Electricity Statism or Free Markets? (Kiesling shows more cards)
By Robert Bradley Jr. -- December 19, 2024“Rob’s snide reference to my ‘chess pieces’ is a reference to my unwillingness to agree with his Utopian dismissal of ISO/RTO organized wholesale markets.” (Lynne Kiesling to Vernon Smith, below)
“Yes, playing with government chess pieces (on-grid solar, wind, batteries, ‘smart’ meters) and a centrally planned wholesale market is Statism writ large.” (Robert Bradley to Kiesling, below)
Electricity specialist Lynne Kiesling champions herself as a classical liberal, free-market advocate. But she is just the opposite and relies on obfuscation and charm to advocate and sell
1) government central planning of wholesale electricity and
2) government-enabled wind, solar, and batteries in place of least-cost (central-station) electricity.
It is her “synthetic regulation” or the highway, premised on a belief that there cannot be private property rights to grid electricity.
This woman of system will not forthrightly define what a free market is with electricity. She looks the other way regarding the fundamental knowledge problem of ISO/RTO central planning. The perils of (dilute, intermittent, fragile) wind, solar, and batteries as grid electricity are just technical issues to be solved. In her technocratic world, the government-wounded supply side calls for … ‘smart meters’ to ration demand in the home or business. Call it Big Brother Economics (BBE)….
Government-directed supply-and-demand equals her ideal of the ‘virtual power plant‘. So much for private control of electricity infrastructure, consumer sovereignty, and taxpayer neutrality. So much for a free market in electricity.
Recent Exchange
In a recent social media exchange, Kiesling calls a free market in electricity “utopian” (below). In her mind, it is assumed that “the grid is a common pool resource in which it is literally—literally—impossible to define and enforce property rights.” Except it is not and was not until mandatory open access made it such. A trick, hidden assumption to jump to Statism. And a Statism that is failing.
Our exchange began with Kiesling announcing her new substack post series, “Economics of Grid Defection“:
A decade ago the talk of electricity policy was grid defection. The underlying economic concept: contestability. The first of a four-part series on grid defection’s decade. More below.
Bradley: Grid defection is a government-created situation due to wind, solar, and battery subsidies. Central station power remains the economic standard in a real free market.
Kiesling: Your obstinate willingness to ignore organic innovation dynamics and your firm commitment to what can only be protected by a government granted monopoly is an intellectual inconsistency that I find baffling from someone who purports to be an advocate for markets.
Bradley: Wrong on both counts, Lynne. I am not ignoring “organic innovation dynamics” to anything. Your chess pieces are governmental, that’s all. Second, “firm commitment to what can only be protected by a government granted monopoly” has never, never been part of my position. Where did that come from? Please, read and understand what a free market in electricity is: aier.org/article/free-market-electricity-a-primer/
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In a parallel exchange with Vernon Smith, she states her differences with me:
…. Rob’s snide reference to my “chess pieces” is a reference to my unwillingness to agree with his Utopian dismissal of ISO/RTO organized wholesale markets. I am no fan of the existing ISO/RTO model, and have made suggestions for changes to its governance and market designs for over two decades, as you know. But as you and I know from personal experience, and as anyone but an ideologue would realize, the actual alternative to organized wholesale markets that would obtain if we eliminated them would not be a market discovery process, but instead would either be re-regulation into an outdated vertically integrated structure that cannot innovate and would not increase the extent of the market, or a government-owned transmission network of interregional trunk lines analogous to the highway system. Arguing otherwise is committing the Nirvana fallacy.
Bradley: “Rob’s snide reference to my ‘chess pieces’ is a reference to my unwillingness to agree with his Utopian dismissal of ISO/RTO organized wholesale markets.” Yes, playing with government chess pieces (on-grid solar, wind, batteries, ‘smart’ meters) and a centrally planned wholesale market is Statism writ large. The end of government intervention is not ‘utopian’, and a real free market is not “re-regulation into an outdated vertically integrated structure that cannot innovate and would not increase the extent of the market, or a government-owned transmission network of interregional trunk lines analogous to the highway system.” What a dodge!
Additonal Comment
Kiesling’s hit-and-run criticisms of the free market option (and me personally for exposing her intellectual shortcomings/cover-up) are mounting. And she is in retreat. Consider these points:
- She conflates the ‘virtual power plant’ chess pieces with ISO/RTOs. The former is different from wholesale government planning of the grid. But the two together form the witches’ brew now afflicting power markets in California, Texas, the Northeast, and elsewhere.
- Lynne’s confession is very late, vague, and shallow: “I am no fan of the existing ISO/RTO model, and have made suggestions for changes to its governance and market designs for over two decades….” Technocrats always see their planned construct as in need of improvement. Far from it: the politicized, rate-inflating, reliability-groping ISO/RTO model calls for elimination, not tinkering.
- Her reference to free-market electricity as “utopian” is a dodge. Simple removal of state and federal laws governing electricity is theoretically possible and eminently reasonable. It is soulless to reject it as politically unachievable (see below). Decades of experienced free-market electricity were not “utopian” but an impressive example of undesigned order (” organic innovation dynamics”).
- Kiesling asserts that electricity deregulation “would not [result in] a market discovery process….” What? With ISO/RTOs abolished, unhampered firms would determine the what, where, when, for whom questions anew. Only a technocrat could believe that free-market entrepreneurs are enshrined neoclassical robots–and government can discover what true free markets cannot.
- Her refusal to directly engage with my arguments has turned into wrong guesses about what is a real free-market in electricity. She is long overdue in writing a Substack assessing my electricity primer. Instead, she ignores it. If we were to debate with a learned, neutral moderator, any free market crowd would see right through her. It’s past time for that debate.
Spiritless Classical Liberalism
Lynne Kiesling is not a classical liberal in spirit either. Free market electricity is impractical, she states. It is “utopian’ and guilty of the “nirvana fallacy”. [1] But in the real world, markets are imperfect, and government planning of markets is more so. “Imperfect markets are better than perfect regulation,” it has been quipped.
The soulless should consider the wise words of Milton Friedman. Expanding economic freedom in an unfree world: requires “keep[ing] options open until circumstances make change necessary.” Continuing (Capitalism and Freedom, 1962, pp. xiii – xiv):
There is enormous inertia–a tyranny of the status quo–in private and especially governmental arrangements. Only a crisis–actual or real–produces real change. When that crisis occurs, the action that are taken depend on the ideas that are lying around, That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.
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[1] The “nirvana fallacy” is misused by Kiesling. The definition is “a type of faulty reasoning that occurs when someone compares an actual solution to an unrealistic, idealized, or perfect alternative.” Since when was a free market in electricity unrealistic or idealized? And what free market economist ever stated that free markets were perfect? Lynne states “I am no fan of the existing ISO/RTO model” as if some more tinkering will solve the problem of government planning and chess pieces. Harold Demsetz, who originated the term, was a champion of free markets in electricity, ironically for Lynne.
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