Governing Spaces

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Governing Spaces
Infrastructure and Place-Based Governance
Chris Harris North Shore City Council February
2007
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How Sustainable is the State?
Common Complaints
Predict and Provide
Perverse Subsidies
Lack of joined-up thinking
Major Project-Itis
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Usual 1980s Prescription for Government
Failure (I)
Increase Choice, i.e. Market Substitutes
Problem Overlooks Complementarities
Complementarities Interdependences
Complementarities require Voice
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Usual 1980s Prescription for Government
Failure (II)
Increase End User Charges for User Focus And
Reduced Taxes
Problem Can worsen structural monopoly, e.g.
through collapse of public transport in favour of
automobile
No simple solution it seems
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Need to Strengthen Citizen Voice as well as
Choice
After World Bank, 1997
Increase Citizen Voice
Core Public Sector
Broader Public Sector
Increase Citizen Choice
Private Sector
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Common Complaints about the State
Predict and Provide
Perverse Subsidies
No joined-up thinking
Major Project-Itis
As much due to lack of voice, as choice
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Critical Area The Broader Public Sector
Infrastructure or Public Space
Policy choices made here preload individual
choices in the market
Where the Rubber Meets the Road (pun intended)
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Example Urban Transport
Are Pedestrian PT trip chains practical?
Do Pedestrians feel marginal or not?
Policy preloads individual choice
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Other Areas of the Broader PS
Broadcasting and Communications
The Health System
Building Standards and Codes
Industry Networks / Development Banks
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Two Key Characteristics
Two Key Characteristics of Broader PS

• Complementarities inscribed in a
• community space

• Often increasing returns to scale
• (network effect / synergy)

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Place-Based Governance Panacaea for the
Broader Public Sector?
Shift management emphasis from Silo to Space
(fairly obvious)
i.e., Functional Outputs subordinated to
Joined-up Community Outcomes
Shift funding from Silo Output Metric
to Community Rent (more subtle)
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Community Rent Concept
Joined-up infrastructure likely to
be underdeveloped if paid for by current users
alone
Windfall capital gains to community from service
but service gets none of this and is unable to
keep up with demand
Examples Waiheke Ferries, Jubilee Line (London)
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Community Rent Concept
William S Vickrey, Nobel Prize in Economics
(1996)
For increasing returns networks, apply
community rent to fixed costs, charge end users
marginal costs
Many others with same idea.
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Community Rent Concept
Land value windfalls created by railways, etc,
should remain in the public domain
Land rent pays for fixed capital or
service guarantee, casual user pays marginal cost
Argument is partly economic but also, fair to
say, partly moral in nature
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Community Rent Concept
Social Market / Rational Ecology
A form of user-pays that does not
imply privatisation of the public domain
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Community Rent Concept
Railway Example in more Detail
Railway (high capacity) paid for by
land development (place-based)
Land value community rent
Land value proportional to spare
railway capacity / Tickets cheap, grow patronage.
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Conventional Self-Funding
Charge on both rail tickets and petrol sales,
with uncollected land value windfalls
More petrol used, funds more motorways. No
effective rail alternative now.
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Complements and Competition
Community rent funds complements
End-user charge rewards competition
Network competition winner take all
Classic Cases VHS versus Beta, Microsoft vs
Macintosh. Survival of Beta, Macintosh, PT etc in
inelastic niches does not invalidate argument.
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From Competition to Monopoly
Winner take all structural monopoly
Predict and provide in single mode if public
service ethos still applies (e.g. motorways)
No incentive to increase capacity too fast if
commercial with uncollected windfalls
(broadband? drugs? toll roads? ferries?)
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Community Rent Concept Revisited

• Community rent thus prevents one
• network taking over and maintains balance

2) Community rent allows favoured network to
develop more rapidly than otherwise
Spending of community rent requires community
voice because (1) and (2) are not always
compatible.
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Final Example
Urban Transport in General
Major capital investment in all modes from
community rent
Privatisation, commercialisation, should be
operational only
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Wrap Up
Must back up administrative side of place-based
governance with arguments from network economics
(Vickrey, etc)
Otherwise, arguments are merely obvious
The End