[Oxidation]

> create much hard to capture value.

This is pretty key.

Imagine a train line that allows commuters to get to work. Trains are expensive to run, so the actual cost to get a commuter to work and back is £100. The commuters are paid (say) £150 a day, after tax. Is this train worth 2/3 of their post-tax income? Probably not, so they won't use it, and the company can't get workers if there's no other practical way to commute. Workers can take less good jobs near home, earn less, but take home more. Or even no job at all. However, a worker generates substantially more than their post-tax salary in value to the economy as a whole, so subsidy of the train fare creates value by getting them to work and generating that value, even though the train cannot actually turn a profit itself by charging the commuters out of their income.

Even if you say "well the company should just pay more if they've made that value", not all that value manifests directly on the company's bottom line, it includes downstream value, as well as intangible things like worker skills that are more of an abstract societal benefit.

In the same way, roads produce massively more value than people would be willing to pay individually: all the food deliveries in a week might be worth, at retail, about £4 billion, say. If those deliveries can't be made, what will be the cost? £4 billion? Or more because the whole country will become a much less effective economy when everyone is starving and looking for food? And the universal-delivery postal system. Healthcare, childcare, energy, etc etc.

[BoiledCabbage]

I wish every single HN post regarding business efficiency explained this concept to people. It's such a basic economic concept, but I've come to learn so many people on HN just parrot "unregulated markets are more efficient therefor markets are best" without understanding at all what's going on. It's become such a basic error with pattern matching. Please understand the situation and don't just say "markets".

Regardless of the specific case here, businesses do a horrible job of accounting for the externalities of their decisions. This shows up in two ways:

1. Negative externalities - there is a large cost to society of my company doing this, but I'm not the one paying the cost. As a result I can still make money off of it so I will do it. Even though it is a net negative for society. Dumping toxic pollution into a river is a great example. You need an external force (government) to step in to ensure they account for that. Either through things like laws to make it illegal (and actual enforcement of those laws).

2. Positive externalities - there are larger benefits to society of performing the action, but the company itself doesn't get that value as a result they don't do the action. Subsidizing things like the US interstate project is a great example of this. Again markets fail to capture this so don't do it. Or if they do it's in a way that's a net negative for society and becomes a defacto tax on all economic activity making other useful businesses unprofitable. Again an example would be if all interstates were privatized and drivers were charged maximal rates. It would drastically reduce economic activity.

There are absolutely situations where markets are not the right solution to the situation and government intervention is, and they usually fall in where there are significant negative or positive externalities.

[GrooveSAN]

I’d say it boils down to the following: - humans can be selfish, or not - humans are powering businesses and gouvernement bodies controlling them, so both can think long-term, global benefits or short term, own-benefits - hence the need for control and/or transparency on decision making, whether it is a private company or a government body - we all know the fiduciary duty of a CEO ; I’m wondering whether some kind of « long-term good » duty also exists for CEO or political deciders, making them accountable of the long-term consequences of their choices.

Our economy and politics are indeed favoring short-term gains by design and that is « simply » what should be controlled to a certain extent. Not easy as this should be a global move, otherwise the long-term advocates are likely to be outperformed by their short-term competitors and not have the time to implement fully their strategies.

[drewcoo]

> businesses do a horrible job of accounting for the externalities of their decisions

Today they aren't expected to. They're expected to extract profit and then socialize any losses, externalities or otherwise.

It doesn't have to be that way.

[HWR_14]

> businesses do a horrible job of accounting for the externalities of their decisions.

If businesses account for them, they stop being externalities.

[burlesona]

Yes, but, the actual math matters. There are a lot of banal public infrastructure projects that cost much more than the value they create, and there are also theoretically productive public investments that are double-dipping into the same “surplus value.” To illustrate there are many roads that were built in hopes of spurring development and development never occurred, but the roads are maintained anyway at a substantial loss of taxes. And to make a simple hypothetical as you did, suppose the train subsidy creates some surplus, but then the city also runs a bus and a ferry and installs bike lanes all on the same route and all of these are gloriously uncrowded… at this point we’ve probably eaten up all the surplus value and then some.

