“It’s a very regulated market, so I wouldn’t call the current state a ‘free market’ in any pure sense.” ( – Michael Giberson, R Street, October 27, 2023)
The understatement of the year, political economy-wise? I’ll take it, just as I did with Lynne Kiesling’s belated acknowledgement that the “knowledge problem” applied to ISOs/RTOs (yesterday’s post).
Is the Kiesling/Giberson obfuscation of today’s centrally planned wholesale market (and a government monopoly to boot) coming to an end? For more than a year, I have begged both Lynne and Michael on social media to simply define what is a free market in electricity–and compare that to the present governmental system.
“I will not dance to your tune,” Lynne answered once in the heat of battle, reversing her no-response, disengagement strategy. And now Giberson, almost as an aside, has put a trump card on the table.
So although Lynne (still) steadfastly refuses to define what is a real free-market in her area of specialty, her uber ally Michael Giberson gave a backdoor answer that was good enough.
Here is the exchange where it happened, and my response.
Rob, in this thread the issue is the definition of pseudo market. Tom hasn’t weighed in on his meaning, Chris suggests it occurs when one tries to turn a natural monopoly into a market, and you claim the natural monopoly is a creation of government intervention.
My view remains we can intelligently discuss the “electricity market” as referring to places real or virtual where willing buyers and willing sellers transact electric power. These markets reflect clear property rights, well enforced contract rights, and venues for resolving disputes. These are characteristics of well functioning markets. It’s a very regulated market, so I wouldn’t call the current state a “free market” in any pure sense. Nonetheless, we have moved approximately a light year closer to a world of voluntary economic interaction in electricity as compared to 30 years ago in the United States.
You seem worried that MOA impinge on property rights of transmission owners. 30 years ago transmission was a fully regulated sector of the industry; it remains almost entirely fully regulated. Both before and after reforms the terms and conditions of transmission use remain dictated by regulators.
I responded to Giberson:
You stated: ” … It’s a very regulated market, so I wouldn’t call the current state a ‘free market in any pure sense.”
YAY! Do you realize how hard this was to get this out of you? (Lynne, speak now or hold your peace!)
This joins Lynne’s “synthetic theory of regulation and technological change” that is …. the MOA model of ISOs/RTOs.
So as an intervention, it is subject to both the knowledge problem and the governance problem. Austrian economics and Public Choice economics. (And property rights theory)
This forms a basis for debate. You can believe MOA/ISO/RTO is a better alternative to the utility/public utility model and is politically realistic. I have not challenged you on either point, have I?
My whole purpose has been to get the (real) free market defined and on the table vs. the MOA/ISO/RTO model. That’s the debate I am asking for–and maybe finally have.
Now, I will state that a free market in electricity is a better ‘model’ and more in the classical liberal tradition. This is where we disagree…
Kiesling also recently stated: “RTO market designs and governance have not evolved to adapt to changing conditions and resource mixes, largely because their institutions are regulatory constructs.” Yay … that’s not free market to me!
And then she adds: “But if you throw the baby out with the bath water then you lose the physical and economic benefits of a connected AC network….”
What??? A free market in electricity has always been, in practice and in theory, about “the physical and economic benefits of a connected AC network.” So what is her trick–her hidden assumption
Lynne’s trick is to pretend that
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