mises.org — There were thousands who were without air conditioning, lights, refrigeration, internet connections, and, well, modern life generally.What do the consumers do about it? Keep paying the bills, to the same company that let them down. They can't switch. They can't influence the production process. They are powerless in more ways than one.
Jul 27, 2006 View in Crawl 4
Closed AccountJul 27, 2006
yeah, your right. When everyone wants something and there isn't enough of it to go around, the market system uses prices to allocate resources to those who have the highest demand for it, while those who demand it less seek alternatives. This is called efficient allocation of resources.On the other hand, having government regulation means you either wait in line for days (think soviet union) or you just can't get any at all no matter how the much you are willing to pay.It is very poor of people to equate causation just because one event follows another. Yes gas prices are set by market prices, but no one ever claimed this would lead to lower prices. It is private companies that are driven by profits which seeks the most efficient way to produce and market gasoline. If you wish to go back to price controls, think of long long lines that you will be witting in for hours, just like in the 70s when we had price controls on domestic production of oil. Your price would not do anything to increase supplyhigher prices right now are resulting from higher world demand. The best that we can hope for is that the oil companies make a lot of money. This will signal to other people to invest in energy production and will help increase supply to match our growing demand. Just look at all the alt. fuel companies right now that are popping up because they see profit potential.Forgive me for ranting
nathanflJul 27, 2006
I live in Florida and underground power lines are a godsend ... until they go out, then they take longer to fix. doh!
Closed AccountJul 27, 2006
@kodakWind turbines might be better, but I don't know if my neighbors will like a giant wind turbine in the middle of my lawn. unless there is some small inconspicuous (on the level solar panels are fairly inconspicuous) turbines out there I don't know about...
luyseyalJul 27, 2006
daldredge:You are completely right. Here in Austin, on the Greenchoice program, our evil government monopoly rapes me for $0.0525 for the first 500 kwh and assaults me for $0.0952/kwh up to a few thousand (I believe -- I've never had a bill over 1500kwh). Maybe I should also mention that I got a massive rebate for installing a new HVAC system to replace the original that came with the house.Regulation only makes sense for a few things and power is one of those. -l
tedcJul 27, 2006
I can't think of a single place in the world where fully deregulated and privatized electricity has worked. Electrical distribution is a natural monopoly, folks. If you think opening it up will foster competition, you're dreaming. Any private company running your grid is going to have a strong incentive to engineer a shortage. That way they can jack up the prices on a deregulated market as they are "forced" to import from other jurisdictions. Here in Ontario, they have been experimenting with deregulation, and the government had to hastily intervene amid consumer outrage when they saw the market rates soaring to as much as 40x their base level during heat waves. I can't wait for them to try privatization next...
personatechJul 28, 2006
Wow, I don't know where to begin..."No, competition with basic utilities is a horrible idea. I was in CA when it was deregulated... "Myth #1: The "deregulation" of the California power grid. The fact is, one set of regulations was exchanged for another. Strict environmental controls resulted in no additional powerplants coming online despite the continued growth of CA's population. Price controls resulted in no incentives on the part of the public to conserve. Price controls also provided no incentive to power companies to purchase power out-of-state sinced they would lose money on each megawatt they purchased."I worked at a particle accelerator there and we had to shut down most of the systems b/c of the severe power shortages which were all faked by the power companies in an effort to artificially decrease supply, raising the cost of power."Myth #2: Power companies "faked" outages to artificially decrease supply. See my response to Myth #1."The moment things are privatized, the company is REQUIRED by law to turn a profit... Meanwhile, state run services can run at a loss, and this has been shown to help a struggling economy during hard times."Myth #3a: "The moment things are privatized, the company is REQUIRED by law to turn a profit"Say what?! I know of no instance where government REQUIRES a company to turn a profit. There may be price regulation (here in NC, that includes most utilities and the insurance industry) where the industries apply for and must justify rate increases.Myth #3b: State run services can run at a loss, and this has been shown to help a struggling economy during hard times.State-run services running at a "loss" in fact never do, they are simply subsidized by taxpayers OR they are financed by growing government deficits. The results are a mix of higher taxes, growing inflation, or the devaluing of the dollar. How do any of these benefit the consumer?
