Wednesday, 18 March 2009

Why do taxpayers own TVNZ? They don't.

Over at Homepaddock the question is asked, Why do taxpayers own two television stations? My response would be they don't.

Homepaddock goes on to say
I can’t remember the last time I watched TV2 but unless it has changed there is nothing on it to justify public ownership.

TV1 has a few programmes which might not appear on privately owned stations, but like Agenda, for instance, they mostly screen at times few people find convenient to watch them.

There may be a case for public service television but TVNZ doesn’t provide much evidence for it.
The problems Homepaddock has with "public ownership" of the television stations may well come down to the point that the "public" don't own them, the politicians do, and so they respond to the wishes of the politicians not the public. There is no accountability to the taxpayer, which I'm guessing is basically Homepaddock's point.

The question is, Why is there no accountability to the public? The short answer is because the public don't own the assets in the first place.

The important point here is that without control you don’t have ownership. As Oliver Wendell Holmes Jr. put it,
But what are the rights of ownership? They are substantially the same as those incident to possession. Within the limits prescribed by policy, the owner is allowed to exercise his natural powers over the subject-matter uninterfered with, and is more or less protected in excluding other people from such interference. The owner is allowed to exclude all, and is accountable to no one. (The Common Law, p193, (1963 edn.))
Clearly the “public” does not have the rights Holmes refers to. The government has these rights. Following Grossman and Hart ("The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration", 'Journal of Political Economy', 94:691-719) economists tend to define the owner of an asset as the one who has residual rights of control over the asset; that is whoever can determine what is done with the asset, how it is used, by whom it is used, when they can use it etc; the public can do none of these thing with a public asset. Hence the public doesn’t have ownership.

The public have no ownership and thus there is no accountability to them.


Brad Taylor said...

'The public' does have control in the sense that public opinion influences policy. It's not too much of a stretch to say that Government is the agent of the people, just with really stupid decision-making rules. Government doesn't act in folks' interests, but it does generally follow their preferences as expressed through politics.

Paul Walker said...

Brad: the effect of public opinion on actions by SOEs is basically zero. When did you last get to exercise any of the rights covered by the Holmes quote? When did you get get to vote for the members of an SOE broad? When were you last asked for input about anything to do with activities of an SOE? When did you last go to the annual general meeting of an SOE? Your influence on what an SOE does is zero. Your influence on SOEs is zero.

Brad Taylor said...

My influence is so vanishingly close to zero in any political decision that it might as well be, and there's a further buffer provided by the autonomy of SOEs; but I think public opinion as a whole still has a significant impact. Boards are appointed by the shareholding ministers, who are constrained by public opinion. Decisions aren't made directly by popular vote, but always in the shadow of public opinion to some extent. When the issue isn't salient (i.e. most of the time) there's an awful lot of slack.

I'm no way defending public ownership, by the way, but suggesting that you can't separate the public and government so cleanly.

Paul Walker said...

Let me make my point another way. Who has the most influence over an SOE, you or the shareholding ministers? The (residual) control rights are not with you, or me, they are in the hands of the politicians.

As to politicians being constrained by public opinion. Remember the Electoral Finance Act?

Paul Walker said...

Can I add one more thing. Private companies are also constrained by public opinion in their actions. Decisions are made in the shadow of public opinion to some extent, even for private companies. But we don't say that the public are owners of these companies because of this.