Monday 19 May 2008

The debate goes on

The debate around the sale of Panmure House, Adam Smith's former Edinburgh home, goes on. At The Debatable Land blog Alex Massie wrties
So, Panmure House, Adam Smith's former Edinburgh home, has been sold. The ASI reports:
Councillors in Edinburgh have approved the sale... to Heriot-Watt University. They chose the £800,000 bid over a higher offer, on the grounds that the University would make the building more accessible to the public. The University plans to restore the house to promote the study of economics.
Hmmm. Wouldn't it have been more appropriate to sell to the highest bidder?
Over at Freedom and Whisky David Farrer replies by noting
Values are subjective. We each have our own unique scale of values and if that weren't so no trade would be possible at all. Let's imagine that I'm in the market for a property. I might be happy to pay £250,000 for a flat in central Edinburgh but another person might well prefer to spend the same amount of money on a sizeable house in rural Fife. And I might be willing to spend a bit extra on a place in Edinburgh simply because it had once been owned by Adam Smith! Others wouldn't. Values aren't limited to monetary considerations.

So I would argue that the City Council hasn't necessarily sold the Smith abode to a low bidder. It all depends on the Council's scale of values and those values can include a keenness for a particular future use of the property. From its point of view the Council has sold to the highest bidder. For once, in this case the Council's scale of values is not unlike mine!
In response to David Farrer, Gavin Kennedy at the Adam Smith's Lost Legacy blog writes
Some commentators to the various Blogs that have remarked about the sale of Panmure House demonstrate their philistine nature by simply demanding that the City of Edinburgh Council sell to the ‘highest bidder’, or demolish Panmure House and turn it into a MacDonalds, or some such atrocity.

I am pleased to see that a Libertarian takes a more intelligent stance.
At Organizations and Markets Peter Klein writes
Some commentators find it ironic that the house’s current owner, Edinburgh’s City Council, is selling to the university rather than accept a higher, competing bid from a private citizen. So much for the free market! But, as a careful reading of Smith reveals, Smith was hardly an advocate for unrestricted laissez-faire, supporting substantial public expenditures on infrastructure and education as well as the legal system and national defense
I find myself in agreement with David Farrer on this.

3 comments:

Gavin Kennedy said...

I won't rehearse the arguments about Panmure House, well aired on my Blog and others. I do however think those supportin the 'highest bidder' argument should study the facts of the competing bids.

Prices in a bid need not be the determining factor. In properties of such age (1690s) bidders may submit a 'clean' bid or a 'conditional' bid, which sharply alters the money price worth of the bid.

The private developer's bid was conditional on a 'structural survey', which places the risk of that bid failing onto the City Council. In such a bid the bidder has sole right to withdraw their bid leaving the Council to start all over again. Such a survey, and the costing of making any repairs to a 17th century building, which was left unusued and empty from 1927 to 1956, could take several months and the bid price in escrow.

The University's bid was 'clean' and unconditional, bought 'as is'. All structural and other risks fell on the University, or rather its source of the bid price, its commercial Business School (i.e., no public funding), and the University would be liable to hand if £800,000 at the moent when contracts (in Scot's Law: the missives) were signed, in a few weeks.

The University's intentions are to turn Panmure House into a 'commercial enterprise', i.e., undertaking activities that earn the University annual cash surpluses for its educational objects, including Council Rates.

The private bidder's bid was not the 'highest' bid when these factos are considered.

Both you and Alex Massie (A Scot incidentally) are not comapring like with like. You may wish to re-consider your hasty conclusion.

Paul Walker said...

What "hasty conclusion"??? My only conclusion is that "I find myself in agreement with David Farrer on this." I don't in fact agree with Alex Massie on this point. In fact sometime ago on the Free Exchange blog I wrote "I would imagine Adam Smith would want his former home being sold in a deal in which both the buyer and seller are happy. No matter what the reason for their happiness. The Edinburgh City Fathers may or may not want to accept the highest offer, that is their right as owners. But to say they MUST accept the highest offer violates their rights as owners, why they sell and at what price is up to them. I don't see why not accepting the highest price is somehow anti- market."

Gavin Kennedy said...

Hi Paul
You are right and it is I who jumped to a hasty conclusion. Apologies all round.

Thanks for your support. The point you make about property rights is a good one.

Gavin