The crumbling public/private distinction

[Epistemic status: Possible. I’m introducing epistemic tags in the blog, stealing them from Gwern. This post is more of an speculation that rings sort of true, but I’m not too confident about it. Until know, when I’ve written something here, I’ve intended it to be a final statement, given the total sum of knowledge available to me at the time, but I’m experimenting with making posts that say things I think, but that I am less confident about. As a result, what follows below may be no more than a glorified rambling.]

What is public and private these days?

These words, Public and Private, historically have been used to refer to things associated with the State -at some level – and things that are not, with a gradient in between (i.e. Public-Private Partnerships). At least there is one relevant subdivision of public and private: ownership versus orientation. A for-profit corporation is a private entity that pursues private ends, a charity is a private entity that pursues public ends, a local government is a public entity that pursues public ends, and a sovereign wealth fund is a public entity that pursues private ends (as long as it behaves like any fund would, maximising profit).

Ownership is who, ultimately, has the right to control what is done with the assets that are owned. Orientation is whether the entity is looking to pursue an end internal to itself, generally profit but not only: a family would be an example of a non-profit, non-publicly oriented, private entity. Public orientation, in contrast, is when instead, the entity looks to foster the good of others, either a particular group or society at large.

There is one more, underappreciated, dimension that I think is rarely considered as playing a role in our conceptual schemas of public/private, which I want to bring your attention to: impact.

The more impact an entity has, the more public it is. The oddity of this one is that unlike the other ones, it has implicit, not explicit, moral considerations attached. In a private company, the behaviour of the parties involved is regulated by a contract, or in a public body by statutes and charters. The point I want to make is that as an entity increases in impact on others, even when its structure and ownership do not change, their moral obligations do change. Because this dimension is fuzzier and is becoming more salient in recent years, I claim that the public/private distinction is crumbling, meaning that we will come to think of private/public more and more in terms of gray areas, and in terms of scale, and less in terms of ownership and orientation.

I got to this idea progressively, coming from a few separate threads, listed below, and I wrote about a similar theme three years ago:

I: Private central planning

Decades ago, there was this debate about why central planning didn’t work. Ludwig von Mises, the Austrian economist, argued that it was because the USSR lacked private property, so in turn they couldn’t have proper prices, and without prices there could be no rational planning. But surely this doesn’t make much sense, even if superfially it seems to: Imagine that Stalin sells the USSR, with all their land and assets, to someone. Then that someone decides to keep things as they are. With the USSR Now being a massive chunk of private property, would economic calculation work? It would work as well as what preceded it, wouldn’t it? . Hayek had a much better solution: What you need is not private property, but several property: many owners. I assume the textbook economics reply to the answer of how to allocate resources their best purpose optimally (according to an argueably non-neutral conception of optimality) is to have a perfectly competitive market. The enlightened economics answer is that such a condition can be relaxed in real life: it is sufficient, but not necessary. The fact remains, that this point weakens the bare appeal to the benefits of private property qua private property often made by libertarians. The relative success of small scale experiences in planning shows that the problem of central planning is not one of ownership, but of scale -or impact-.

II: Singapore

I’ve come to think of Singapore as the Apple of countries. It’s not a liberal setup, but a heavily opinionated framework for living, from the criminal punishment system, to the government’s 99 year land leases to inhabitants. If you like it, it’s a really nice place to live. If you don’t, well then you won’t.

Imagine that the real Apple dumps their piles of cash in the ocean (cashing them in into sand beforehand) and builds Singapple, with a similar set of rules. I bet this would get acclaim from libertarians, and mockery from the left, being decried as a corporatist dystopia. Yet functionally, it would be roughly the same thing (or better). The Apple case, while clearly privately owned, would have Apple providing the general welfare and coordination enhancing mechanisms that are generally associated with governments, thus being publicly oriented as a means to be profit seeking. Anecdotically, this is one reason while some claim that monarchies are superior to democracies: if the monarch regards the nation as their personal property, they will be more incentivised to manage it well. I don’t think this has been true historically, for what is worth. But I can see it working for the case of Apple. Which leads us to:

III: Private government

Elizabeth Wa Anderson published a book, Private Government, arguing that employers hold more power over employees than commonly thought, and that we could do well in regarding them as private governments, and that in the same way that public governments can be injust and oppresive, so can private governments.

