The Railway buy back decision and economic sense
Posted July 22, 2008on:
Over at the Standard, Steve Pierson points out a TV1 poll that shows that the majority of New Zealander’s are happy with the decision to buy back the railroad at a cost of over $1bn. That is cool, if society is happy with doing something and has full knowledge of the costs and benefits, then it is the right decision. Ultimately, the purpose of government is to maximise social welfare, and as long as the welfare cost to the 24% who don’t like the decision is less than the welfare benefit gained by the 68% of people that are for the decision then this appears like a fair tact to take.
However, I was a bit confused about this comment:
The Government has acted in a way that makes economic and environmental sense. The only opposition has been from the ‘free market is always right’ lobby and National.
I have stated before that the direct economic case for a rail buyback is difficult to make (insofar as it require some hefty normative assumptions), and other economists have also stated that in an a strictly monetary sense, this is likely to be a bad idea (Andrew Gawith, David Grimmond).
In all truth, the government’s policy may not make economic and environmental sense – insofar as the funds could be used to achieve both goals in better ways. However, if the public realises this, and is still for buying back the Railways – it is the right thing to do. I suspect many people might disagree with me here, but the will of the people, when they are fully informed, is what the government must satisfy.
Of course, maybe the public hasn’t been fully informed – in which case, this poll tells us nothing 🙂