That is a great question. There are various types of auction systems that can be used. See [1] for an overview.
> If the state owns land with a billion barrels of tar sands oil on it, should they sell it for $1/barrel? $2/barrel? Should it accept the lowest bid that the market will put forward?
Why would they accept the lowest bid? Typically in an auction one accepts the highest bid (except a Vickrey auction, where the price paid is the second-highest bid). This is particularly true in the context of privatization because resources should be allocated to those who value them most and thus have the strongest incentive to use them efficiently [1].
> What if the state sat on the land for 10 years - would it get a better bid then? Maybe it makes sense to wait until the time is right to privatize?
It depends on the government's goals. The underlying assumption of privatization is that markets are better resource managers than central planners (e.g. due to the price mechanism solving the economic calculation problem). If a government wants to maximize efficient allocation of ownership rights, then it should privatize as quickly as possible using one of the aforementioned approaches. If a government just wants to maximize revenue for themselves (see Venezuela), well, then anything goes.
> Deciding when, and for how much, to put resource-bearing land onto the market is a highly political, non-market-driven process.
The issue is indeed highly political. However, it is by definition also market-driven. Unless by "non-market-driven" you meant not exclusively market driven, in which case I would agree.
> You can't just say 'privatize it', and hope that markets will find the optimal outcome. (Optimal for whom?)
Optimal for society at large, through efficient allocation of ownership rights. We do not have to rely on "hope" since there is a lot of empirical and theoretical evidence that markets are better resource-managers than governments.
What if the highest bid that you receive today is not as high as what you would receive in 10 years? The government owning land, is by proxy, the public owning land. As a member of the public, and as such, a minority shareholder in that land, I want to either see the proceeds from its use be distributed to me, or, if it will be sold, to be sold at a good price [1]. If a buyer willing to pay such a price is not found today, then I'd rather sit on that land for a decade, then see it go for pennies on the dollar. As a shareholder, I don't give two rats asses about giving up my stake so that someone else could optimize overall economic productivity today. I want to optimize the overall gains for myself, overall.
> Optimal for society at large, through efficient allocation of ownership rights. I don't understand your use of the term "hope", since there is a lot of empirical and theoretical evidence that markets are better resource-managers than governments.
At its extreme, the most efficient allocation of ownership rights would lead to the government selling off all the oxygen in the country, and you having to pay some rentier, just so that you could breathe. Optimizing for situations like this is a fringe, highly ideological position.
[1] Markets aren't always liquid, there are, at any point in time, few buyers for billions of dollars worth of land, the few bids may not be competitive, you may not get your money's worth if you start a resource firesale tomorrow.
> What if the highest bid that you receive today is not as high as what you would receive in 10 years?
What if it is lower?
And if the government has some special knowledge as to what oil prices will be in the future, it should instead buy a bunch of oil and openly trade on the market.
I simply do not believe that the government has this special knowledge or is significantly better than the market.
If you want to reduce risk, you could instead sell the land over time. IE, sell x% of the land every year, over the next 10 years.
The risk that prices will go down is just as a big of a problem as the risk that prices will go up. I see no reason why one should choose status quo bias in favor of keeping unused land that might go up or might go down.
You raise an interesting point in your first paragraph. However, no man is an island and this is especially true for players in a market economy. Improvements in efficiency at the societal level benefit you at the individual level, and conversely, the opportunity cost of foregoing such improvements harms you as well.
Theoretically, one could wait 10 years to maybe get a higher payout (if such a thing weren’t already reflected in the current market price). However, I can’t think of a real-world example where doing so would offset the opportunity cost of lost efficiency during the intervening years.
> At its extreme, the most efficient allocation of ownership rights would lead to the government selling off all the oxygen in the country, and you having to pay some rentier, just so that you could breathe. Optimizing for situations like this is a fringe, highly ideological position.
You find this bizarre because oxygen (at atmospheric concentrations) is not (currently) a scarce resource on Earth, so it makes no sense to assign property rights over it. In situations where oxygen becomes a scarce resource, like space stations or planetary colonies, you can bet there will be a market for oxygen. That is, unless technology makes it feasible to produce in such abundance that the price goes to zero.
There’s already a market for pure oxygen needed for industrial uses, so there’s nothing verboten about oxygen being priced. In that sense, it’s just a resource like any other.
That is a great question. There are various types of auction systems that can be used. See [1] for an overview.
> If the state owns land with a billion barrels of tar sands oil on it, should they sell it for $1/barrel? $2/barrel? Should it accept the lowest bid that the market will put forward?
Why would they accept the lowest bid? Typically in an auction one accepts the highest bid (except a Vickrey auction, where the price paid is the second-highest bid). This is particularly true in the context of privatization because resources should be allocated to those who value them most and thus have the strongest incentive to use them efficiently [1].
> What if the state sat on the land for 10 years - would it get a better bid then? Maybe it makes sense to wait until the time is right to privatize?
It depends on the government's goals. The underlying assumption of privatization is that markets are better resource managers than central planners (e.g. due to the price mechanism solving the economic calculation problem). If a government wants to maximize efficient allocation of ownership rights, then it should privatize as quickly as possible using one of the aforementioned approaches. If a government just wants to maximize revenue for themselves (see Venezuela), well, then anything goes.
> Deciding when, and for how much, to put resource-bearing land onto the market is a highly political, non-market-driven process.
The issue is indeed highly political. However, it is by definition also market-driven. Unless by "non-market-driven" you meant not exclusively market driven, in which case I would agree.
> You can't just say 'privatize it', and hope that markets will find the optimal outcome. (Optimal for whom?)
Optimal for society at large, through efficient allocation of ownership rights. We do not have to rely on "hope" since there is a lot of empirical and theoretical evidence that markets are better resource-managers than governments.
[1] https://link.springer.com/chapter/10.1007%2F978-3-642-60825-...