Deregulation Meets Markets

Deck: 

Econ 101 Shows the Way

Fortnightly Magazine - January 2019
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"The ships hung in the sky in much the way that bricks don't." 

-Douglas Adams, "A Hitchhikers Guide to the Galaxy"

 

Since deregulation began, electric and gas "markets" have on many occasions exhibited unusual price and allocation results in much the way that free markets don't for a simple reason. They are not free markets and have serious structural defects invariably leading to these anomalous results.

In Economics 101 textbooks everyone quickly learns the power and beauty of the free market mechanism. The individual preferences of millions of consumers and producers aggregate into supply and demand curves, such as those shown in Figure One, which then determine price and quantity. Adam Smith's invisible hand then signals to producers and consumers to produce or consume more or less than they did.

Figure 1 - Economics 101

See Figure One.

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