Friday, 25 October 2013

Private Property/Public Good. Discuss

I have been pondering the private property rights / public good argument, and I need your help.

Overall, a lot of things might be improved if private property rights were respected.  For example it would be reasonable for a houswife to take action against a nearby power station operator if his plant produced contaminants that dirtied her clean washing on the line. His pollution invades her private property and ruins her enjoyment of it, so she could reasonably request that he be made to cease and desist. This would apply whether she was an owner or a tenant.

But, in lots of cases the State pushes something through against local wishes on the basis of the 'public good', which is straightforward denial of property rights.  So HS2 for example would be a non-starter, even if it were privately financed. In other words private property rights could frustrate the ambitions of a major undertaking by the use of 'ransom strips' by some landowners.

Or would it? If we had universal LVT would it not be the case that once 99% of the land had been acquired for the track the last 1% would have a very high rental value that would exceed what could be earned by any other use than as a railway. The owner would be forced to sell by the unsustainable LVT imprests?   

In fact once the route was published all the landowners along the route would have the same LVT rating.  In other words LVT evens things out not only in favour of private property but also enables the construction of large national sized undertakings? The attempt to be the owner of the last ransom strip would not occur.  I am making the assumption that large undertakings like a railway are a Good Thing - if privately financed.

(In re an earlier posting, in passing I read somewhere recently that the bulk of the cost of nuclear power stations in the UK is regulation....?)


Kj said...

Good thought experiment on a friday night. First of all, I have as much belief in the "private" assembly of land for national scale infrastructure, as I have in fairies. But for the sake of discussion...

The only credible private infrastructure developments (narrow, very long property), as used by propertarian libs by examples as well, are pre-development planning. But not on a "national scale", not by a long shot. I don´t really know about such a thing happening without government assembly. "Private" development of trainlines, turnpikes and the likes, have certainly been done, but AFAIK, assembly have never been done without government acts or land grants. And those infrastructure developments have indeed been partly based on exploitation of land rents (surrounding development). Which is smart, but it eventually breaks down without the infrastructure owner being the residual claimaint for the long term.

Anyway, let´s assume that we have a very free market system in land, no planning, with LVT based entirely on the best surrounding use. A long property for a road or train line, doesn´t have a set value for each square (as in the worth as a train-line), the value is entirely in the whole property, the linear. So the total rental value is what can be achieved in the linear, but along the line, the squares would be worth valued at whatever the surrounding use is (built, farmland, woodland). So someone building the line, would have to assess the whole line, and if that value is whatever they can get away with paying along the line, they can go ahead. The problem is this can change. So either the owner will have to be creative with responding to changing rental values along the line, or the property will have to be assessed separately to keep the rental value within what the whole line is worth. I.e. classification of land according to a government act.

An additional complication: At assembly, there will still be a ransom value. The line assembler will have to take over the rental value of each square, plus whatever the owner wants extra for parting with improvements, and there is more scarcity in the availability of land that is appropriate for the line. There is the ransom value. Maybe the assembler could make several alternative routes to reduce this, but this increases transaction costs again.

And so on...

Re nuclear plants: If you are comparing with chinese nuclear plants (as written about by T. Worstall); sure, regulation matters some. But you also have to look at another factor. If someone wants to build something in China, and the government happens to agree, it´s going to get built. That reduces cost quite considerably...

Graeme said...

for a small island such as Great Britain, this is a tough call. Is it better to go from London to Manchester by plane or train or car. The timings are not very different, when you build in the checks for an airline and the need for transport from a rail station to the real destination, plus parking for the car.

20 years ago, I had to attend meetings in Manchester from my base in North London. The factror that counted was being able to listen to my choice of music and not having to be with other people for 3 hours - but I am a sociopath

Physiocrat said...

Under an LVT system, the land value data thereby acquired would make to possible to forecast, in general terms, whether a particular piece of new infrastructure was likely to lead to a net increase in land value sufficient to justify the cost of construction.

I am doubtful in the case of HS2. I would be surprised if it is the best way of investing 40 billion in the railways. My hunch is that investment should focus on local and medium distance transport to provide better local connectivity. The case for HS2 has also been over-stated by the claim that a high speed railway costs little more than a conventional 125 mph one. A lot of continental trains are restricted to 160 kph so as to avoid the compliance costs of regulations which apply to higher speed running. The operators are consequently able to keep perfectly good 1960s stock in use, which costs next to nothing to maintain and has long since been bought and paid for. It is also, incidentally, a damn sight more spacious and comfortable.

Lola said...

Ohysiocrat. Oh I am Damn' sure that HS2 is a complete economic non-starter. It was just an example.

Mark Wadsworth said...

L, it is not just roads and railways, it is also national grid, telephone wires and mobile masts, internet cables, gas and water mains. sewers, canals, harbours and so on.

Put to one side whether they are privately owned/financed or not, clearly all these things are by and large of huge benefit to everybody as a whole.

i.e. even if you don't own a car and walk to work, most of your colleagues and customers will drive there, your food from the supermarket is delivered by lorry etc.

Without these things our economy stops stone dead. So in theory, land owners could hold out for a ransom value of about 99% of GDP, which must be wrong, morally or economically or on any level.

We also know, that all of these things have required to some extent compulsory purchase orders or other "infringement of property rights". But this was clearly a price worth paying.

Which raises the next question - do these Faux Libs who yap on about the rights of landowners being paramount to everything, so they never drive down a public road or use a mobile phone or flush the toilet?

And as you hint and Kj and Phys confirm, LVT will balance this out to a large extent.

Mark Wadsworth said...

G, the "train or car" decision is often quite a marginal one, as I have said before.

To the extent that the choice is even there (i.e. you have a car and there is a train line from A to B), which is "better" depends entirely on how many people would be in the car, how far out of town your end destinations are - if you have to travel for a dozen miles to get to and from the end stations, that favours car, centre to centre favours rail. And how much advance notice you have of when you want to travel, so you go regularly/daily or occasionally etc.

Kj said...

I´m with Phys on high-speed. Another point that is often not appreciated, is that energy-use is not linear with speed, but more exponential, depending on tech ofcourse. This is fine with for example a highish-speed city-to-airport train, like we have in Oslo, where willingness to pay for a few minutes earlier arrival is high. But for a very long route, in addition to the capital costs, land-use and so on, I´m not really sure.