside, this report doesn't seem to be about wealth being created unevenly.

This report claims 5 specific ways that privatisation of services has caused life to become worse for low income and/or minority citizens.

There is scant evidence backing up that "usually". You obviously need some incentives for people to take risks or work hard, but no Zuckerberg or Gates or Kamprad or Ek would have been discouraged if his marginal tax rate had been 10% higher.

Indeed a social safety net such as the one you could fund with such a tax increase may make it easier for people to start businesses, because they know failure wouldn't mean starvation.

It's also pretty clear, that success requires more than motivation. You also need education, and access to (infrastructure/decision makers/capital/potable water ). Inequality, in the sense that the American right glorifies, stands opposite such access. The Ayn Rand crowd seems to really enjoy their phantasies of inflicting harm not only on the poor, but also descendants three generations down the road.

And so you get some people to argue about "wealth creation" in a country that has created the greatest wealth ever amassed by humankind but also has major cities whose drinking water is unfit for human consumption.

>>There is scant evidence backing up that "usually". You obviously need some incentives for people to take risks or work hard, but no Zuckerberg or Gates or Kamprad or Ek would have been discouraged if his marginal tax rate had been 10% higher.

Had Elon Musk's marginal tax rate been 10% higher, we wouldn't have Tesla or SpaceX, considering he nearly went bankrupt multiple times trying to build both companies. Your comment about drinking water is also inaccurate considering the water systems in nearly all US cities are government controlled monopolies.

Or he would have structured his investments slightly differently to take into account the extra tax, and been fine.

Or he would have gone bankrupt, but got back up again thanks to an improved social safety net.

Or a better funded space program would have made greater progress on its own, and he could have focused on another aspect of his vision of colonising Mars.

You can't just look at how people did under one set of circumstances and extrapolate to another.

wealth creation at the expense of lower prices isn't a better outcome.

Why are all these think tanks named with such patriotic and nation building like names. It makes you look at it even more suspiciously, whatever they say.

Pando had an interesting piece a while back on the origins of privatization [1]. I guess that anyone buying into that would be unsurprised by the conclusions of the present article.

  1: https://pando.com/2014/09/25/ferguson-is-our-libertarian-moment-but-not-in-the-way-some-libertarians-want-you-to-believe/

Equality does not exist. It is an abstract concept.

What the best political philosophy gave us is the another concept - the equality of rights and liberties. Equality before the law. This means than no person could be discriminated, based on gender, racial, cultural or religious context.

There is no such thing as social or economic equality. This bullshit has been oversold to us by political demagogues and populists (as opposed to political philosophers).

Society means inequality. It means hierarchy. It is based on inequality, it is driven by inequality no matter what disconnected from reality pseudo-intellectuals would tell us.

Biology has precedence over physiology, psychology and sociology. Social inequality comes from genetic and economic inequality. Without the first there will be no human species, because there will be no evolution. Without the second there will be no human civilization, which is based upon trade and capital - resource allocation.

Competition for everything, not just survival and reproduction, but also social status is a part of reality of any complex ecosystem, including human societies. Capitalism is a "natural" system of resource allocation, based on partial rationality, greed and so-called human nature (which in turn is based on biological markers, psychological traits and social heuristics) that promotes competition (and also restricting monopolies and regulating markers) which is based on inequality, has inequality as its driving force.

Not a single attempt to go against physics, biology, against the laws of ecosystems (sociology) and so-called human nature would ever succeed, no matter what utopia naive human mind will produce and promote. Every single utopia that violates any single environmental constraint will fail. It happened with communism, it will happen with socialism. Economics is very real - as real as one of the main forces of natural selection (species has to balance their energy spending according to the constraints of the environment - this is what economy is).

Inequality is here and always will be, like beauty and ugliness, intelligence and stupidity, success and failure.