nybble41Jul 28, 2006
@taylorhaywardOr we could just turn the utilities into private companies, which would implement the spirit of your idea much more efficiently than some arbitrary pay-for-performance scheme. The profit-or-loss for a private utility company--and thus the investors who control its actions--would mirror its success at supplying electricity to the most households at rates that adequitely subsidize the required infrastructure (and thus prevent consumption of capital, the failure to save for the replacement of failing infrastructure).
csmerrittJul 29, 2006
@bigdavediodeHow can you be too principled?
ccranJul 29, 2006
Well, economics is a social science, despite the fact that it is still approached by most economists (and certainly most lay folk) as purely empirical. The article makes an economic argument. I don't see how it is any more "view point" driven than a Keynesian approach.
vdaliessioJul 30, 2006
Electric power (so-called 'deregulation' to the contrary)is a fully-regulated government -enforced monopoly from top to bottom. There is nothing, repeat, nothing free market about the power grid at the national, state, or local level. This is the fundamental problem underlying the increasing failures of the system. Despite generating more watts than ever, generation, transmission, and distribution cannot efficiently meet demand, because they do not have the information generated by free markets. A free-market approach would expose these inefficient maintenance-deferring cash cows to needed discipline, resulting in a better order of supply and demand. The reason the public utilities increasingly fail to meet demand is analogous to the calculation problem Mises described under socialism - no one knows the real cost to supply any given kWh, because there has never been a market to determine it.California's notorious deregulation scheme fixed retail prices charged to consumers, while freeing some generation and transmission from regulation, leaving huge monopolies in those sectors free to raise prices to whatever level they wished, which they did. The distribution companies could not raise their prices to meet demand and had to shut down. The mayhem that ensued got Gray Davis recalled. Those commenters who believe that electricity generation and distribution are "natural monopolies" don't have a clue - electricity generation is extremely flexible and scalable, and given a free market it would cease to be an issue. Electric monopolies are no more "natural monopolies" than telephone (see wireless, VoIP) or radio & TV (see satellite).The libertarian solution? Complete, total deregulation of electricity. Let all who want to provide, provide, retaining all liability for their generation, transmission, and distribution, using their own property that they purchase with their own money. If voters then vote down new generation, transmission, or distribution under this scenario (although they won't have much power to do so), they will deserve to sweat in the dark.
dacyacAug 3, 2006
If I had my druthers, I would rather live in an anarchistic, free market society. Heinlein's _Future History_ on New Beginnings is one of my favorites of all times. That said...It is an act of faith to say that a "free market" could build and maintain the type of infrastructure required to live the lifestyle we have all become accustomed to. It has never been tried on a scale much larger than the small towns of the American West (and at that inadvertently and not deliberately.) And never with a level of technical complexity beyond the horse and buggy.I recall when I was active in libertarian politics that there was talk of buying an island in the pacific to give it a go. Don't know that anything ever came from it but talk. Until there is data that shows how private companies can compete and provide infrastructure services, I will remain skeptical. Until someone walks the talk, claims that a free market can do this or that is just that, words based on an act of faith. Faith don't run the air conditioner. (Though faith could reduce the need for air conditioning.)
vdaliessioSep 2, 2006
Flag all the anti-Mises posts as trolls.Misesians are interested in economics first. You need to leave out emotional or political responses to a problem and look at the economics only. Only then can you see what the actual solutions are, as opposed to the knee-jerk responses I have been seeing here.Electricity generation produces a good. Electricity transmission is an inter-industry service. Distribution is a retail service. These three businesses are related, but fundamentally different from each other. The first big mistake made is treating them like they are one big "thing", which has been the state of things since it began. The next big mistake made is thinking that more of the same thing that is failing (regulation) is somehow going to solve the problem created by regulation, which is a mismatch of supply and demand.To repeat, regulation is the PROBLEM. It keeps out generation and distribution that could compete with the current monopolies. Regulation completely benefits the PRODUCERS. Wake up and realize that if you support regulation, you are opposing your own economic interests.Examine the ongoing evolution of telephony viz-a viz broadband. Finally some cracks are showing in the 100-year-old regulatory monopoly of POTS. The cracks are whre the free market shows through (VoIP, etc). How much better off would we be / have been if there were no regulation?