Wednesday, March 01, 2006


I've been getting a lot of questions about the toll road issue and privatization in general. Mainly, folks expect Libertarians to be in favor of privatization.

In general, yes we are in favor of privatization. In fact, Libertarians like toll roads and other cost solutions that involve user fees, whereby those who use a government managed resource pay for their use, while those who do not use it, do not pay.

With all things, the devil's in the details. Libertarians like a good, equitable deal. We are concerned that Major Moves does not provide the best deal possible for Hoosiers. We are concerned that a 75-year lease leaves too many unanswered questions. For instance, what will the rate of inflation be in 2068? Nobody can answer that, but it will be a major factor in the assesment of tolls. Libertarians prefer a 10- or 15-year lease.

Also, we are not convinced the Daniels Administration is capable of swinging a deal that points the lion's share of the benefits towards the people of this state. Daniels has a short track record, but a very easily assessed record.

The naming rights for the new, unbuilt stadium are being awarded today. The talk is that the rights will rake about $50 million. That's just talk, so we'll have to wait and see.

What isn't talk is that the Colts will get ALL of that money. None of it goes to the state, to defer the cost of construction.

This is a horrible example of giving away the store. Some measure of the money should have been going to the state, had a better- for Hoosiers- deal been worked. Maybe half of the money, or 30% of the money, or even an amount split in proportion to what is borne in costruction costs by both the state and the Colts. Yeah, it's a great deal for Mr. Irsay.

So, yes, Libertarians are skeptical about the deal negotiated with a Spanish-Australian firm. If "Quick Fix" Mitch was able give away so much to the Colts, why are we to suppose the Major Moves deal is any different?

All we have is a short, blemished track record to go by.

Update: It's more lucrative for Irsay than ever imagined, as the Lucas Oil naming deal poised to yield over $120 million. The state's cut remains the same: zero. Per today's Indy Star report:

The Colts will keep the money from this naming-rights deal as they do from the current agreement with RCA. The team is kicking in $100 million toward the cost of the stadium, but the city is helping the Colts out by paying the team $48 million for early termination of the RCA Dome lease.

Construction on the $500 million stadium with a retractable roof began last year and is expected to end in time for the 2008 season's first kickoff.

So, on naming rights alone, the Colts are done paying for "their share" of this project, and are already into their profits- unlike the people of Indiana, who will pay and pay.

Again, we are skeptical of the Daniels Administration on privatization. The Colts stadium should have been private, but Daniels made it public, and worse, gave away the store. The privatization of roads is a good idea, unless you give away the store.


GadFlier said...

"Privatization" is far too often used as a shibboleth rather than a guide to rational behavior. As others have already noticed, what is being done in the name of "privatization" is almost invariably not the sort of thing that privatization advocates want us to think of when we hear the term. It is not opening up government functions to a free and open market. Instead, "privatization" becomes a euphemism for socialism by proxy. Instead of free competition for providing a service, the service is handed out as a fat, juicy, and exclusive government contract, wherein the force of law is used to set up a monopoly. As many liberty-loving economists have sagely pointed out, real monopolies--the worst poison for any free-market economy--only exist when they are set up and perpetrated by use of government power. Oddly enough, if one looks at the vast majority of "privatization" efforts, they turn out to be monopolies. They are exclusive contracts given to a for-profit entity that prohibit, by law, any sort of actual free-market competition to occur in regards to that particular service. In other words, while privatization might be a great concept, its execution turns out to simply be perpetrating the same old systems we have, except doing so in a way to absolve government officials from immediate responsibility.

Mike Kole said...

Indeed! Along with the misuse of the term "privatization", also include "deregulation".

Witness California's energy "deregulation" from a few years back, which was really "re-regulation", which ensured new monopolies under different terms, with different beneficiaries.

The whole issue has been tricky for some Libertarians to enunciate, because we are expected to be in favor of actual privatization- which we are. This just isn't the real deal.