Well, since I grew up in California let me say a few quick words about the crazy California energy crisis. There is a growing chorus of conservative columnists who say that the crisis isn’t the result of too much deregulation but too little. (You know who they are!) It’s an argument as foolish as it is elegant.
Several California power companies face looming bankruptcy because the cost of the electricity they buy was deregulated but the prices they are allowed to sell at remained capped. So their prices skyrocketed but their revenues remained flat because they couldn’t raise their rates.
Now along come the gaggle of deregulation wiseacres who say: Wait a minute. Of course this isn’t working! You can’t half-way deregulate. You have to do it or not do it. Deregulate all the prices or none. If you hadn’t left in the caps on utility rates, prices would has risen, the whole system would have stabilized, and these utilities wouldn’t be on the brink of going under and dragging the whole state with them.
This is true, of course. But assertions can be true, and irrelevant, and even moronic all at the same time. And this one certainly qualifies.
You don’t get consumers to vote for deregulation by telling them their prices will go up. You entice them by telling them their prices will go down. And thus to make sure they’re not being hoodwinked voters will often require some guarantees. And thus the caps.
If rates were going to skyrocket, why do it in the first place?
Now the dereg floggers will argue that once all the magic of the market got going, incentives would kick in, new production would come on line, and prices would just fall and fall and fall.
Don’t bet on it.
Lots of my lefty friends can’t get the logic of markets through their skulls and refuse to see the benefits of market forces in many aspects of economic life. Phones are the key example, of course. But the applicability of market forces to all aspects of economic life is a classic bogey for high-IQ simpletons whose minds are apparently not big enough for more than one good idea.
Phones are one thing; electricity is different. Why is electricity different? More on that later.