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The Economists: On the Future of Energy Markets

The Power of Price Responsiveness
Fortnightly Magazine - April 1 2002

and competitive electric power system. "Enron was one that was trying to provide leadership," Stalon says. "Now that its leadership will be dissipated, it's not clear who is going to take the leadership in restructuring. After all, if you are a large generating company, it is not a competitive market you want. It is a market in which you can exercise monopoly power in an unregulated environment."

While concerned about how Enron's collapse damaged certain segments of the industry, Joskow also believes the company's demise has taught policymakers and regulators to keep an eye on the problems of corporate governance and disclosure, instead of focusing only on market structure.

"It turns out many of their investments were unsuccessful," Joskow says. "They went to great efforts to hide that. It looks like what Enron was most innovative in was cooking the books and avoiding responsible disclosure."

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