LegoPower77
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| reply to broadbander
Re: Will the data show regulation the way to go?
When I say free market, I don't mean a perfectly competitive one. Degrees of market concentration are unimportant, in some cases a highly-competitive market works best and in others, they don't. The processor market is super-concentrated, but it's damn cut throat, too.
A company that makes monopoly rent can and does offer a benefit because they have the resources for research and development. Standard Oil in 1870 sold refined oil at $26.4/bbl and had 4% market share. By 1911, they had brought the price down to $4.7/bbl and had 69% market share. Same scenario for Alcoa, in 1887 a pound of aluminum sold for $5-8, by 1941 it was down to 15¢/lb.
This is why the Hayek quote, "Enthusiasm for perfect competition in theory and the support of monopoly in practice are indeed surprisingly often found to live together."
said by broadbander  :Utilities are very odd and particular markets though, not exactly prithee to typical market rules. Fair enough. That Regulatory Reform article in my other post shows the "rightist" side of the public utilities conundrum.
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LegoPower77
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No, I fault the artificial market structure created by the politicians out in lotusland, though. Arbitrage is not evil. It's always the law of unintended consequences and the regulators failed because they're not all-knowing and set up incentive for eeevil businessmen to make a profit.
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morbo
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said by LegoPower77 :If you want to believe in conspiracies and such, fine. did you forget about the price manipulation in the California electricity market or are you just ignoring it?
there is evidence that this stuff has happened, so to just blame it on "conspiracies" is just sticking your head in the sand. |
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LegoPower77
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I agree with qualifications. I do think we're on the same page more than not. For one thing, we, as a nation would be much better off if we adhered to the principle of subsidiarity. But alas, state's rights=racism anymore.
Since you're in the industry, you may be interested in an academics take on New Zeland's attempt at deregulation. (The By-line is wrong, Vernon Smith is now at George Mason in Fairfax, VA.) Be warned, it is long.
Maybe you'd be interested, this is short, another professor at Mason has a weekly column, a recent one is on ideological point.
As long as we're talking ideology, I disagree slightly with your "grand ideological" sweeps statement. The only way subsidiarity is to work is if we adhere to the idea of limited government as set forth in the law. It's said we have a "living, breathing Constitution," but if that's so, then the law—the limit on government—"becomes a mere ball of wax" and there is no real limit on the powers of government.
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broadbander
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| reply to LegoPower77
There's nothing about free markets that guarantees Always Low Prices.
There is according to theory. Well, no, not low prices, but c.o.p plus the smallest fraction of one cent (if competition truly exists).
Utilities are very odd and particular markets though, not exactly prithee to typical market rules.
reply to morbo
said by morbo :
(it created an incentive to providers and the stock market players to manipulate prices as desired, under the guise of gaining free market efficiencies).
If you want to believe in conspiracies and such, fine. I can tell you, as a person who follows markets, prices oscillate back and forth for one reason or another. There's nothing we can do to stop the ebb and flow of things because as long as there are differences, conditions will always change.
The commodity markets actually reduce drastic price shocks because eeevil speculators are willing to take the risk of holding their wealth in a volatile good allowing the producer to have a stable business plan.
Regulation is not the panacea that will prevent people from having to confront costs (i.e., unlimited wants/limited resources). There's nothing about free markets that guarantees Always Low Prices. Always.© I don't know what the politicians out there said about deregulation; deregulation and free markets aren't the same thing. (Indeed, one cardinal requirement of free markets is contract enforcement, which naturally would require legal rules, i.e., regulation.)
All a common theme of my posts over the years is that we would, in most cases, have a superior outcome if we allowed the discovery process that entrepreneurs use to gain advantage be allowed to run it's natural course regardless of the structure of the market (even where there is a highly-concentrated [so-called monopoly] market). Government/regulatory oversight, while necessary to some extent, in one way or another erects a barrier to entry. We musn't be Utopians on one side or the other.
Agreed ... relatively. My years covering the utility industry have taught that the regional relative monopolies do indeed make alternative entries difficult. Because of the nature of grid, "alternative technologies" are often not alternative delivery systems, which would provide true competition.
Broadband is not a strict utility though, as there is indeed more than one delivery method and it is not a necessary "commodity" yet.
In your regulated areas, someone had to pay the price; do they pay higher taxes? go with fewer services? or possibly could they be free-riding on the nonregulated areas? (I don't know, and I'm not saying I do.) I do know the cliché, "there's no free lunch."
Most areas are regulated in some capacity (as they have to be with a grid that involves both public and private ownership/services). Municipal customers generally pay slightly less, but that's because municipal utilities have far smaller areas to concentrate resources on (and aren't trying to profit), but conversely, private companies have more power to use their money to make money and invest in the grid.
Broadband is a relatively similar situation, but younger and with more opportunity for competition (particularly in service provision) with the right hand (see my above post for my opinion on the matter), not too heavy, but not too light and very careful to engage local governments, as opposed to the less efficient federal government (federal government having exclusive and final regulatory jurisdiction over things that are best left localized has caused problems in nearly every industry it has happened in). |
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LegoPower77
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| reply to morbo
said by morbo :(it created an incentive to providers and the stock market players to manipulate prices as desired, under the guise of gaining free market efficiencies). If you want to believe in conspiracies and such, fine. I can tell you, as a person who follows markets, prices oscillate back and forth for one reason or another. There's nothing we can do to stop the ebb and flow of things because as long as there are differences, conditions will always change.
