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May 17, 2017



Personally I think there is some logic in believing nationalization would increase the deficit.

Purchasing an asset shouldn't change the deficit one way or another.

But if you purchase the asset because you believe the owner is extracting excessive rents, the equation changes. You could extract the rents yourself, but what would be the point? The importanat consideration is that the current owner will only sell the asset voluntary if you are paying upfront the discounted value of his rents.

Is that really what Labour is proposing?


And on cue:


Martin Holterman

Stanley Milgram did these kinds of experiments asking people to stand up in half-empty carriages in the NY metro in the 1970s. Staggering compliance rates.



I doubt that the concept of re-nationalisation includes an option for the current owner not to sell.

The (labour) government would not be looking to pay for "goodwill", as it used to be called. The current owners are not, quite rightly, their friends.

The bargain would be as devoid of negotiation as the up-coming Brexit one is likely to be.

The world has changed!
"Goodwill" does sound so much better than "future rent extraction".

gastro george


Prices to the customer can be lowered. As long as the "rent extraction" is still greater than the cost of finance, then it's win-win.

Future profits on a regulated utility are dependent on the harshness of regulation. Labour might choose to use that as an lever, but I couldn't possibly comment.



That sounds rational (as does Chris's photocopier example). How often do people ask to jump in line; or for everyone in a carriage to stand? Rarely, if ever. Nearly always with good intentions. If this was abused, people would wise up, and change their default behaviour.

No free lunch theorem, meet Pascal's mugging.



If the purchase is not voluntary (and the manifesto kind of implies it is voluntary I think), then it's just a wealth tax . I am sure there are more efficient ways to raise money with a wealth tax.

@gastro george
Of course Labour could change regulations and lower future rents. What would be the point to nationalize then? I don't see the advantage.

I am personally see no reason to think nationalization will help railways. Labour nationalized railtrack ten-fifteen years ago (kinda, the company was bust anyway). The government determines the type of rolling stock. It determines the large majority of prices. It monitors quality and it can terminate franchises due to breaches. The Southwest trains is the franchise most directly controlled by the government with the government directly paying a thrid party for services. Are we going to nationalize the companies building the rolling stock? Or the steel mills that produce the track? Nationalization is not black and white, it's a spectrum.

The only possible reason to encourgae nationalization is that it will likely shift a large part of the rent collection from the private company shareholders to the workers. If that was the only effect I could get behind it. But I am afraid I believe this would likely increase total extracted rents, if for no other reason that taxes are progressive which means that spreading the rents between lots of people means their after tax value increases.


@ David - As a professional translator of annual reports and such, I can assure you that it's quite commonly called "goodwill" even today.

@ acarraro - The point may be that it's politically more possible (i.e. possible to a greater extent) for the public than for the private sector to deviate from the combination of factors of production that corresponds to minimising costs. For the public sector, rent extraction may thus be a means to an end in some ways in which it cannot be for the private sector, even a regulated one.

Arthur Murray

Typo, 4th paragraph, 5th line. It should read:

They found that in the straightforward game, dictators GAVE an average of $1.53.

Chris Mealy

The funny thing about the copier experiment is that it worked for copying 5 pages but not at all for copying 20 pages:


Hmmm ... looking at this again, it seems a replication crisis kind of paper. Small n and the numbers are a little too perfect. Somebody should try to replicate it.

Andrew Curry

@acarraro, The point about the rail sector is that most of the rents are subsidies from the government to the rail companies, which then get passed on to shareholders or foreign rail companies (see Aditya Chakrabortty on this in the Guardian, passim). But it doesn't stop there.

In some cases, e.g. Southern, the privatisation contract badly mis-incentivises the contractor in such a way that they have no interest, financial or otherwise, in providing decent service. See David Boyle on Southern Rail. (More generally, the alignment between the DfT, wanting to make the franchise system work, and the franchise holders is such that the DfT is caputred by the franchisees.)

And finally, the evidence from the franchises that have been run, briefly in some cases, by publicly managed companies also suggests that service outcomes improve.

Apart from that there's no merit in Labour's proposal.

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