Collective Ownership & The Invisible Hand

Those two phrases tend to split opinion along traditional left and right wing lines.

The lefties love the idea of Collective Ownership ('CO') because they think it means centralised state ownership, and the right wingers hate the idea for the equal and opposite reason. Right wingers appreciate the concept of The Invisible Hand ('TIH') but lefties deny it even exists, which is why they want everything to be nationalised, regulated, centrally planned etc.

Actually, CO and TIH are much the same thing: consider a large plc with tens of thousands of shareholders - instead of each shareholder owning a desk, a delivery van, or some computer records and employing one or two people, they each own a small percentage of a larger whole. The business and all its assets are owned collectively. In theory, shareholders could vote to liquidate the company and take the assets pro rata to the number of shares they own, but in all but the most extreme cases, they would lose out sorely by doing so - you're better off with £5,000 worth of shares than you are with a second hand delivery van, for example (or else you'd sell the shares and buy a second hand delivery van).

Similarly, you could say that this pooling is TIH at work; if there are economies of scale, people end up better off by owning a small share of a larger pie than the whole of a very small pie.

[Further, that plc might have tens of thousands of employees. Of course, they do not 'own' the business in a legal sense, but in economic terms, they very much do, and they speak of 'their colleagues' or 'their desk' or 'their cash till' or whatever. In the long run, an employee has much the same interest in his employer doing well as a shareholder does.]

"What's the point of all this musing?", you may ask.

Let's be old fashioned and assume that this plc is run for the benefit of its shareholders. It may be that they have a shop (or factory) near you, which you visit frequently because you shop (or work) there, but it is making losses and they close it down. As a customer (or worker), you will be a bit miffed, but if you are also a shareholder, you will benefit. TIH continues working.

Or it may be that the plc wants to open up a new shop (or factory) near you. Maybe you don't like this, because it will mean more traffic on your road. Or maybe you do like this because you'll get a job there. If they open the shop or factory, some win, some lose, but the economy as a whole wins. TIH is still working.

The problem is that NIMBYs will always have a stronger voice than people who are looking for a job (because there are more of them). Imagine that every business had to get the permission of everybody within a certain radius of its stores or factories before it opened one or closed one, we'd end up with some quasi-socialist nightmare. No new shop or factory would be allowed to open, and existing ones would not be allowed to close (or would be subsidised, like 'rural post offices').

Oh ... this is exactly what has happened to this country. As this story illustrates, TIH has been largely smashed to pieces in this country by the Home-Owner-Ists; it cannot guide people to the overall optimum outcome. The story concerns NIMBYs and Greenies, both staunch opponents of economic progress, ganging up against the third Heathrow runway, but the same principle applies to anything and everything.

"With you so far" I hear you sigh, "So what's the solution?"

OK, as a thought experiment and not a serious proposal, let's superimpose the CO model that we had with a plc on land ownership. Everybody hands over their land to UK Land plc (which then owns all UK land) in exchange for shares to the same value. UK Land plc collects market rent on everything and dishes it to shareholders as regular dividends, so that instead of owning a house worth £200,000 and living 'rent free', you own £200,000 worth of shares in UK Land plc, pay £8,000 a year rent and get £8,000 in dividends. Shares in UK Land plc would be freely tradeable, of course.

UK Land plc would thus have one aim - to maximise its rental income on behalf of its shareholders. When deciding whether to allow a third runway at Heathrow it would compare the possible fall in rental values of houses in the flight path against the increase in rental values (more jobs in the area, they can collect more rent from BAA etc) and if this gives a positive result, it would go ahead (I'm assuming that it would, for the purposes of this post).

The same applies to power stations, sewage works, new houses, roads - things that help the UK economy and which enhance rental values overall go ahead; other stuff doesn't. Land would be put to its most efficient use without the NIMBYs and Greenies blocking everything.

So, turning back to the people affected by a third runway, some don't like aircraft noise, but they wouldn't have to worry about the capital value of their home, because the capital value of their shares in UK Land plc would go up ever so slightly; and if the rental value of their house goes down, they can either stay there and pocket the difference (their dividend income from UK Land plc also goes up ever so slightly) or move elsewhere. Others are happy to live near Heathrow because they work there and want a shorter commute. And so on.

But all shareholders in UK Land plc would benefit from the new runway, even if they live in the Outer Hebrides. Almost by definition, the gains would outweigh the losses. TIH would sort out who lives where on the basis of free markets; rather than the Home-Owner-Ists first deciding where they want to live and then dictating everything else that happens via a rigid planning system.

Just sayin', is all.