“because in this case the consumers are the owners and therefore it makes much more sense to take the “dividend” in kind rather than going through some convoluted pricing mechanism (do we want an enron type system being run here?) and a bunch of middlemen. ”

There are two points here. If one is that we should have the consumer as the owner, I still feel we should redistribute the income directly rather than lowering the relative price of power – as it leads to overconsumption of energy relative to other things.

The second is whether we should have the consumer/taxpayer as the owner in the first place.

So even if we accepted that second point, I’m still not sure I agree on the idea of changing the relative price – market prices are a great way of allocating resources relative to how people value them.

“any sale will just see yet further widening of inequality which kind of puts in a dent in the opening sentence. of course that’s just my opinion”

Income inequality is an interesting issue, in the same way as the notions of absolute and relative poverty are interesting – there is something there, but changing industry policy on their basis is not quite the right mechanism. If we want to reduce inequality we can do it through income transfers – we just have to accept that the overall pie will be a little smaller. The equity-efficiency trade-off always exists.

I like democracy as I believe it gives us an indication of the sort of trade-off society wants. But I think it has to be established transparently at the macro level, not through the use of industry policy which is both less clear and likely to lead to a greater number of unintended consequences.

“I believe in a society where we make sure everyone has enough income to afford basic human needs”. well that’s a very good place to start.

And i agree the price signal is key to making economic decisions. However, in the case of energy I don’t think that is helpful (or water for that matter which I think should be priced). i favour a mixed approach with a domestic tradable quota with a price on top for the rest. why?

because in this case the consumers are the owners and therefore it makes much more sense to take the “dividend” in kind rather than going through some convoluted pricing mechanism (do we want an enron type system being run here?) and a bunch of middlemen.

i’ll take my kwh thanks and yes we can sell the rest.

obviously to run a system like this you need national ownership. any sale will just see yet further widening of inequality which kind of puts in a dent in the opening sentence. of course that’s just my opinion 🙂

“I have an even better approach though: sell the SOEs as monopolies, THEN open them up to competition, then repeat and hope that the buyers don’t twig to what’s going on”

Hahahaha, love it.

“I wonder how relevant it is to New Zealand though – are there any SOEs left that have a legal but not a natural monopoly? I imagine that would have been the case for, say, TVNZ back in the day, but not any more.”

I think that is probably the case as well – however, when it comes to policy analysis it is definitely something to keep in mind, while the government makes choices on a case-by-case basis.

I believe that this entire issue has illustrated that doing a “stock take” of state assets is actually a good idea.

I wonder how relevant it is to New Zealand though – are there any SOEs left that have a legal but not a natural monopoly? I imagine that would have been the case for, say, TVNZ back in the day, but not any more.

That is an excellent point. The counterfactual I used didn’t take into consideration changes in levels of competition – a factor that will be relevant for some case-by-case asset sale decisions. Thanks for that – I will keep it in mind for future use.

“just that they work out a reservation level they would sell at, and if someone is willing to pay more we can infer that they will provide efficiency gains.”

I take you point. The only thing a would argue is that no one may be willing to pay the government’s reservation level if that level is based on, say, the firm being currently a monopoly but being a competitive firm in the future.

“i love numbers as much as the next economist BUT they simply provide the monetary facts and often lack any context.”

Any economist that does not try to provide context, and reach out as broadly as they can with costs and benefits, is missing some of the point of doing economics.

Economics refers to the methodological individualistic framework we use to “frame” an issue, so that we can pin down the different factors and discuss the trade-offs – it doesn’t tell us to do anything, but it does help clarify our thinking on how society, and policy, work.

“the context here is that energy is a basic human need. we should be supplying it at cost.”

I disagree – even though I agree with the sentiment. I believe in a society where we make sure everyone has enough income to afford basic human needs – but I DO NOT believe that we should mess around with prices.

By messing around with prices we wreck the price signal that tells us about scarcity, value, and gives people the incentive to adapt and change. However, I want people to have at least a level of income to meet what we view as needs in a modern society – and this is how government transfers work.

“roger may be really excited about this but creating purposeful and efficient organisations does not rely on them being owned by owners focused on extracting the highest profit possible.”

But we do know that if organisations respond to price signals, changes in demand, and underlying value – then they provide what people in society want, and are more likely to innovate and adapt to the constant change in the environment.

“i prefer to see the energy system fully nationalised…no doubt sacrilege round here but i clearly have a different perspective on how society works. ”

I wouldn’t call it sacrilege, I just don’t see how nationalising a resource because we define it as a “need” makes any sense – if there are excessive competitive issues, external costs/benefits, or there is no institution that can redistribute then I can see a possibility. But when we have a government that can redistribute income, that should be the first port of call – not messing around with price signals.

Truly, subsidising individual goods and services without finding a true external cost/benefit that cannot be taken into account is not the way of policy – the subjective bit we should add it “what is the minimum income we should ensure people in society get” NOT “what services should we socialise and subsidise because we think they are important”.

the context here is that energy is a basic human need. we should be supplying it at cost. personally i prefer a domestic tradable quota. i also believe the “soe” model is rubbish….it’s almost the worst of both worlds…way too many overpaid people in those businesses.

i prefer to see the energy system fully nationalised…no doubt sacrilege round here but i clearly have a different perspective on how society works.

roger may be really excited about this but creating purposeful and efficient organisations does not rely on them being owned by owners focused on extracting the highest profit possible.

Fair point.

I would note that I avoided the conclusion that the government should try to maximise the revenue they get from the sale either – just that they work out a reservation level they would sell at, and if someone is willing to pay more we can infer that they will provide efficiency gains.

I would also note that the paper appears to discuss a very specific situation – namely when the monopoly power is time limited, and the government can exert some influence on the price that is set during that time when they set up the initial sale.

@rauparaha

Preferably a finger that supports my priors