Mark Wadsworth

This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working

Bridge-Owner-Ism

I outlined what Car-Owner-Ism would look like a while back. DNAse has now done the same for Bridge-Owner-Ism (Option C):
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Here are a few options for ways a government can handle the issue [of privately owned monopoly toll bridges]:

A. Allow more bridges to be built.

B. Tax and redistribute the monopoly element of the Bridge toll, allowing the bridge operator to cover their costs and make a reasonable profit.

C. Allow people to buy a stake in the Bridge operator. Thus putting more money into the operation, the monopoly situation means that the operator does not need to spend this money on investment or improving efficiency of the bridge it can all go to directly increasing the value of the company.

Stakeholders get a discount on the bridge toll dependent on how much equity they own. For stakeholders any rise in tolls is countered by the rising value of their equity. In lieu of B the government charges a modest stamp duty for each stake purchase. This is favourable since a cash for equity exchange is “real” whereas monopoly profits are “imputed”.

Non-stakeholders are incentivised to buy in to get their discount on the toll. Exisiting stake holders benefit as the value of their stake is pushed up with the increasing demand for equity. Since everybody is apparently benefiting from this situation the government can relax lending constraints to allow people to borrow lots of money to buy the now expensive equity and further push up the value of the company.

Given the success of the situation, the increased revenue the government gets from each equity exchange need not be spent on infrastructure (such as bridges) it can be spent on creating public sector jobs ,preferably on the other side of the bridge.

Bayard added: Let us not forget that the prospect of making a profit on the original bridge in question was so poor that the government had to offer a tax waiver as an incentive to build it in the first place.

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