Technically you are right. However I think we should handle social inequality similar to the way we deal with "natural inequality". For this we developed modern medicine, which raises the bar for natural selection. Everybody is thankful for medicine, because it could be beneficial for almost anyone. Social welfare is very similar to medicine in that sense, as it raises the selection bar. However, our attitude towards welfare is different than to medicine, because the social status is directly visible, so everybody knows if he'd benefit from welfare. Unlike the "natural status", which is usually hidden and hardly inspectable.

> Equality does not exist. It is an abstract concept.

> [..]

> Inequality is here and always will be.

I won't comment on the incoherent and uninformed rambling between your opening and conclusion.

The incoherence here is only apparent. Logical negation of an abstract concept could be very real, which cannot be said about a reverse transformation.

Consider the similar negation of an abstract concept - non-zero.

There will always be people who are poorer than others, but there’s nothing prohibiting poor people from working their way up the ladder beside government regulations.

Poor people are hurt most by government programs like welfare, and laws like minimum wage. Private enterprise allows people to make a living for themselves by providing services to people who need them. By working harder than others they can break out of poverty, instead of relying on the government to keep everybody down for the sake of "equality”. This used to be a norm.

"When governments directly provide a service, they often provide living wages and decent benefits to workers. When private companies take control, they often slash wages and benefits in an attempt to cut labor costs, replacing stable, middle class jobs with poverty-level jobs.”

This is so incredibly disingenuous. All this is saying is that it’s beneficial to the society that the government creates artificial jobs that can’t sustain themselves and gives immunity from market fluctuation to people who perform these jobs at the cost of regular taxpayers who aren’t immune, and have to train themselves in new fields, and change jobs. The government can’t just provide these benefits without negatively affecting the rest of the society.

I feel like a lot of people here don't understand this because they've never been poor in America. I would never want to deny help to someone who needs it, but as most of these social programs are structured, they're a trap. I was poor for most of my life. It was making the conscious decision to not be poor, making a plan and working my ass off that let me get out of poverty. Nothing got in my way other than my own ability to succeed. Nobody tried to stop me (well some friends and family were less than encouraging, but I'm used to that).

So people read your comment, and it sounds like a fiction to them, hence the downvotes.

N.B.: Yes I took education loans made available by the government. But most of it wasn't subsidized since it was my 2nd bachelor's degree, and the rates on that stuff is usury currently. I don't really want to get into a debate about that stuff, but just mention it as I figure somebody might ask. In a world without readily available loans, I would like to think I would have just made a different plan.

People like you made US what it is today, and instead of elevating success stories like yours people would rather complain that life is unfair, and that others have it better. Parents or grandparents of people who are the middle class today went through what you did, only a few decades ago.

Thanks for the compliment. I certainly wasn't trying to paint myself as the poster boy for anything, but I think my story can be interesting for people who haven't experienced poverty, especially because I bought into a lot of the kind of thinking you describe, and letting that go was a large part of getting out of being poor. I actually am a second generation immigrant (my mother is from Panama), and even after my parents split we had a pretty hard-scrabble life with her working for minimum wage, and my father being self-employed and not much better off. Still they never took advantage of welfare programs (well, not until after I was raised, but that's a different conversation), and there was a pride associated with not doing it. It'd be foolish to say that people should never take help if it's available, but I think it's often overlooked just what a deleterious effect it can have on a person's morale.

Further, as the old saying goes: Necessity is the mother of invention. People will live in whatever situation they can tolerate, so changing what you can tolerate is the necessary first step to improving your lot in life.

*edit: changed 'and even after we split' to 'and even after my parents split' because I clearly lost focus on what I was writing in the middle of that sentence.

I'm amazed that this comment got downvoted. How is that so many people reject the notion that is the productive sector who pays for the public sector to have _all_ the public money?

I continue to suggest that inequality is an actively good thing.

Freeing 100 people from jail will increase their inequality; should we therefore oppose it?

You're going to need to elaborate a bit on that one...

I don't get it.

What things have prisoners/jail common with privatization?

Please explain.

It depends on where the inequality is coming from. If I own more than you because I worked harder, it is ok. But if I own more than you because I stole from you, it is not.

