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September 07, 2007

Rent Vs. Buy – Socialism

Last post gave examples from housing, transportation, and communication of whatever it is that drives us from being renters to buyers whenever we have an opportunity to change status. Also asserted that access to capital, while necessary to become an owner, is often not sufficient. Common infrastructure like utilities, roads, and networks are often needed to make individual ownership of homes, cars, and communication devices possible. Moreover, oligarchs in the renting business (incumbent telcos, for example) often erect legal, regulatory, or simply monopoly barriers to keep renters from becoming buyers.

Socialism’s attraction was that we really don’t like the oligarchs we rent from and don’t feel they ought to own everything (I’m talking emotion and not economics here but emotion drives politics which affects economics). Socialism’s failure is that oligarchic ownership by the State is often less efficient and less fair than private oligarchy. The commissars still end up with dachas and almost no one else does. WE want to be the owners of the assets most important to our lives; WE don’t want them owned by someone else, public or private, and rented back to us with conditions. Socialism addresses the desire not to have some other individual own your house, farm, or transportation; but it doesn’t give YOU ownership as an individual so it fails.

But what about the infrastructure?

If there were only railroads and no highways, cars would not be very useful except for getting to and from the station. In general, roads ARE publicly owned. Is this socialism? It enables the private ownership of cars and trucks.

Utilities in the US are a mixed bag. Sometimes they’re government owned; some times co-op; sometimes private. Despite the fact that some of us rural types have our own wells and septic systems, wide-spread home ownership wouldn’t be possible if there weren’t municipal-scale water and waste systems. Is private monopoly or municipal ownership better for the stuff that runs under the streets? Is there a third alternative? Does it matter? What’s important is that we do need to have this infrastructure there so we can own homes and we can’t build it all ourselves as part of our homes in most places.

We own our modems and WiMAX receivers but we need to get signal form somewhere. You probably suspected that I’d get around to telecommunication sooner or later. The structure of the telecommunication industry in the US from under the streets to through the air is vitally important. It will be driven by the forces of the rent vs. buy battle we are always fighting but not always winning.

But before I opine on that, we’ll digress into energy rent vs. buy. And not until a subsequent post.   

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» The Economics of Shared Infrastructure from Rickerism
What is the economic theory of shared infrastructure? Surely someone has addressed the theory, but I cannot find it. This particular economic theory will have a far more significant impact on the 21st Century economies that it did in the pass. Thus, I ... [Read More]


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