The facile libertarian answer is to say “Oh, but you can leave”. But isn’t this the same answer the libertarian themself would get if they complain about taxes? Yes, you can leave, but at a great cost to you. The libertarian might reply that it’s different because the government does not own your house, while the employee-employer relation is voluntary. But imagine that they did, that you had a large private government that owns a chunk of land. Would it be okay for them to do as they wish? Clearly not.

Even though it wasn’t her intention, Anderson’s point cuts both ways. Yes, large private entities are like governments in some sense, but also governments themselves are like large corporations. If labour contracts for life are wrong, are the rights and obligations that come with citizenship, a for-life contract, wrong? Beyond some basics (what a government qua public entity with a high impact is obliged to), it seems to me that yes, the idea of  citizenship as currently understood is morally wrong. This seems to be something that most people will disagree with, and it doesn’t seem that people will change their mind about in the near future.

But imagine, for a moment, that the world becomes more tolerant of political experimentation and city-states becomes more common. Let’s assume open borders in this world. Perhaps each city, upon arrival, would have a contract, for a length of time lower than 5 years, that would compel you to pay into a welfare fund for that city, or impose other obligations, but for a short term (no more than say, those 5 years), similar to employment contracts. Different cities would have different levels of regulation and welfare (Like today’s States, but with more variation).  It would be odd to see “thick” citizenship with things like draft or high tax rates. More reasonable would be “thin” citizenship (rights and obligations regarding cooperation problems, or public goods) After all, you can always leave. If this is so, then the reason citizenships are so “thick” today is that people can’t easily leave, similar to the cases that Anderson is denouncing.

IV: Open borders thought experiments

I support the gradual opening of the borders. In the course of exploring the blogosphere, back in its day, I came across argument about whether one would or not allow open borders in your own house, a small town, a city, or a country.

For you own house, everyone agrees that you can restrict admission to it for whatever reason, even if you want to ban people from a certain race from entering.

For the other scales, open border advocates would generally say that the owner or controller of the area in question ought not to restrict anyone from going in or out, while the rest of the world would say that this is true but only for foreigners.

But then comes Venice, and other cities, who have either set up tourist controls or levies to deter tourists from passing by. I haven’t seen this addressed from the open borders angle. My own view is that cities do have some right to control who comes in, and that they can make decisions that favor their inhabitants even vs prospective inhabitants. States would not, but city states would fall under the former category. In my visit to Rome this year, the large numbers of tourists made the whole experience unpleasant. As a resident of Rome, it would seem reasonable to me to have some say over this. On efficiency grounds, this is just the fact that space is limited in cities, and people are walking negative externalities. After some point, the crowding may be unpleasant.

Which then leads us to think of cities as potential prisoner dilemmas. You can think of a place that is nice to live -because- it is low density and has nice scenery. A marginal person won’t ruin this, and so they may move in. The place may be soon ruined by too many people. Local control can fix this issue: NIMBYs, in some contexts, are right.

V: Families

Families are also private governments, yet there are limits accepted on what they can do. This limits do not coincide with the limits of a liberal democracy: families are generally not democratic, if anything they operate by dictatorship at worst or consensus at best -but this is regarded as being okay-. Belonging to a family is initially involuntary (one may consent via hypothetical or implicit consent), but generally it is accepted that one may leave at any time, with some provisos  (e.g. divorce may be required before). It wasn’t always like this: In the past marriage was for life, but things are better now.

VI: Locke’s venditio

In a not very well known work of his, Locke wrote about what a just price would be in situations that intuitively seem to lead to exploitation. For example, a grain merchant arrives to a famine-stricken town. If the price that he would normally sell at is 10, can he charge more than 10? Yes, argues Locke. Locke ultimately argues that the market price is the just price, and the market price is the price that would be observed in a competitive market. So he controls away your market power, but leaves other conditions (the famine) as they are. This has far-reaching applications, because it supports the need for legal restrictions on, say, utility companies or any natural monopoly, doing so on an argument that could be construed as fairly libertarian, which tends to be quite strict in its justification of coercion.