No, the inequality is still bad, it's the productivity it incentivised which is good.

If we could get the productivity without the inequality, that would be better. Maybe that's not possible, but unless we recognise the distinction, we won't notice if we find a way to achieve that.

Shouldn't someone get more if they work harder or invent a better mouse trap or are we all just ants in a giant social machine meant to extract as much out of us until we die. The problem is too much and you have enough power to effect the rules.

No, we should do whatever maximises utility. (I guess I should have said the utility is the good thing, not the productivity.)

If rewarding people for hard work creates more utility, then we should do that, but we shouldn't try to moralise it.

I agree with your statement. I just feel like a lot of times in the public discourse there is an underlying assumption that most, if not all, of the inequality comes from theft or foul play.

Inequality is bad. Other things may be good. If your action achieves something good at the expense of more inequality, then it may still be worth doing.

If inequality itself is good, then does that mean we should apply punitive taxes to poor people and subsidize the rich?

> If inequality itself is good, then does that mean we should apply punitive taxes to poor people and subsidize the rich?

It's kind of what we around here, don't we? Most rich don't pay much in taxes, effectively subsidized by state

Perhaps, but few people would argue that we should, at least not directly.

The top 5% pay over 55% of all Federal taxes.

And that is not enough, as their wealth is higher than that 55%.

But that's not the argument I'm responding to.

Fundamentally every inequality has ever been the source for war. Be it measurable inequality or perceived.

Inequality is not the source of war, it is the source of everything that you see. It's also known as diversity and is the basis of life. You can't be rooting for diversity and against inequality at the same time - you're contradicting yourself. Unless you're also against diversity, in which case you really don't understand much of anything.

Inequality can only ever increase. The opposite is unnatural (and rather impossible).

Well sure, if you define "inequality" to mean any differences between people, then it includes diversity.

But of course, what people are actually talking about is inequality of utility, which is a mostly distinct subset of that, and fairly unambiguously bad when considered on its own.

You can then argue that inequality is necessary for other good things, but you're going to have to try harder than vague rhetoric like the "basis of life".

Diversity =/= inequality, unless you live in some weird universe where every unique state has a unique utility value.

I was studying the topic of derivatives for an exam.

It was interesting - the whole point of derivatives was to prevent the fact that markets are volatile. So its a way to "Price Fix".

That is the entire point of markets ! to allow free floating of price.

I found the whole thing funny, that a market solution lead to the creation of something that was against the entire point of market.

What the modern neo-liberals and capitalists will learn - is that there is no perfect system.

I'm sorry to tell you don't really understand how derivatives work, even price fixing for that matter.

Prices of derivatives such as forward contracts and options are freely floating and are widely traded. "price-fixing" is defined as a coordinated effort to corner the market, a good example would be when siegel tried to corner onion futures, which lead to creation of "onion futures act". Historically, only few have succeeded in cornering the market.

https://en.wikipedia.org/wiki/Onion_Futures_Act

You're conflating the market as a whole and an individual participant in the market.

Derivatives aren't intended to prevent volatility in the market as a whole (arguably they can have the opposite effect). What they allow is for a participant to reduce the volatility, to them, of a market price [0].

The advantage to the individual is that they can reduce their exposure to factors beyond their control, that they have no expertise in and/or that they do not wish to actively manage. The advantage to the market is that it encourages more participants.

In this context, one can look at derivatives as acting a lot like insurance. It doesn't prevent bad things happening (it doesn't prevent market volatility) but it can cushion their effect on you the participant.

The corollary of making such useful tools for hedging risk is that they can also be used for speculation too i.e. gambling. But then again, not all of us registered neo-liberals think the system is perfect.

[0] I'm using the terminology in the post I'm replying to. I'm aware that there are derivatives on underlyers other than prices and derivatives that control for factors other than price volatility but I didn't consider that hedging my language (excuse the pun) added any clarity.

Reply on news.ycombinator.com