This is hopefully obvious, and yet the excess road building problem is ubiquitous in the US and costing us fortunes.[1]

So we can’t just hand-wave and suggest that all infrastructure and all subsidies always create more value than they cost, we have to be critical and especially careful not to pretend that non-financial benefits can pay for real financial costs.

1: https://youtu.be/7IsMeKl-Sv0

[entropyie]

I agree, and I would love to see more state managed, long term thinking enterprise. The problem I have seen first hand though is that we've somehow established that state worker = impossible to fire. I've seen teachers literally hit students and not be fired. I've seen unions in state owned transport companies prevent truck drivers from changing a lightbulb by themselves, forcing a truck offline for a whole day and missing all deliveries. I've seen employees prevented from lifting a modest box to their own desk, having to wait for a "trained porter". This is the main reason so many politicians are wary of public enterprise. If we could tackle the worst abuses of unions then we would be in a much better position to have stronger public enterprise.

[relaxing]

Meanwhile we all know corporate workers who produce zero or negative value for the enterprise, yet are not fired.

The main reason politicians are anti-public enterprise is because they are entwined in the profits of private enterprise. "Lazy union workers" is a handy cover, though.

[entropyie]

Yeah, I hope you didn't read to much into my comments. I am in favor of state run utilities... Just pointing out some problems I've seen... For sure the private sector are in bed with government and have their own problems with bad staff and short term thinking.

[snapplebobapple]

While what you are saying can be true, it can also be true (and often is true) that the kind of subsidies you are talking about create large negative costs or have much cheaper alternatives that the subsidy negates consideration of. You have to actually do a reasonable analysis of each individual situation to come to any sort of conclusion and it is very dangerous to assume one way or the other.

Pretty much all of your examples can be rewritten to reflect the above. One example would be: what if it is only marginally more expensive for the company to build the workplace nearer the workers, making the train unnecessary? If the subsidy exists they will capture the value of avoiding that cost while foisting the cost of the train subsidy on tax payers, which is a net negative.

[lotsofpulp]

It is possible that the train lines can be built in insufficiently dense areas to make it worth using, and it can be possible that the roads are designed too wide/too numerous/etc.

Just because a government builds it does not mean it is worth it for society. And if it was worth it at time X, it does not mean it will be worth it at time X+1.

See the multitude of comments and threads about living in communities with work and play in the same community, as opposed to driving 30min each way from a suburb to a work area and back.

[Aerroon]

>Even if you say "well the company should just pay more if they've made that value", not all that value manifests directly on the company's bottom line, it includes downstream value, as well as intangible things like worker skills that are more of an abstract societal benefit.

This bears emphasizing.

The main benefit a company provides is the goods they produce. The money is a measure of how much people value the goods at the time, but the main benefit is in the actual goods themselves.

Eg the electric grid is more beneficial than what people pay for it. If the cost of electricity doubled everyone would still keep using a fridge. If the cost of fridges doubled everyone would still keep using a fridge.

And that's the success of modern society - all the beneficial stuff we have access to that make our lives a little bit better.

[danuker]

If the workers really are producing "substantially more" value for the economy, they are probably underpaid in the first place, or the specific train line/project is a bad investment (too expensive).

[Oxidation]

Workers always earn less than the value they make for a useful business under capitalism (and that's before taxes, which don't necessarily require or imply capitalism). There's always a point where a cost to a worker exceeds the value to that worker, but doesn't exceed the value to society of facilitating that worker's labour.

There are edge cases, but in general inhibiting the ability of workers to work (e.g. by making it expensive to get there, or expensive live near enough to the work, fail to allow them to be healthy enough to do the work, make it hard to take care of children while working, restrict access to or quality of education etc) is not good for a society built on work.

[otikik]

Not “always”. Monopolies, cartels, nepotism and plain old incompetence are all present under capitalism.