VII: The Posner-Weyl proposal

Tied to the above, but not directly related, Eric Posner and E. Glen Weyl published Radical Markets, which contains a proposal that would involve everyone publicly stating the price they would be willing to sell (potentially) anything they own, and then they would be taxed at a fraction of the stated price to ensure that people are honest in their assessments. The authors do not advocate going as far as having your toothbrush up for auction, but they say they they could easily apply the mechanism to cases like land. Is this proposal a move towards public or private control? Capitalism or socialism? One has to shrug here: it is a proposal that weakens ownership, and moves the orientation of every asset more towards serving the public good – towards efficiency, in particular. But one may still say: is it right to put literally everything up for auction? Answer what you wish, but it seems clear that for items that are more public in the impact dimension, the answer seems to be more like yes. Things like land or houses, and especially if those are in particularly crowded areas where your refusal to sale at market price (the Lockean market “just” price) would count as attempting to exploit your buyers.

One can imagine that some people will want to be able to own -in a real sense – a house, forever, and others couldn’t care less. What is lost in being able the safety of knowing that no one will snatch your house in an auction if so they wish is gained in general urban planning efficiency. In Singapore, the government leases land to developers for 99 years. After those 99 years the lease can be extended. But if the government wanted to revamp public transit, they don’t neet to expropriate anyone, just wait until the lease expires. The Posner Weyl proposal would enable this on a shorter timeframe.

VIII: Nozick’s water hole

Imagine there is a desert island, someone washes up there and puts some sticks around a only source of fresh water in the island. A second person comes to the island. Can the first person refuse (in a moral sense) to give the second person water (perhaps for a fair price). The answer for Nozick – and most people – is no, that person must share the water. Nozick appeals to Locke’s proviso, but this also falls under the public umbrella: by virtue of having a great impact on others (controling the water is a matter of life and death) the water hole becomes public even when no contract was signed.

IX: Facebook, Google, Twitter

Calls have been made recently for regarding and regulating these companies and the platforms they provide as public utilities. This wouldn’t have happened with other big companies in the past for the same reasons. Sure, some have accused them of abusing their dominant position and being monopolies – I thnk they haven’t and the EU is deeply wrong-. But most importantly it has been said that they have to be regulated because of the fundamental role they play and will play in today’s societies, especially in matters regarding political discourse.

The classic and correct defense – that anyone can create their own facebook and that myspace didn’t stay there forever – doesn’t apply in this case. It’s not a matter of possibility, but of actuality: it is about the impact that the decisions of those companies have here and now while they exist. That they have an extra duty to be careful with what they do seems clear to me, whether this should be set by law or by internal processes is something that for now I think is best left to the platforms themselves.

X: Hume’s ship

Imagine that A kidnaps B and B, puts them to sleep, and at some point B wakes up in a ship in the middle of the ocean (imagine a 17th century setting). What can the captain demand of that person? The sailors have contracted obligations and so they have duties and rights. That person can’t just leave either, they are in the middle of the ocean. What is that person obliged to, and is that person owed anything? The answer: That person doesn’t have the obligations of a sailor, but must do a share of work, and is entitled to receive sustenance, if available. The impact that the captain has on the life of that person is too great.

XI: Ostromite government

What authority does an organisation have if it has arisen to organise a resource that otherwise would be mismanaged due to wrongly aligned incentives? It seems there is a difference between being a gang and coercing people into doing whatever and being a gang and coercing your fellow fishermen into not fishing too much because if they do then the fishery will deplete.

XII: Some general patterns

What sort of restrictions does the publicness derived from impact impose? These comes to mind:

  1. Easy to leave or join
  2. Resolution of coordination problems, by force if needed
  3. Long term obligations if present are not too long term
  4. A degree of public orientation
  5. Wrongness of imposing restrictions unrelated to 2.

If the future belong to multiple private governments at different scales instead of one single sovereign, I expect that their goodness will be judged against these 5 points.

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2 Responses to The crumbling public/private distinction

  1. Talha Gülmez says:

    I have to correct one little detail: Mises never thought USSR’s economy would collapse because they had no private property. He called socialist governments “socialist islands in a capitalist world”, so they always had the opportunity to use price indexes, which they did.

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