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How the Free Market Rocked the Grid
sean_nestor sends in a story at IEEE Spectrum that begins:
"Most of us take for granted that the lights will work when we flip them on, without worrying too much about the staggeringly complex things needed to make that happen. Thank the engineers who designed and built the power grids for that — but don't thank them too much. Their main goal was reliability; keeping the cost of electricity down was less of a concern. That's in part why so many people in the United States complain about high electricity prices. Some armchair economists (and a quite a few real ones) have long argued that the solution is deregulation. After all, many other US industries have been deregulated — take, for instance, oil, natural gas, or trucking — and greater competition in those sectors swiftly brought prices down. Why not electricity?"
No, the solution is MORE regulation, not less.
The rates need to be regulated, and the private companies need to be taken over by nonprofit public organizations.
Every time deregulation is tried, consumers get shafted.
Yeah, Look at airplane tickets and how much they have gone down...
Or better yet, Phone companies! My bill is as low as... Egads! It isn;t. Help!
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"First things first -- but not necessarily in that order"
-- The Doctor, "Doctor
You mean like Wall Street or Enron?
There are no free markets. There are only markets controlled by governments and markets controlled by customers. The markets controlled by customers work out pretty well for customers. The markets controlled by governments work out pretty well for governments and the politicians that run them and the lobbyists who fund them and the corporations who make money because the politicians control the markets in their favor.
Don't piss off The Angry Economist
The IEEE publishing a political editorial like this really discredits them as a professional organization.
I've had enough abrasive sigs. Kittens are cute and fuzzy.
...a market for electricity will ensure nobody goes without electricity, presumably by the same process by which a housing market ensures nobody is homeless and an international food market has caused an end to world hunger.
The ideologues are back with a vengeance. After all that has happened, after the finance system collapsed (and showed that it wasn't really made of anything substantial in the first place) how can anyone still listen to market fundamentalists?
If we can put a man on the moon, why can't we shoot people for Apollo-related non-sequiturs?
Just look at all the "innovation" that companies like Enron brought to a deregulated energy market! Let's ask California how well that worked out for the average consumer. While we're at it we can look at deregulatory laws like the Commodity Futures Modernization Act and the repeal of Glass-Steagal that enabled such "innovation". The "free market" for oil is now run by speculators who can buy and sell contracts for millions of barrels of oil but never have to take delivery, creating false demand and squeezing millions of dollars a day from average americans as they have to pay over $3.00/gal to fuel their vehicles. What else has deregulation done? How about all those nasty little unregulated derivatives such as MBS(mortgage backed securities) that imploded the world economy? That's financial "innovation" like the world had never seen before. All thanks to deregulation, yay!
All things are subject to interpretation, whichever interpretation prevails at a given time is a function of power and n
For the same reason "life isn't fair"
As long as 1% of the total population controls 90% of the wealth, there is no such thing as competition or free market capitalism.
I like competition and I dislike government intrusion but there is a reason FOR government and that is to protect it's citizens, that includes protection from economic crimes as well as physical ones.
The middle class is shrinking regardless of which ideology is popular that month. People are losing their homes left and right, jobs are going over seas and yet still so many people are ignorant to the real issues.
Deregulating natural monopolies doesn't solve the problem. It just hands a blank check to a corporation chosen by the government to fuck it's customers however it chooses.
Free market is an oxymoron to anyone that actually understands what the two words mean.
From TFA:
Such arguments were compelling enough to convince two dozen or so U.S. states to deregulate their electric industries. Most began in the mid-1990s, and problems emerged soon after, most famously in the rolling blackouts that Californians suffered through in the summer of 2000 and the months that followed. At the root of these troubles is the fact that free markets can be messy and volatile, something few took into account when deregulation began. But the consequences have since proved so chaotic that a quarter of these states have now suspended plans to revamp the way they manage their electric utilities, and few (if any) additional states are rushing to jump on the deregulation bandwagon.
Yeah, so, how about not continuing this experiment with our critical infrastructure?
