“The separation of government and electricity (six words) or, more precisely, the separation of government and the generation, transmission, and distribution of electricity (twelve words) is simple enough…. Why deny this Political Economy 101 definition between free-market reliance and government intervention?”
The separation of government and electricity is a straightforward, time-honored application of classical liberalism (or the free market). It has existed as long as I have been in the debate (the 1990s) and probably since the beginning of the industry. In contrast, restructuring, partial deregulation, or reregulation connotes the mixed-economy alternatives of market here-government there in this market.
Deregulation as an escape from public utility regulation harks back to the Reason Foundation and Robert Poole Jr. in the early 1980s. In 1985, Poole’s Unnatural Monopolies: The Case for Deregulating Public Utilities (Lexington Books) challenged the “natural monopoly” case for franchise protection and rate-and- service government regulation in the different industries.
For electricity, the book featured Walter Primeaux (introduced to Poole by Gordon Tullock) who made an empirical case for rivalry (real or potential) against an entrenched government monopoly.
In 1986, the Pacific Research Institute for Public Policy published Electric Power: Deregulation and the Public Interest, edited by John Moorhouse with a foreword by Harold Demsetz. [Demsetz’s own “Why Regulate Utilities” (1968) laid the theoretical groundwork in this area.] Chapter authors Primeaux and Richard Gordon favored total deregulation, the true free market. Other authors in this volume explored partial deregulation and/or restructuring, a middle way between a free market and the status quo.
Kiesling’s Hide-and-Seek
In a peculiar instance of intellectual hide-and-seek, Lynne Kiesling, advocating mandatory open access under governmental agency (and a lot more), refuses to engage in first principles in the political economy of electricity. I have noted the irony:
Imagine a self-described classical liberal that cannot define classical liberalism (a real free market) in their area of specialty. Imagine a self-described “directionalist” who cannot define the end-state. And imagine this person telling me, as her critic, “I will not dance to your tune.”
Imagine this person promoting the classical liberal worldview (such as Adam Smith’s Man of System), stating yet making statements that “the grid is a common pool resource in which it is literally—literally—impossible to define and enforce property rights.” That shocking rebuke of foundational classical liberalism assumes government intervention rather than debates it. This sleight-of-hand results in her “synthetic theory of regulation and technological change,” itself reflecting hidden views of natural monopoly, market failure, political feasibility, and other complaints against a true free market.
Is the cover-up worse than the proverbial crime? This is a ripe question since Kiesling’s governmental model has been whipsawed by economic dis-coordination on the one side and politics on the other (in the case of Texas, see here).
Giberson Tip-Toes In
I recently made some progress with Michael Giberson, Lynne’s confidant and intellectual ally, on the simple distinction between market and government in electricity. The social media exchange began with a comment by David Schellenberger:
I routinely insert “[classical]” before “liberal” or “liberalism” in quoting text so that readers in the United States will be aware of the reference.
in reference to a Cato Institute post, “What Does ‘Liberal’ Mean, Anyway?” Noticing that electricity specialist Michael Giberson was active on Shellenberger’s post, I commented:
And what does it mean in regards to electricity? Michael Giberson?
He responded:
Rob, in my spare time I am working on a somewhat academic answer to your question. I’ll send you a copy for comments. Might be September or October, depending on how it goes.
I immediately responded:
That complicated? Boo! Come on–something is really fishy is going on if you can’t knock this out quickly.
Just don’t ‘Kiesling’ me with lingo, hidden assumptions, obfuscation, and central planning engineering constructs. What is wrong with a separation of government and electricity in a typical classical liberal framework? But if you can reduce ‘intellectual transaction costs’ and stop ‘increasing rivals cost’ [my problem with Kiesling], that would be appreciated!
This was a rather stern response. While I was pleased to get a promise, I was taken back by the complexity of it all.
Conclusion
The separation of government and electricity (six words), or, more precisely, the separation of government and the generation, transmission, and distribution of electricity (twelve words) is simple enough. Go ahead and say that a free market, classical liberal policy it is not economically efficient or not politically feasible. Bring in electricity as a “market failure” and/or “natural monopoly.” And simply state (as Lynne Kiesling refuses to do) that you stop short of a free market or classical liberalism in electricity.
But don’t say those six or twelve words do not represent an operative definition in the traditional lexicon of free market reliance and government intervention.
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