Re: Coercive Monopolies in Technical Markets (Intro)

From: Jeff Bone (
Date: Fri Apr 13 2001 - 12:08:23 PDT

BTW, I want to nip one argument in the bud right before it happens. I've been
arguing that, in an economic sense, networks are special. Some regulation proponent
is going to try to support my argument by pointing out that power grids are a kind of
network, and "just look at what deregulation of the power industry has done to
California." Response: thanks for the attempt at support, but no thanks.
California's power problems are the result of lingering *regulation,* not

First, it's worth asking the question "why can't California produce enough power to
meet its own needs?" The answer is regulation. Environmental regulation, NIMBY
initiatives, regulated consumer pricing, and other forms of regulation mean that
power providers cannot cost-effectively build enough production capacity to service
demand. This means that California *must* import power; regulations on the import
of power lead to the second problem.

The State of California mandates a maximum wholesale price that power producers can
pay for a kilowatt-hour. Power producers in neighboring states are unwilling to sell
electricity to California-based concerns at this price whenever it's lower than the
price they can charge other parties for the same kilowatt-hour.

You can't have your cake and eat it, too; you've either got to live with market
pricing, free trade of electricity, environmental deregulation, or rolling
blackouts. Looks to me like the choice has been made. Don't cry for those poor
folks in CA, though; whenever they get hit by a rolling blackout, they can just
leave the office, wander out into those great, beautiful protected South Bay salt
bogs, smell the nice clean air, and admire all the pretty, "endangered," and
protected Spotted Snootwhackers and Doodley Dungbeatles.


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