Asset sales are in the papers again today:
If New Zealand’s Government were a business, it would have no case to sell stakes in its energy generation firms… Sustento director and economist Raf Manji said. It was admirable for the Government to lower debt, but the numbers around selling stakes in energy firms to do so did not add up, he said.
No more important public good existed than energy, as it was essential to people and businesses, so it was dangerous to raise the firm’s focus on profits.
Much like Raf, I’m not ideologically opposed to the government selling assets. However, we clearly disagree about the rationale for selling energy assets. He makes two points: it’s a bad business decisions, and energy is a public good so public provision is required.
On the first point, economists have long argued that the country is not a large company and shouldn’t be treated as such. If we wanted governments to be highly leveraged investors to return a profit then they should probably stop taxing high productivity people and giving the money to people with lower productivity. I’d ditch the welfare system, too: a loss-making business if ever I saw one! Obviously the government’s not an investor trying to turn a profit so let’s focus on what can do to improve social welfare and equity. Raf’s second argument seems to implicitly acknowledge that by appealing to the government’s role in providing public goods.
The public goods argument is far stronger because it is widely acknowledged that public goods are under-provided by the public sector. The reason is to be found in the two defining characteristics of public goods:
- One person’s use doesn’t decrease the quantity available for everyone else. For instance, however much I enjoy clean air in New Zealand, there is no less for you.
- You can’t stop people from using it, so property rights over it become fairly meaningless. You can’t own clean air here and sell it, so there’s no private incentive to generate it. That’s why we need environmental regulations to deal with pollution.
What’s striking about these two characteristics of public goods is that energy fits neither of them! When I use energy, you can’t use that energy. When I don’t pay my power bill the power company can cut me off. So energy isn’t a public good and the arguments for public provision that apply to public goods don’t apply here.