In reviewing my previous blog entry, it is possible that some might conclude that I am not fond of capitalism. Allow me to disabuse this entire notion. I am an ardent advocate for capitalism. For the most part, my fervent advocacy relates to three basic truths. There is not another economic system conceived in the mind of man that works as well. Capitalism when purely and properly implemented represents the cleanest, and the least encumbering method of matching consumers with producers. And lastly it is the method by which the largest portion of a given population can be given the largest amount of the freedom they were endowed to have.
In my previous post, I took to task certain aspects of the economic model with reference to the electrical grid. I used words like slavery, balkanization, and oligarchs. I felt then, and I still feel now that those words were an accurate critique of that sector of the economy. In large measure, Adam Smith would not recognize his economic theory being applied to this economic segment.
The utility sector is by and large governed by the worst words in the economic lexicon, necessary monopoly. The two words are largely oxymoronic in nature, because rarely are they ever true. Also these monopolies obviate the key elements of a functioning capitalist system. It renders without relevance competition and choice. The two elements are the two key weapons that ensure the price paid by the consumer is the best and fairest price available in the market.
As an aside, Ohio, my home state, is currently experimenting with a model that is supposed to end local and regional monopolies. The idea is a good one. The end result however as currently implemented hasn't gone far enough. It hasn't introduced true competition to this market segment. It has granted the illusion of choice. Consumers have a range of options to choose from, but the power generation is still largely done from the same companies and same locations. So in essence only the front office business functions have been opened to choice. The wholesale per kilowatt part of the equation, the most important part of the equation of competition, is exempted from competition.
Some would argue that this part of the equation needs to be exempt to guarantee viability of the market and the companies within it. I find this argument to be pure and unadulterated excrement. We either force full and complete competition in a market segment or we don't. Half measures lead to an illusory façade in which competition can be claimed, while it is not actually happening.
The utility segment needs to be made subject to true competition. The consumer needs a marketplace for energy choices that is free, fair, open, and fully competitive. Anything less harms the consumer unfairly and is an impediment to the free exercise of consumer freedom and economic choice.
Some argue that the energy sector is different. They say that allowing multiple players to fully enter the market creates duplication of utility infrastructure and clutters an already clutters an already cluttered landscape. There are some valid points at which I would grudgingly acknowledge some acceptance of validity. I would respond we do not tell car manufacturers that all cars must be built in a single location and transmitted along the same delivery path to the consumer. And those potential car market entrants should not be allowed to build and own the plant to build their own cars or the means to deliver their products. If we don't say that to this category of players, because it would impede competition there; then we shouldn't say it here.
For me, capitalism is a binary state. It is either a one or a zero. It either exists or it doesn't Capitalism is like democracy. It is messy. It doesn't yield clean, linear results that actuaries and accountants and policy makers can see clearly on a spreadsheet. Other command driven economies do this, but they harm consumers and largely fail every single time they have been tried. They restrict choice and they enslave the participants.
Balkanized necessary monopolies run by the oligarchs that have bought, or bribed their way to their positions are a general menace to the public good. They harm the consumer. They limit choice unnecessarily. They are an impediment to the public good. They cause consumers to pay higher prices than would otherwise happen.
The logic of this market segment baffles me. Microsoft became a monopoly that our government grew wary of and subjected to strict oversight and scrutiny. The government even found it necessary to sue them over their monopolistic behavior. They said their activities harmed competition within the market. They said their actions harmed the consumer. If however Microsoft was a player in the utility market instead all their activities would have been acceptable. They would never have been sued. They likely would been praised as a reliable and valued partner.
In short, radical change needs to come to the energy sector. Capitalism needs to be applied there. Adam Smith's teachings need to go there. The consumer is in need of relief from the yoke of these necessary monopolies. Only in doing so will we uphold the virtues we claim to cling to and hold dear.
In my previous post, I took to task certain aspects of the economic model with reference to the electrical grid. I used words like slavery, balkanization, and oligarchs. I felt then, and I still feel now that those words were an accurate critique of that sector of the economy. In large measure, Adam Smith would not recognize his economic theory being applied to this economic segment.
The utility sector is by and large governed by the worst words in the economic lexicon, necessary monopoly. The two words are largely oxymoronic in nature, because rarely are they ever true. Also these monopolies obviate the key elements of a functioning capitalist system. It renders without relevance competition and choice. The two elements are the two key weapons that ensure the price paid by the consumer is the best and fairest price available in the market.
As an aside, Ohio, my home state, is currently experimenting with a model that is supposed to end local and regional monopolies. The idea is a good one. The end result however as currently implemented hasn't gone far enough. It hasn't introduced true competition to this market segment. It has granted the illusion of choice. Consumers have a range of options to choose from, but the power generation is still largely done from the same companies and same locations. So in essence only the front office business functions have been opened to choice. The wholesale per kilowatt part of the equation, the most important part of the equation of competition, is exempted from competition.
Some would argue that this part of the equation needs to be exempt to guarantee viability of the market and the companies within it. I find this argument to be pure and unadulterated excrement. We either force full and complete competition in a market segment or we don't. Half measures lead to an illusory façade in which competition can be claimed, while it is not actually happening.
The utility segment needs to be made subject to true competition. The consumer needs a marketplace for energy choices that is free, fair, open, and fully competitive. Anything less harms the consumer unfairly and is an impediment to the free exercise of consumer freedom and economic choice.
Some argue that the energy sector is different. They say that allowing multiple players to fully enter the market creates duplication of utility infrastructure and clutters an already clutters an already cluttered landscape. There are some valid points at which I would grudgingly acknowledge some acceptance of validity. I would respond we do not tell car manufacturers that all cars must be built in a single location and transmitted along the same delivery path to the consumer. And those potential car market entrants should not be allowed to build and own the plant to build their own cars or the means to deliver their products. If we don't say that to this category of players, because it would impede competition there; then we shouldn't say it here.
For me, capitalism is a binary state. It is either a one or a zero. It either exists or it doesn't Capitalism is like democracy. It is messy. It doesn't yield clean, linear results that actuaries and accountants and policy makers can see clearly on a spreadsheet. Other command driven economies do this, but they harm consumers and largely fail every single time they have been tried. They restrict choice and they enslave the participants.
Balkanized necessary monopolies run by the oligarchs that have bought, or bribed their way to their positions are a general menace to the public good. They harm the consumer. They limit choice unnecessarily. They are an impediment to the public good. They cause consumers to pay higher prices than would otherwise happen.
The logic of this market segment baffles me. Microsoft became a monopoly that our government grew wary of and subjected to strict oversight and scrutiny. The government even found it necessary to sue them over their monopolistic behavior. They said their activities harmed competition within the market. They said their actions harmed the consumer. If however Microsoft was a player in the utility market instead all their activities would have been acceptable. They would never have been sued. They likely would been praised as a reliable and valued partner.
In short, radical change needs to come to the energy sector. Capitalism needs to be applied there. Adam Smith's teachings need to go there. The consumer is in need of relief from the yoke of these necessary monopolies. Only in doing so will we uphold the virtues we claim to cling to and hold dear.
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