power crisis
I was a civil-libertarian "liberal" before I became an ethically-consistent libertarian.
(Although, unlike the ACLU, I've never seen the 2nd Amendment as an aberration within the Bill of Rights, and it always bothered me that my fellow "liberals" opposed it so ardently and so irrationally. My friends called me an "armed liberal" back before they and I learned the term 'libertarian'.)
I was an ethical libertarian (E1) before I became an economic libertarian (E2). This means that I accepted the Non-Aggression Principle as an ethical basis for libertarianism, long before I understood enough economics to fully grasp the practical consequences of government intervention.
The Non-Aggression Principle formalizes a way of living that many people already believe in:
No one has the right, under any circumstances, to initiate force against another human being, nor to delegate its initiation.
Still under the sway of my liberal indoctrination, I accepted that the practical consequences (P2) of laissez faire might be negative, and that intervention might therefore have positive results, but I've never believed that the ends could justify the means. That's what it means to be ethically principled (P1).
Relatively late in the game, I started to learn economics, and came to learn that my statist indoctrination had been a pack of lies.
The evils of deregulation, so called, turn out to be the results of intervention, not the consequences of free markets at all.
Even without knowing enough to guess at causes, I became very skeptical of media portrayals of "deregulation". This meant that when California had its power crisis of three or four years ago, I knew the media had to be wrong to portray it as the dread effects of deregulation. Had I begun to read economics, I'd have known immediately that shortages can only be caused by price-fixing, and that free pricing will balance supply and demand.
I posted yesterday's rant against emergency price fixing before I read the following passage in Thomas DiLorenzo's new book, How Capitalism Saved America:
When the government imposes a price ceiling -- that is, mandates prices that are below what the free market would generate -- it artificially boosts consumer demand while reducing incentives for supply, which causes shortages. To see the negative consequences of price ceilings, one need look no further than the electric power catastrophe in California that began in 2000. The state government placed price controls on electricity and at the same time (to pander to the environmental lobby) enacted regulations that effectively prohibited electric companies from generating new power. It doesn't take much more than common sense to realize that this was a sure-fire recipe for the electric power shortages that have plagued California (though the anticapitalists insist on blaming the shortages on "deregulation," even when the electric power industry is heavily regulated).
2 Comments:
I used to be a socialist if you can believe that.
The price cap was a symptom of the problem, not the cause.
In this specific case, the limited deregulation was the problem. Not because deregulation is inherently bad, but because energy can't be commoditized (is that a word?).
Pepsi cola is a commodity. Unlike energy, it can be transferred from person to person over any distance, and it can be saved or consumed by anyone.
You can make a market for and trade Pepsi cola very easily, a sixth grader could figure out how to do it. To make a market for energy is a monumental technical task. The larger the distance you transport it, the less you have. It can't be saved, only used. The transport capacity is severely limited and incredibly expensive to expand. The list goes on...
The problem occurred when some smart people (at Enron and other places) found a loophole in the market system that was set up. They found that they could artificially inflate the price of energy in specific locations (California) and reap great rewards. This was not because of economic factors, but because of the specific technical problems inherent in the transfer of energy. For political reasons this forced the California government to set a price cap which naturally results in shortages. The cap wasn't the problem; it was only a sign that something was rotten in California.
The technical problems with energy markets also caused another major problem you might have heard of, the NE blackout. As I said above, the transport capacity of electric energy is severely limited. A natural economic outcome of free trade in such an environment is that the transport capacity is quickly maxed out and remains pegged there.
This happened in the NE. Then one of the major energy transport mechanisms (or loops) failed. The system automatically rerouted through another loop, but because it was already maxed out, it quickly overloaded, failed, and the power was diverted to the next loop. This cascaded into a massive system failure that would have never happened if the loops where not saturated by unnecessary power transfer caused by the newly de-regulated energy markets.
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