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I wanted deregulation. But not if we can't do it right.
Fortnightly Magazine - April 15 2001

less. Again, akin to price controls, good intentions don't always produce good results, especially when they are contrary to sound economic principles.

What Now?

Scholars surely will study the California episode in the years ahead. They will debate without end—on empirical grounds, I hope, and not ideological—whether deregulation was a failure, or whether California ever even tried "deregulation," or only something different. The recently joked that California should "forget deregulation and try the real thing," and I agree. But those of us who feel this way will likely remain on the defensive for a long time. The government and the people believe that deregulation failed in California and is liable to fail elsewhere. Regrettably, we may see a stalling, or even scaling back of deregulation efforts throughout the world that may take years to reverse—and in all types of industries, not just electricity.

California made us aware that deregulation can increase prices in the short term, the only term relevant to politicians. Long-term benefits may be forthcoming, but they're difficult to prove. And besides, who's willing to wait?

All of this leaves me with the following question:

Today, after all we've been through, I still believe in "genuine" deregulation of the electric power industry. On the other hand, I am even less sure now about pseudo-deregulation driven by interest-group politics.

To me, the pertinent issue revolves around whether we should do it at all if we can't do it right. At least to me, California has caused me to pause and reconsider the merits of real-world deregulation.

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