I already accept that, where it makes sense, competition should be expected to produce better results than a monopoly. It is the practice of privatising services that are by their nature monopolistic, given they all users share a single piece of infrastructure that concerns me. OTOH, I don't see any need for governments to run airlines, mobile telecommunications networks, or indeed many of the operations of Telstra. My only argument is that there is simply no proof that privatising all government operations is justifiable from an economical point of view, given the mixed success of doing so over the last 10-20 years in Australia. But the "true believers" in free markets (the IPA, or the CIS, or the HR Nicholls society) will insist that this is the case, evidence aside, and their ideology has significantly affected government policy, both Labor and Liberal.

Note that there are economic downsides to competition: it forces companies to focus more on "out-selling" their competitors rather than simply developing a quality product at a low cost (the SECV never spent any money on advertising!), it tends to increase litigation and still creates significant work for governments as they now need to monitor the activities of the multiple private entities that have taken over their role. And lastly, it's more likely to lead to market failures: in the electricity supply business this can be seen today where each individual electricity supply business stands to benefit from selling *more* electricity to each consumer (thus generating more wastage, meaning more pollution, and more GHG etc.), when it would be the whole economy's best long-term interest for electricity suppliers to focus on helping customers reduce their usage, by purchasing more efficient appliances etc. (Note however, Amory Lovins has described how in California, deregulation there has lead to lower usage and more efficiency, partly because deregulation lead to higher electricity prices, but also because government policy deliberately decoupled quantity of energy sold from profits - which is hardly a typical "free market" of electricity suppliers).

Next, addressing b) and c)!

While the thread has moved from its starting point I want to go back for a while.
I once thought, as a child, the government could run every thing, I was wrong.
Australia goes with mixed so will I , America concerns me such a great country with great ideas but such a failure.
Health and some much more is based on income not need.
Mixed must find a way to get results from both systems that benefit us all.
This thread will attract some who remind us of our failures states and federal but how many will remember our tax base? the costs of better services in price and tax?

Ok, you say "Govt regulation and taxation are both costs which have to be passed on to consumers."

No one is doubting that excessive red tape and bureaucracy increases costs unnecessarily, and there much room for improvement even today.
But quite a lot of regulation has the opposite effect, of boosting innovation, and of forcing companies not to create costs that must be paid by everyone at a later date.

They say "necessity is the mother of invention". Regulation in the automobile industry has forced manufacturers to innovate and perfect solutions such as catalytic converters and airbags - even though at the time industry fought against the regulations, claiming they would drive up costs and put them out of business (as they have been doing again in the US with recent proposed regulations to improve CAFE standards). There are myriad other examples, but the phenomenon has been widely written about (Google "porter hypothesis"). Regulation does not necessarily increase costs - and if it does, often the extra value created with those costs is well worth the price tag.

Further, the regulations we have today regarding pollution (e.g. SO2 emissions from power plants) exist precisely because before we had them, pollution was getting so expensive to clean up. Like most thinks in life, prevention is cheaper than cure. Again, this is a case of market failure, because without regulation, the companies creating the pollution are not the ones specifically penalized by the costs of cleaning it up. Now whether the regulation should exist in the form of specifically mandating maximum pollution levels for every corporation and strictly enforcing this, or the "market solution" of trading pollution rights between corporations is still a worthwhile debate - again, there are arguments both ways (my suggestion to start with trading - but on the understanding that if no significant improvements are made within a certain time period, then there will be a switch to tougher regulation or "pollution taxes").

Next post: labour regulation.

Wiz, regarding your comments as to privatising electricity supply, I don’t know
enough about your ES situation, so won’t comment. AFAIK in Europe
the whole power grid is interlinked, so there is competition in power
generation itself. So nuclear, coal, hydro are all in the market together
and consumers would clearly benefit.

I don’t see why consumers would use more power then they actually
require, so can’t see your argument there, perhaps you can explain.
As to using power more efficiently, more efficient appliances etc,
the way I see it, that’s a role that Govt can play, not PE. Govt is already
in that business, supplying subsidies for solar water heaters etc.

Regulation might boost innovation, but it still comes at a cost that
has to be born by somebody, in the end mostly the consumer. As to airbags,
I certainly would never want one, when seatbelts do a great job at
much lower cost. Quite a few people have been injured by the force of
airbags.

Yes, the Porter hypothesis suggests that regulation might indirectly lead
to lower costs, but it also might not. The Japanese don’t sound so
enthusiastic. http://www.rieti.go.jp/en/columns/a01_0103.html

The core problem seems to me to be that when Govt runs a business,
politics often dominates economics and nobody really needs to care
about efficiency etc, for there is no incentive. I had this very discussion
with a relative some time ago, he works in a Govt dept. Its virtually
impossible for Govt to fire anyone, so there is no good reason for anyone
to bother to innovate, improve or change things. As long as they turn
up for work and at least pretend to look occupied, all is sweet. They are
given an annual budget and as long as they don’t overspend, that’s fine
too. If there is any money left at the end of the year, its spent if they need
it or not. According to him, petty pilfering is common, as everyone looks
after their little patch of self interest.

tbc

While people hold the position that the Government is responsible for my welfare and life then the government will need more increases in taxes to meet the growing expectations. Rarely do people settle for a simple life, they want increased benifits and lifestyle.

In large Government employment work-place less and less people actually perform and are carried by a minority. They all expect the same pay at the end of the week. In Private businesses the non-performers are dismissed because they are not assisting in the creation of the budget.

Socialism sounds utopian on paper, it does not work in reality unless all are committed to the same idealism.

Yabby, you're not really posting a lot that I disagree with - especially when you sensibly couch your statements with qualifiers like "seem" and "often". However, while it may be the case that there aren't significant incentives to improve efficiency in government-run and funded organization, that doesn't automatically mean that a bunch of competing private firms will do any better. For a start, I've worked with plenty of large private firms that are riddled with all sorts of efficiencies that have existed for years (H.P. would have to be the worst). And as I said before, competition introduces new demands on operations that don't exist in monopolies.

Re customers using more electricity – this is exactly what happens as suppliers strive to provide electricity at ever lower costs. If electricity cost twice what it did now, there is no question we’d use less of it – and I would argue that if the last two decades of technological development had been focused on developing appliances that used minimal electricity, then we could have all the luxuries we do now – big fridges, widescreen TVs, you name it, at half the electricity usage. But the current structure of market doesn’t do enough to reward manufacturers that build and sell efficient appliances, and does reward suppliers that sell more electricity (and note that this applies to the wholesale market just as much as the consumer market). And it’s hard to see how a completely free market, with no regulation or subsidization at all, could have that structure.

I did want to address labour market regulation next, because it's so obviously topical for this election. There have been lots of criticisms of WorkChoices, ranging from the claim that it has increased confusion and red tape for many businesses (especially with the new fairness test) to the fact that workers perceive (fairly or otherwise) that there is less certainty in the workplace, where basic conditions that have been enjoyed by all for decades are now at the risk of being swept away.

Next: why labour market regulation is good for the economy.