governing spaces chris harris north shore city council february 2007 infrastructure and...
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Governing SpacesGoverning Spaces
Chris HarrisNorth Shore City CouncilFebruary 2007
Infrastructure and ‘Place-Based Governance’
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Common Complaints:
‘Predict and Provide’
‘Lack of joined-up thinking’
How Sustainable is the State?
‘Perverse Subsidies’
‘Major Project-Itis’
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Increase ‘Choice’, i.e. Market Substitutes
Problem: Overlooks Complementarities
Complementarities require ‘Voice’
Usual 1980s+ Prescription for ‘Government Failure’ (I)
Complementarities = Interdependences
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Increase End User Charges for User FocusAnd Reduced Taxes
Problem: Can worsen ‘structural monopoly’,e.g. through collapse of public transport infavour of automobile
… No simple solution it seems
Usual 1980s+ Prescription for ‘Government Failure’ (II)
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Need to Strengthen Citizen ‘Voice’as well as ‘Choice’
Private Sector
Broader PublicSector
Core PublicSector
Increase Citizen‘Voice’
Increase Citizen‘Choice’
After World Bank, 1997
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As much due to lack of voice, as choice
‘Predict and Provide’
‘No joined-up thinking’
Common Complaints about the State
‘Perverse Subsidies’
‘Major Project-Itis’
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‘Infrastructure’ or ‘Public Space’
Critical Area: The Broader Public Sector
Policy choices made here preload individual choices in the market
‘Where the Rubber Meets the Road’ (pun intended)
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Example: Urban Transport
Are Pedestrian – PT trip chains practical?
Do Pedestrians feel marginal or not?
… Policy preloads individual choice
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Other Areas of the Broader PS
Broadcasting and Communications
The Health System
Building Standards and Codes
Industry Networks / Development Banks
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Two Key Characteristics
• Complementarities inscribed in a community space
• Often increasing returns to scale (network effect / synergy)
Two Key Characteristics of Broader PS:
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Shift management emphasis from ‘Silo’ to ‘Space’ (fairly obvious)
Shift funding from Silo Output Metric toCommunity Rent (more subtle)
‘Place-Based Governance’: Panacaeafor the Broader Public Sector?
i.e., Functional Outputs subordinated to Joined-up Community Outcomes
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Windfall capital gains to community from service but service gets none of thisand is unable to keep up with demand
Community Rent Concept
Joined-up infrastructure likely to beunderdeveloped if paid for by current users alone
Examples: Waiheke Ferries, Jubilee Line (London)
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‘For increasing returns networks, apply community rent to fixed costs, charge end users marginal costs’
Community Rent Concept
William S Vickrey, Nobel Prize in Economics (1996)
Many others with same idea.
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Community Rent Concept
Argument is partly economic but also, fairto say, partly moral in nature
‘Land value windfalls created by railways, etc, should remain in the public domain’
‘Land rent pays for fixed capital or serviceguarantee, casual user pays marginal cost’
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Community Rent Concept
A form of user-pays that does not implyprivatisation of the public domain
‘Social Market’ / ‘Rational Ecology’
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Railway Example in more Detail:
Land value = community rent
Community Rent Concept
Railway (high capacity) paid for by landdevelopment (place-based)
Land value proportional to ‘spare’ railwaycapacity / Tickets cheap, grow patronage.
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Charge on both rail tickets and petrol sales, with uncollected land value windfalls
Conventional Self-Funding
More petrol used, funds more motorways.No effective rail alternative now.
Railway funded from tickets = Losses, cuts,in face of car competition (Dr Beeching). Fewer destinations served = collapse.
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Community rent = funds complements
Complements and Competition
End-user charge rewards competition
Network competition = winner take all
Classic Cases: VHS versus Beta, Microsoft vs Macintosh. Survival of Beta, Macintosh, PT etc in inelastic niches does not invalidate argument.
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Winner take all = ‘structural monopoly’
No incentive to increase capacity ‘too fast’if commercial with uncollected windfalls (broadband? drugs? toll roads? ferries?)
From Competition to Monopoly
‘Predict and provide’ in single mode if public service ethos still applies (e.g. motorways)
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1) Community rent thus prevents onenetwork taking over and maintains balance
Community Rent Concept Revisited
Spending of community rentrequires community voice because (1) and(2) are not always compatible.
2) Community rent allows favoured networkto develop more rapidly than otherwise
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Urban Transport in General
Privatisation, commercialisation, should be ‘operational’ only
Final Example
Major capital investment in all modes from community rent
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Wrap Up
Must back up administrative side of place-based governance with argumentsfrom network economics (Vickrey, etc)
Otherwise, arguments are merely ‘obvious’
… The End