The commodity markets actually reduce drastic price shocks because eeevil speculators are willing to take the risk of holding their wealth in a volatile good allowing the producer to have a stable business plan.
Regulation is not the panacea that will prevent people from having to confront costs (i.e., unlimited wants/limited resources). There's nothing about free markets that guarantees Always Low Prices. Always.© I don't know what the politicians out there said about deregulation; deregulation and free markets aren't the same thing. (Indeed, one cardinal requirement of free markets is contract enforcement, which naturally would require legal rules, i.e., regulation.)
All a common theme of my posts over the years is that we would, in most cases, have a superior outcome if we allowed the discovery process that entrepreneurs use to gain advantage be allowed to run it's natural course regardless of the structure of the market (even where there is a highly-concentrated [so-called monopoly] market). Government/regulatory oversight, while necessary to some extent, in one way or another erects a barrier to entry. We musn't be Utopians on one side or the other.
In your regulated areas, someone had to pay the price; do they pay higher taxes? go with fewer services? or possibly could they be free-riding on the nonregulated areas? (I don't know, and I'm not saying I do.) I do know the cliché, "there's no free lunch."
Cost implies choice, so be proud to be pro choice. 
(Read how price gouging can be seen as good.)
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KrK
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Now that's a great reply.
I really can't add much to that at all. I've always believed the best policy would be have a private company that builds out the network, repairs it, upgrades it, and expands it, and charges people for access to the network, but they DO NOT provide any services themselves. IE they are an infrastructure company, and that is their job, and their income.
They charge all users equally, and allow the companies to choose what services/packages/entertainment they want to provide over the network, and consumers can pick and choose what services and packages they would wish to buy.
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morbo
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1 edit | reply to LegoPower77
if you want to get picky, then yes, deregulation didn't cause the price jump (it created an incentive to providers and the stock market players to manipulate prices as desired, under the guise of gaining free market efficiencies). however, it enabled the price jump. areas in texas that haven't deregulated (are still regulated) have not experienced that jump in prices. it's the same result for consumers: 20-30% more cost for the same electricity as before.
in the case of electricity, regulation has prevented all out gouging of consumers. no regulation = gouging. |
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broadbander
join:2005-07-21
Brooklyn, NY
| reply to LegoPower77
Can the government just arbitrarily set a price and have it be so?
Kind of, but if they do on a federal level, it will indeed be swallowed in debt and never accounted for with taxes, subsidies or bonds.
That is why such regulatory price functions are best left to local governments and the private industry together. Both have more direct finance accountability than the feds. |
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LegoPower77
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said by morbo :add Texas to that list. since deregulation, 20-30% increases. unbelievable. Dictionary.com defines "post hoc ergo propter hoc":
n : the logical fallacy of believing that temporal succession implies a causal relation
That is, literally, "after that therefore because of that."
Just because prices went up after deregulation doesn't mean the deregulation did it; it could have been the fact that NYMEX electricity (symbol JM) spiked first to 120 ¢/Mwh (Aug 05 and Dec 05) and then to above 140 ¢/Mwh (July 06). The average being between 60 ¢/Mwh and 80 ¢/Mwh.
Even with regulation, you can't have such an enormous price increase to an input and not have to raise rates.
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LegoPower77
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| reply to alanhdsl
I'm for prices reflecting reality. Regulation tends to mute the price function and therefor leads to waste.
In the case of electricity (and everything else for that matter), when people don't confront the full cost, they will waste it. Higher prices give incentive to conserve. High prices in a regulatory regime probably will not translate down to the consumer, but someone still has to pay for it. Can the government just arbitrarily set a price and have it be so?
If it's a choice between supply and demand, buyers and sellers setting the price or a politically-connected regulatory board setting them, I'll take the former even if that means high prices happen sometimes.
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broadbander
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| reply to KrK
A mostly un-regulated pseudo monopoly (or duopoly) that acts in their best interests only and deliberately creates high barriers to viable competition AND lax oversight and control.
I agree that is, in short, what exists (though the situation is murkier in certain areas). But I wouldn't call it "the" third option, it is "a" third option as there are many other options on the table.
My feeling is that the best of those other options is a system in which the federal government ....
1. plans an initiative a la Kennedy (we will put a man on the moon, it will be done by X) and then
2. lays down incentives (in the form of taxes, special exemptions, free cat food, whatever did the trick in other countries) for private companies to spread broadband to places with less profitability (and for those incentives to kick in when the jobs done) in partnership with the local municipalities,
3. encourage local governments to facilitate their own broadband networks (by giving credits to local utilities who do so) with some legislation guiding the policy for such a network (i.e. what circumstances need to be present for it be allowed [perhaps 1 or less current ISPs serving in any one part of town with X speeds)] either solo (a la Lafayette) or in partnership with a private provider (a la Philly),
4. pass laws ensuring that state regulators do not have the power to wholesale stop local governments from providing broadband or partnering with third partners to provide broadband (leaving the power to ban broadband in a particular region solely up to the local government and/or federal government),
5. and last, but not least, open the lines to service provider competition.
