Thursday, 15 March 2012

The whats and whys of nationalisation

I'm back, not that you missed me or anything, but regardless of your lack of appreciation of me I have returned yet again to bestow my knowledge upon you. To this end I intend to write about the economic arguments for the nationalisation of certain sectors of the economy and while many economists go on and on and on about how the free market can solve everything, they are what we call "bad economists" and should not be listened to under any circumstances.

Also note that I am not advocated total nationalisation of everything, there are some things which I feel work best when left to market forces, the difference between sectors of the economy that should be nationalised and those which shouldn't lies in the incentive structures and the effects of competition as I shall demonstrate throughout this blog.

1. Pharmaceuticals.
There are, according to the ever reliable wikipedia, three hundred and sixty nine pharmaceutical manufacturers in the United Kingdom. After giggling at the fact that number ends with sixty nine, you may noticed that this means that the pharmaceutical resources of the United Kingdom are divided three hundred and sixty nine ways. This strikes me as something that is likely detrimental to the medical research sector.
Also note how the incentive structure for a pharmaceutical company is contrary to the common good. If a firm produces a treatment that has be done constantly for the rest of the patients life, this is likely to create much higher profits than a cure. Hence it has been demonstrated that the pharmaceutical industry is one where a state-owned monopoly is preferable to the free market.

2. Farming
This is a more tricky one but this is another sector which would be better under state control. The reasons for this are thus. Firstly, it allows for the circumvention of the glorified ludditism that is "organic farming" which the existence of is frankly embarrassing, if the state controlled agriculture then we could have proper investment in superior GM crops and new farming capital, which is sometimes unavailable due to the low profit nature of the agricultural sector. Also, it will allow for the production of a "food surplus" for emergency stores as well as for various humanitarian projects and as a foreign policy tool, its much easier for oppressed people to overthrow their dictators if we provide them with food as well as weaponry.

3.Scientific research in general
This one is rather straight-forward for some of the same reasons as the pharmaceutical industry, such as the merging of resources and the allowing of them to work in unison as opposed to in competition, but there is also the avoidance of "tech-killing" whereby a company could invest in research in areas that would harm its profits, thereby enabling them to patent it and then not use it. It would also allow for more UK firms to benefit from technological advancements, as opposed to simply the firm that patents it, as the government could license the tech to any and all UK firms. Finally it would enable research into areas that aren't deemed profitable, but that could provide benefit to humanity.

Theres a few arguments for taking a few sectors into state ownership, I may do a few more later but right now I don't want to and its my blog so I'll do what I want, get off my back.