#92 Public Ownership and Scarcity Part I
Private ownership sustains assets more securely and distributes them more fairly than public ownership.
At the risk of sounding like a “summer camp report,” this podcast takes most of its information from an Alaskan cruise that was an MBA graduation gift for my wife, Ginger.
Limit the Supply
Our cruise ship spent a day in Glacier Bay National Park, where only two cruise ships are allowed each day. Have you ever noticed that government control almost always limits the supply? Think about it. If Glacier Bay was owned and operated by a for-profit agency – Oh, I know that caused some of you to catch your breath. Imagine, a limited resource owned and operated for profit. Yea, like the computer you’re watching right now, over the broadband line, and in the chair you’re sitting and the shoes you’re wearing. They were all provided by for-profit companies who privately own the rights to their brands. That’s why your computer and broadband and chair and shoes were purchased at such a low price: Competitors forced down the price. But since Glacier Bay is in a National Park, the government bureaucrats decide how many people can enter every day, and the current number is two cruise ships. That means, people who can afford to see the glaciers get to see them, while the poor have to stay home. It’s even more insidious than that: The cruise lines make a deal with the National Park guys, who sell the rights to the cruise ship companies, who in turn market them to those who can afford them. If you’re rich, you get to see the scarce glaciers, if you’re poor, stay home.
Oh, and why two? If their assumption is the cruise ships harm the glaciers, why let any in the park? “Two cruise ships in Glacier Bay each day” is not among the Ten Commandments. Two is either too few – which is my claim because it disallows the poor from seeing them, or its too many, because they are destroying the glaciers. Which is it? Why would anyone assume that two per day is the perfect number? This is what happens when federal bureaucrats make decisions. When the market makes decisions, scarce goods get distributed fairly. When the government makes decisions, there are either too few, or too many.
No Free Speech
While the ship is in Glacier Bay National Park, only the government bureaucrats can speak over the cruise ship’s public announcing system. Matter of fact, the ship can’t have any other activities while the Park Rangers are on the ship: No gambling, no dancing shows, not even live music. They DID let us eat, maybe we should be thankful for that.
Ginger and I had an experience in the Panama Canal that was the opposite of the Glacier Bay National Park cruise. The cruise ship hired this expert who grew up in the Canal Zone and knew just about every rivet in the structure. He was fascinating, I could listen to him for hours. Certainly, there are private citizens, whose speaking ability is for sale to the cruise ship in Alaska, but they are not allowed. The National Park forces us to listen to their government-sponsored bureaucrat, and the ship does not have the freedom to hire their own glacier expert. The lead park ranger said that among the four rangers, they had 15 years of total experience. He had nine, one of the others had six. That means that two of them may have known less about glaciers than I did, but I was prevented from speaking while the Park Rangers were on the ship.
During one of our visits to Russia, a woman told us frankly, “The government officials come on government TV and tell us the government’s policies are good for us.” There was a long pause, then she concluded, “We don’t believe them.” Think about it. We had just lived her experience, but in the United States. A government official came on a government-controlled public announce system and told us what the government was doing was good for us. Did we believe them?
I discuss a related topic in podcast # 40 Titled “The Curse of Crony Capitalism. As private citizens on a cruise ship, we were required to stay a minimum distance from the glacier. Think about it: If Senator Schumer and Congresswoman Pelosi were squiring around Angela Merkel and they wanted to impress her, do you think the Park Rangers would allow them to get closer? I’m calling them “the nobles” in this section. As a Park Ranger, your boss and benefactor, two of the most powerful people in Government, are being guided by a lowly Park Ranger. You think he’s going to keep them the same distance that our cruise ship was kept from the glacier? If you understand the fallen nature, and agency theory that I will discuss in an upcoming podcast, you will understand that the legislators get special privilege. You can search You Tube for the video of Congresswoman Pelosi walking around the metal-detector that she ordered installed. Enough said. I talk about this more in-depth in podcast #81 Private Property.
Sustaining Scarce Goods
People outside of economics and finance think that private owners of goods destroy them. That doesn’t make any sense. There are private owners of caves in Texas, mostly near San Antonio. Why would they destroy the asset that provides income for their family and workers? But you continually hear this nonsense that goes something like this, “Private owners destroy scarce assets, so we have to put them in the hands of government bureaucrats who will sustain them.” Hogwash. Here’s the financial viewpoint: If a publicly owned stock gained value today, it’s because the thousands of potential stock-buyers deemed that the net present value of the future revenue has increased. That’s it. If a firm destroys its assets, the stock value goes down. If it preserves them, the stock value goes up. Economics is about human behavior, that’s why one of the first books in the discipline was titled Human Action by Ludwig von Mises. Humans – and businesspeople ARE humans, by the way – respond to incentives. They are incentivized to preserve their assets that create future revenue.
What is the incentive for government bureaucrats, like the Park Rangers? They want to move up the ladder to a higher position and a bigger park. That has nothing to do with preserving the scarce resource for future generations. Their motivations are short-term, the motivation of the public stock company is more long-term in nature.
If you follow stupid laws, you get more stupid laws. There is a stupid law in Glacier Bay National Park. They don’t want you to litter, so the coffee that’s served while in Glacier Bay National Park is served in plastic cups, not paper cups. Let’s see if we can get inside the twisted mind of a litterer. It really is twisted, because it would break my arm, to throw litter out the window, but as an economist, I’m pretty rational. People litter as a show of power. It’s against legal and moral laws, so people who feel dis-empowered throw litter out the window as a show of power, saying, “They tell me not to do this, but I can do it. Look how powerful I am.” Yea, twisted, huh? So the park service denies this twisted person a paper cup that would deteriorate in about a year, and forces him to throw out a plastic cup that will last thousands of years. That’s what happens when you make reasonable assumptions about unreasonable people. Just one minute for a side-note on this subject. How many times have you been watching a news report about a murder, let’s say it’s a mass-murder, and the news person tells you, “Investigators are seeking a motive.” Huh? How about the assumption that a mass-murderer is crazy? Same with the litterer, he’s crazy. Giving him a plastic cup instead of a paper one doesn’t make him any less crazy, it just gives him something with more heft so he can throw it further.
So we’ve seen that private ownership sustains assets more securely and distributes them more fairly than public ownership.
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