Political certainty or ethics?

SANRAL has failed to raise bonds at a bond auction. The Financial Mail attributes this to "uncertainty". Fair enough, to an investor, certainty is always better than uncertainty, all other things considered equal.

Isn't there a shortcut though? Act ethically - stop mining a captive audience for cash just because they have little option but to pay - and they won't cause political problems for your plans.

I have nothing against toll roads in principle, but I have a real problem with captive states handing over public assets to (quasi-)private interests along with de facto monopoly power. And despite my sometimes-libertarian leanings, I do not want to leave it to the market to decide how many roads should cross a countryside, for the same reason I don't think I would like the libertarian outcome of private nature conservation (I suspect there just wouldn't be enough of it).

But the way SANRAL seems to be exploiting its privileged position leaves a bad taste in the mouth. They are enclosing the commons that we have already paid for (and we continue to do so with the fuel levy we pay regardless of which road sections we use) simply by improving or even merely maintaining a stretch of road - perhaps adding a lane and probably also counting tolling facilities as "improvement". Then they have the gall to tell us that their tolls do not constitute double taxation [PDF]. It all looks, smells, and sounds like pigs feeding at the trough.

So to those of you who are fortunate to be investors, especially any of you who get to have a say in your investments' operations: try agitating for ethical behaviour, for treating customers with a little respect, leaving some money (read: value) on the table to make transactions worthwhile for those customers. (SA steel producers: yes, I'm also looking at you and your import parity pricing [PDF].) Perhaps these variables are ones you have a little more control over, unlike the notion of "political stability".

The value of the last breath of air

A comment about price vs. cost vs. value triggered a lingering thought experiment:

Suppose the intergalactic bypass got built and Earth was destroyed to make room, and you were one of the few survivors of the demolition. Let's further suppose that you were one of two trillionaires (infinitaires even) bidding in an auction for a can containing the last breath of air, that only one of you can breathe. After that, you die; the only question here is whether to postpone your demise by half a minute. There are no heirs (they either are dead or soon will be too), no charitable causes (the poor are dead, so are charismatic megafauna), and no liabilities (the revenue service is no more, and the phone company is out of business).

What is that can of air (as likely to be "fresh" as it is to be a sample taken from a sewer) worth? You might want to say it has infinite value, but I'm not so sure. Life seems of infinite value only if you don't know how much of it you have. Somehow I can't see myself spending my entire personal worth for one last breath of air. OTOH, a cool trillion is pointless if you can't spend it.

So much for the last breath of air. What about the one you're taking this very moment? What is it worth?

The value of an education

intellectual_coward asserts:

The common experience of many of the protesters is that of being crushed by an outrageous burden of high interest student loans. Today it is common for graduating seniors to carry $50,000, $75,000, or even $100,000 of debt.

Of course it's frightening to start your career deep in the red. But is it really "outrageous"? I'm not so sure. If there really is a free lunch to be had by getting educated, then in the long term, more people will do so, until there is no longer an advantage to doing so - when the expected lifetime income increase matches the increased cost of tuition (as more people seek a commodity, the cost of providing it rises).

An education has value, but who should pay for it? We might like others to pay for our own - that is the rational if selfish desire that seems implicit in the comment quoted above. But why? Why should my tax dollars make you rich by paying for your education? That does not seem fair either, does it? (A justification of such a subsidy might include second-order making-the-cake-bigger-rather-than-the-slice arguments.)

But why would an education cost $100,000? Back in the late 1990s when I got my university education, the tuition fees did not come close to that - the total might have been of the order of $15,000 (and included a change of direction when I realized biochemistry + physics was not a good career for me). A state subsidy would also have applied, but nothing like $100,000 worth of it. [1]

Perhaps part of the problem is that some sections of society have forgotten about applying capital cost-effectively. Maybe their universities need to learn to do more with less.

A politically incorrect counterargument is that not everyone has the same aptitude for a higher education. It certainly matches my anecdotal observations. If some people are born with a built-in advantage over others, it is natural that they would, in aggregate, earn more over their lifetime than those whose lack of talent consigns them to perform only undifferentiated labour - which anybody could provide, should they choose to. This may not be fair, that the genetic lottery determines one's prospects in life. It is, though, economically efficient - and stable.

[1] A University, particularly a private one, may want to pursue "profit" (by whatever name suits their mandate). A reasonable return on capital invested would be fair - but this return should be related to the prevailing interest rates. I don't imagine education as a particularly risky industry, so its return on capital should be fairly low. (Otherwise there would be more schools, until the return again matched the borrowing rate + (low) risk premium.) Keep this in mind when comparing what an education costs the school to provide, with its price to the student.