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The limits of liberty

(Please note, this bloggage inspired by Frontline) I have stated before my position that the government should remain out of the economy unless there is a market failure. Ideally, all commodities from food to utilities to housing to consumer goods could be provided by the market, competition pushing down the prices of all products. In reality this isn’t possible in many cases. In the case of most utilities, however, most people in the US have lived their entire lives under a system of regulated monopolies. The reason for this is that in a monopolistic system, the monopoly can charge anything that it wants; and utilities provide necessities, meaning that they can gouge people for as much as they want. That’s why regulations exist; in the case of electricity, the bottom line is that rates charged must be “just and reasonable” and that’s where all regulations come down to.

Of course, monopolies don’t allocate resources efficiently; and regulated monopolies don’t really make that much money. Hence the problem. Theoretically, this inefficiency means that a competitive system will always outperform a monopoly, even a regulated monopoly. Starting in the late 60s, the tide began to turn in the US politically towards divesting the government of regulatory responsibilities. Air travel deregulation has mostly worked fine. Long distance telephony has worked fairly well. Local telephone deregulation is too new to call. And then there’s electricity. See, in the old system, the utilities weren’t doing very well, because they were big, bloated masses of industry that were inefficient from not having to be in a competitive market, yet they weren’t allowed to charge the rates to cover their costs as they had them. So the utilities began lobbying for deregulation.

California was the first to run into problems, but won’t be the last. More or less, the economic advisors (lobbyists) that explained what would happen to the legislature post deregulation were withholding key pieces of information. They were predicating their assumptions based on a model of perfect competition, which just doesn’t happen in an industry like this. In fact, major barriers to entry into the energy market exist. First, the power lines that get the electricity to the state are owned primarily by one company, the Southern Company. The pipelines getting natural gas, which fires many power plants in California are owned by one company, the El Paso company. Much of the electricity is traded by Enron. None of these companies existed in their modern forms ten years ago – they were cobbled together to respond to the tide of transmission deregulation that began to come together with federal legislation passed in the early nineties. To say that these new companies are making money is a ludicrous understatement. Service is down, prices are up; and the basic question now is “what do we do?”

Here’s the basic dilemma for me and my philosophy. Although the government tends to muck up things it gets involved with, there are few alternatives. Asking the basic question of “who benefits?” yields a very ugly answer. Since deregulation began, a very few large corporations have made literally billions and billions of dollars. Where once that money went to inefficient monopolies in state and into tax coffers, the same money (and much more money; remember that the prices have risen across the board at a far greater pace than the rate of inflation)is now going to compensate people like Kenneth Lay, (previously named as a corrupting influence in the Bush administration) to the tune of a nine figure paycheck last year. And it surprises people that the Bush administration doesn’t want to institute (wholesale) price caps? Follow the money.

Bottom line: monopolies may be inefficient, but that doesn’t answer the basic question of who should benefit from the fruits of the economy’s production. Should we set up a system to benefit the many (the ratepayers) or the few (the corporations set up to make money in the new system)? Despite my antipathy towards the government, my utilitarian focus indicates that the former option remains the best one.

AWL right!

I dare you to read this link about the short-lived WWF character known as the Shockmaster without laughing out loud. Check it out: the Shockmaster was this dumb guy wearing a Stormtrooper’s helmet painted blue. Upon his debut, he tripped on the threshold of the door, dropping the helmet on the ground. I mean, how ridiculous is that? Unless you compare it to the misadventures of Doink the Clown, and the other clown wrestling pretenders, it’s untoppable.

From MeFi: Our president is a pimp. Ok, that’s harsh. The article just says he likes to help with the matchmaking going on among his staffers. This just seems a little bit sick to me. It reminds me of when I got on the debate team in college. “Never date another debater,” I was told. Have I mentioned that my wife was my debate partner? Heh heh heh.


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