misconceptions and deregulation


Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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4 Responses

  1. Avatar Sully Fick says:

    Unfortunately, I remember a lot of these same arguments when I was living in California in the late 90’s and early 00’s. Phil Gramm pushed through the legislation to deregulate CA’s energy commodity trading for his buddy Ken Lay.

    And, we all know what happened next: price gouging, rolling blackouts, huge increases in prices, less competition, more monopolies, etc. People DIED because of the games that Enron played, and Enron was allowed to play games because the industry was deregulated (using many of your arguments, E.D. Kain).

    So, forgive me for not believing that deregulation of industries is always a good thing. The arguments (at the time) were that more competition was needed, that it would lower prices, provide better service, blah blah blah.

    Instead, California got the Governator, who has now succeeded in destroying the parts of California that Reagan hadn’t already destroyed.

    “Deregulate, baby, deregulate!” makes about as much sense as “Drill, baby, Drill!”

    Now, in idealistic terms, competition is a fine thing. In actual practice, legislation that deregulates a large industry (like banking, or energy, or health care) has never provided an increase in meaningful competition – it always favors a single monopoly (or a very small group). It is written by humans, after all. Well, politicians, I guess, but some of them are human, I think.Report

    • Avatar E.D. Kain says:

      I already addressed this issue here. I wrote then:

      With all due respect, this is simply nonsense. The problem was not deregulation, it was government price-caps on energy costs. Utility companies could make more money shipping power out of state than keeping it in state. In fact, the only way for utilities to remain in business given tight price controls was for utility companies to sell to other states which led to a shortage at home. In a truly deregulated market prices would have reflected supply. In fact, this would have led to people conserving more power rather than using up energy that was priced artificially low by the state. Truly deregulated markets would reflect actual prices and force people who used too much power or water or gas to scale back usage.

      If you want to see real rolling blackouts, keep costs artificially low through government intervention, which will also keep innovation to a minimum. Who needs to invest in alternative energy if existing energy is kept cheap and reliable?

      Beyond this, there is the simple fact that criminals will commit crimes one way or another. Should their have been better oversight so that Enron could have been discovered earlier on? Sure. But does that mean the problem lies in deregulation? Not at all.Report

      • Avatar Sully Fick says:

        This is overly-simplistic.

        1. PG&E and SDG&E were forced (by the deregulation) to sell off >50% of their generating capacity to private companies (like Enron) and were then forced to buy back the power from those private companies. This had NOTHING TO DO WITH PRICE CAPS.

        2. The FERC was to step in and regulate those newly privatized energy generators, so that they could not gouge customers. They DID NOT. There is a lot of evidence that politics played a role (include influence from the White House). This had NOTHING TO DO WITH PRICE CAPS.

        3. During warm days, the demand crept close to supply, but never exceeded it. The rolling blackouts and other problems occurred because Enron (and others) shut down their newly privatized generators for “maintenance”, even though no maintenance was needed. This pushed supply below demand and they reaped ludicrous profits. This had NOTHING TO DO WITH PRICE CAPS.

        4. This DOES have something to do with price caps. Retail prices were regulated. Wholesale prices were deregulated. I’m sure you can see the problem in that. So, it would be fair to say that some of the problems were due to retail price caps. It would also be fair to say that some of the problems were due to deregulating wholesale prices. Glass half full or half empty?

        5. Before the whole privatizing thing, energy production and distribution in CA was excellent for decades, with no rolling blackouts or sudden price increases. This does not show a causal effect to privatization, but I think it sure smells like it.

        I find your argument limited and somewhat hollow. Certainly price caps played a small part, but they were not the only reason for the problems. Deregulation played a significant role in this, despite what you want to believe.Report

  2. Avatar Bob Cheeks says:

    E.D., dude, I think you have a very good foundation to work with in your recommendations. Now, who’s going to pay attention?
    B.O. and his epigones have their agenda, they’re not interested in ‘fixing’ anything.Report