Not to mention that a business which a) has extremely high barriers to entry and b) is inherently a monopoly was never going to have much of a "free market" to begin with. Of course trying to force it to act contrary to its nature, by fiat, is only going to create problems.
As far as wisdom and foresight go, this is bottom-of-the-class material here.
It's amazing that there is so much debate about this. If you take a hard look at this debate, it's the same old story every time. It just gets rehashed every now and then as though it were a new issue, as though this "debate" were covering new ground. The truth is it never moves forward. It moves in circles. Really, how hard is it to understand that natural monopolies are not fertile ground for free-market principles?
I'm all for free markets. I want them to succeed. This one can't. The reason electrical service has higher prices, lower service, outages, and other problems when you try to treat them like free markets is because they are not free markets. You will never have an electrical free market until it becomes cheap, reliable, and cost-effective for each home to be "off the grid" and generate its own electricity. Until we come up with that kind of technology, we're going to need local monopolies to deliver electricity to us. Because monopolies are inherently abusive, they need reasonable regulation and close scrutiny.
Please can we stop presenting this as a new and interesting issue? It's neither. It's more like an algorithm that produces the same results each time it iterates.
It is a miracle that curiosity survives formal education. - Einstein
Ah yes, the universal "not really a free market" argument. It usually goes like this:
Libertarian:
The free markets are the solution to any economic problem! The more you deregulate, the better of you are!
Random dude:
Um, but then why, all the times we tried to deregulate, it became worse? *points out specific cases*
Libertarian:
That's because those still weren't free markets - you haven't deregulated enough!
Random dude:
So can you give some examples of real free markets then?
Libertarian:
No, the evil government backed by jealous socialist mob always cracks down on us. But you just trust me, when we actually get one, it'll be totally awesome for everybody.
As someone else recently said to Slashdot, libertarians are the guys who, if you ask them how to get out of a pit, tell you to dig down. If you dig for a while, and ask them how come the exit is farther than it were, they'll tell you that you haven't dug deep enough.
I'm sure they won't like the comparison, but it's very reminiscent of Marxists and other far-left groups saying "The Soviet Union/Mao's China/Pol Pot's Cambodia weren't truly communist". This pattern is quite common amongst ideologues of various descriptions, both on the left and right.
It doesn't matter what course you choose to take. If you leave the psychopaths in positions of power, then whatever system is used will only lead to further misery.
These problems can only be solved by the recognizing and removal of non-humans. I'd start at the banking level, remove the psychopaths from that system, undo usery, and then work down.
If the ability to experience empathy is a pre-requisite before one can be considered human, then Psychopaths are not human. They are a predator population which has embedded itself at the highest levels of power and social control. If you want to treat them kindly, then that's fine, but whatever happens, they need to be removed from their positions or we will continue to live in a state of war, poverty and misery.
-FL
What was the worst thing about California, it was regulation that brought about the shortages that caused the price spike. Retail prices were fixed. Fuel costs went up. Unprofitable generation went offline for for repairs, maintenance, or upgrades, or simply shut down.
This was followed by a mild heat wave. The result was rolling blackouts as the cheap efficient sources were inadequate. New generation and transmission was not built due to lack of profit.
That sounds like an argument for government involvement, not against. If power generation and transmission is a responsibility assumed by the government, then the government can do things a private corporation is loathe to do. It can build out capabilities ahead of, and in excess of, present demand, and it can run at a loss over periods of time as necessary.
Also, the recall era brown-outs were deliberate political ploys intended to raise public ire sufficient to support a recall of Governor Davis. Had the private utilities ran at a loss (perhaps with public subsidies, like we currently do with farms in the US, for the exact same type of reason), the brown outs would have been significantly less widespread.
The problem isn't that private corporations are efficient, the problem is that they are far too good at being efficient and don't know when efficiency should give way to the service of the public well being.
Read more history. Look up Pinochet and the "Chicago boys", read Chomsky, or if that's too dense for you than "Shock Doctrine" will cover the topic nicely.
http://en.wikipedia.org/wiki/Miracle_of_Chile