“When I attend NARUC meetings and other topical meetings, I am absolutely astounded by the number of rent-seeking non-profit organizations that are advocating for changes to shape the electric industry in ways that accommodate their interests (where do they get all that funding?).
Not all of them are wrong! But most assuredly, many of them are!”
The electricity regulatory framework is broken.
The long list of market distorting policy includes subsidies, mandates, mispricing, costly but ineffective regulations, entry restrictions, political vs. evidence based decision-making, social vs. market emphasis, and just plain anti-market bias. Add to this a gaggle of well-financed crony capitalists that can attend endless meetings to advocate for more of these misguided efforts.
The myriad reforms, just another layer of politicization, will take us even further from an economically coherent electric services industry to one that is full of command and control.…
Continue Reading“The distinction between renewable and non-renewable resources is tenuous and perhaps in the last analysis untenable.”
– M. A. Adelman, The Economics of Petroleum Supply (Cambridge: The MIT Press, 1993), p. 66.
M. A. Adelman, profiled yesterday, was an empirically driven energy economist. He was not a Malthusian because the data suggested otherwise. He found with petroleum what Julian Simon found in the the family of mineral resources.
Adelman’s writings richly describe the way to understand the paradox of expanding depletable resources. He emphasized that oil was a fungible, global commodity, and improving knowledge can overcome diminishing returns in different regions and certainly globally.
And Adelman captured a point that Alex Epstein today stresses: that oil is not a ‘natural resource’ but a man-made one, from finding the treasure in the ground to refining the raw material into useful human products to transporting the inputs to delivering the outputs to points of human consumption.…
Continue Reading“Diminishing returns are opposed by increasing knowledge, both of the earth’s crust and of methods of extraction and use. The price of oil, like that of any mineral, is the uncertain fluctuating result of the conflict.”
– M. A. Adelman, quoted in Michael Lynch, “Morris A. Adelman, Petroleum Economist, Has Passed Away,” Forbes, May 9, 2014.
A giant of petroleum economics, MIT economist Morry Adelman, died last week at the age of 96. (A short mention in the Boston Globe is here.)
Unlike the Malthusians and peak-oilers in particular, Adelman kept his eye on marginal costs and institutions (resource ownership, government policy) to understand that oil was not a fixed, depleting asset but, at least potentially, a super-abundant, expanding one. To grow and thrive, petroleum needed market incentives just like plants need water to grow and thrive.…
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