As with other utility systems, the regional nature of broadband means that special emphasis must be put on local cooperation. Other countries have managed that without centralizing the whole thing. I think we can, too. |
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KrK
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said by broadbander :implemented on a local level, with support, but not intervention, from the federal body. LOL. Ok, who's speaking with philosophical idealogy now. |
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KrK
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That may well be; But right now we've got the worst of both worlds. I think either:
1) You have a completely open free market with no barriers to competition entering the market, with a level playing field
or
2) You have a large monopoly player or incumbent that is tightly regulated and monitored for abuse, and pushed and prodded to do what is best for the nation (not just their own interests.)
I think either one of these solutions works the best.
However, what WE have is the bastard third option:
A mostly un-regulated pseudo monopoly (or duopoly) that acts in their best interests only and deliberately creates high barriers to viable competition AND lax oversight and control.
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"Regulatory capitalism is when companies invest in lawyers, lobbyists, and politicians, instead of plant, people, and customer service." - former FCC Chairman William Kennard (A real FCC Chairman, unlike the current Corporate Spokesperson in the job!) |
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broadbander
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1 edit | reply to KrK
said by KrK :said by broadbander :These are two extreme views neither of which works in utility or utility-like markets. The former is impossible because of physical limitations. The latter has little accountability and allow for massive loss or profit squander. Read it again. #2 has never been tried properly. Note it says tight oversight and control. What's been tried is "lax oversight and control". Many would argue that what we have NOW is the "solution between the two" and I'd intend to agree except it's the worst case scenario instead of the best of both worlds. No, solution implies it works, which of course what we have doesn't. What we have isn't at all what I was referring to, so philosophically even if that is what some would argue is "between the two" its irrelevant to my point and my proposed solution. The solution is multifaceted. Not really "in the middle" but "a mixture" of the two notions, implemented on a local level, with support, but not intervention, from the federal body.
EDIT: As for number 2 ... it HAS been tried and the result IS almost always what I described. It "has never" been tried "completely," because it cannot be tried completely, just as communism will never "really" exist. Which highlights my point. Theoretical ideological ways of thinking do not equate to real world results in this industry, and most industries, and well, life in general. I stand by my statement: the solution is complex and particular and the situation should be dealt with as comparable countries are dealing with it. |
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KrK
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1 edit | reply to broadbander
said by broadbander :These are two extreme views neither of which works in utility or utility-like markets. The former is impossible because of physical limitations. The latter has little accountability and allow for massive loss or profit squander. Read it again. #2 has never been tried properly. Note it says tight oversight and control. What's been tried is "lax oversight and control".
Many would argue that what we have NOW is the "solution between the two" and I'd intend to agree except it's the worst case scenerio instead of the best of both worlds. |
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broadbander
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1) Impossibly, particularly in a utility market, with limited avenues of distribution.
2) This setup has never worked in the long run and actually, a federally-sanctioned telecommunications monopoly (as opposed to state and regional co-op and municipal providers) has a lot to do with the current crop of broadband problems/confusion.
These are two extreme views neither of which works in utility or utility-like markets. The former is impossible because of physical limitations. The latter has little accountability and allow for massive loss or profit squander.
The solution is between the two and has so much to do with the particular place and the particular service/provider. The best solutions are pragmatic partnerships, not grand ideological sweeps. |
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KrK
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That may well be; But right now we've got the worst of both worlds. I think either:
1) You have a completely open free market with no barriers to competition entering the market, with a level playing field
or
2) You have a large monopoly player or incumbent that is tightly regulated and monitored for abuse, and pushed and prodded to do what is best for the nation (not just their own interests.)
I think either one of these solutions works the best.
However, what WE have is the bastardized third option:
A mostly un-regulated pseudo monopoly (or duopoly) that acts in their best interests only and deliberately creates high barriers to viable competition AND lax oversight and control.
--
"Regulatory capitalism is when companies invest in lawyers, lobbyists, and politicians, instead of plant, people, and customer service." - former FCC Chairman William Kennard (A real FCC Chairman, unlike the current Corporate Spokesperson in the job!) |
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alanhdsl
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The retail price was capped, in repsonse to the assertion that deregulation would make prices cheaper. It was to force the providers to live up to this promise.
Enron and company forced up the price on the wholesale side and tried to force the state to break the caps. If that had been allowed, the retail price would have tripled. Instead, the evil regulators kept the caps and sent the Enron guys to jail. Notice that despite continuing growth and not much new generating capacity, California has not had nearly as many problems since the supply manipulation was stopped.
If the position is that higher retail prices are a good thing in exchange for reduced regulation, fine, make that point to the public. But be honest about it and state right up front that higher prices are your goal. |
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morbo
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said by major marco I mean, look how beneficial electricity deregulation has been for the State of California. Utils are practically free.
[/BQUOTE :add Texas to that list. since deregulation, 20-30% increases. unbelievable. |
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