The Real Cause of Blackouts

[Riddick]

Op-Ed here, cliff notes below:

[ QUOTE ]
All last week, major parts of Queens, New York, were without electricity following a failure of power that plunged much of the city into darkness amidst sweltering heat for more than a week.


[/ QUOTE ]

[ QUOTE ]
What do the consumers do about it? They follow the news and keep paying the bills, to the same company that let them down. They can't switch. They can't influence the production process. They are powerless in more ways than one.


[/ QUOTE ]

[ QUOTE ]
Now, if markets were in charge, a heat wave would not be looked at as a problem but as an opportunity. Entrepreneurs would be swarming to meet demand, just as they do in every other sector that is controlled by markets. The power companies would be praying for heat waves!


[/ QUOTE ]

[ QUOTE ]
After all, do shoe manufacturers see a massive increase in footwear demand as a problem? Do fast food companies see lunchtime munchies as a terrible threat? On the contrary, these are profit opportunities.


[/ QUOTE ]

[ QUOTE ]
Then [after monopoly was coercively granted] the economists got involved ex post and declared that electrical power is a "public good," under the belief that private enterprise is not up to the job of providing the essentials of life.

[/ QUOTE ]

[ QUOTE ]
Competition would lead to price reductions, innovation, and an ever greater variety of services — the same as we find in the computer industry.


[/ QUOTE ]

[hmkpoker]

[ QUOTE ]
under the belief that private enterprise is not up to the job of providing the essentials of life.

[/ QUOTE ]

You mean like food and shelter?

[Riddick]

On a related note, is it ever possible for there to be a "shortage" in the free market? Not to be confused with a good's scarcity, a good's shortage is when consumers want that particular good, they have whatever it takes to pay for it, but the suppliers are unable to meet the demand. A blackout seems to me to be a prime example of a government created shortage. By artificially limiting the number of suppliers (effectively to one, maybe two in a given political district) any entrepreneurial opportunity to enter the market and supply electricity when more is demanded than the monopoly can provide is restricted. People die as a result of this artificial restriction.

Or a less morbid example: surfers are aware that recently Clark Foam, the leading supplier of blank foam used to mold surfboards, shut down suddenly (this shutdown was actually *caused* by the California government, but we'll pretend for now that it wasn't and that the owner was just spiteful and hated money). So relative scarcity of blank foam plunged and the cost of foam skyrocketed for the a brief time. You could still get foam, you just had to pay a much higher price for a few months last winter. Not surprisingly, entrepreneurs. unrestricted by artificial government limitation (and utilizing more of Mexico on the supply-side now, I believe) jumped at the opportunity and as of now foam is once again in abundant supply and back to previous prices.

A more simple example: Picasso's. Because I want a Picasso and cannot get one doesn't mean that there is a shortage of Picasso's. It simply means the relative scarcity of Picasso's has rendered them out of my purchasing range.

[TomCollins]

[ QUOTE ]
On a related note, is it ever possible for there to be a "shortage" in the free market?

[/ QUOTE ]

Of course, but it is almost always temporary.

Suppose you are the only manufacturer of widgets. People like widgets a lot, but they only have a shelf life of 3 days. Your widget factory gets destroyed by a natural disaster. After three days, all of the widgets that have been stockpiled are gone. But people still want them. Even those who have infinite means to pay for them cannot. It takes time to rebuild your widget factory to cover this.

In the simplest case, some emergency happens and a particular good is in high demand. Since a free market is not perfect, vendors might not react fast enough to this sudden increase in demand, and sell out.

But you need to define what you mean by "shortage".

[pvn]

[ QUOTE ]
A more simple example: Picasso's. Because I want a Picasso and cannot get one doesn't mean that there is a shortage of Picasso's. It simply means the relative scarcity of Picasso's has rendered them out of my purchasing range.

[/ QUOTE ]

Yeah, but they're GOUGING!

[MtSmalls]

[ QUOTE ]
After all, do shoe manufacturers see a massive increase in footwear demand as a problem? Do fast food companies see lunchtime munchies as a terrible threat? On the contrary, these are profit opportunities.

[/ QUOTE ]

Not to inject reality in to your theoretical world, but does the term "barriers to entry" mean anything? The cost of building and maintaining a power plant of any size or magnitude is substantial. Not to mention trying to locate one in a populated area. You can't throw up a ConEd plant next to the WalMart or McDonalds.

[ QUOTE ]
the economists got involved ex post and declared that electrical power is a "public good," under the belief that private enterprise is not up to the job of providing the essentials of life.

[/ QUOTE ]

Reality check: Power companies (gas/electric/other) are PUBLIC Companies. most are listed on the NYSE or other stock exchange. Heavily regulated, but still profit producing public companies.

As to your other comment about shortages, they happen all the time. While supply and demand are the key factors, DELIVERY of the supply is often the cause of the shortages.
When gasoline prices in GA rocketed to $5 in the wake of Katrina, was it because there weren't millions of gallons of gasoline in SC and FL? Or was it because there was no working pipeline (from the Gulf Coast) available to supply certain areas of the state? And didn't those supplies arrive not too long after that by tanker truck and later by repaired pipeline? There are millions of barrels of oil in the ground in Saudi Arabia, Iran, and even the US. Why aren't there a 100 wells per acre sucking the oil out of the ground as fast as they can at $75 a barrel?? Economically unfeasible? Engineering problems? or are the companies (like the diamond consortiums) creating an artifical shortage, so their quarterly profit is $10 billion instead of $8 billion?

[SNOWBALL]

[ QUOTE ]
On a related note, is it ever possible for there to be a "shortage" in the free market?

[/ QUOTE ]

Sure. Sometimes there are non-governmental barriers to entering the market for suppliers. Like if consumers want a certain kind of wine that only grows in a certain area. Is that what youi are talking about?

[ianlippert]

[ QUOTE ]
Not to inject reality in to your theoretical world, but does the term "barriers to entry" mean anything?

[/ QUOTE ]

If there is enough profit to be made there are plenty of corporations that would jump at the chance. There's nothing stopping the creation of the McPowerPlant.

[xorbie]

riddick,

how much do you know about "natural monopolies"?

[Copernicus]

[ QUOTE ]
[ QUOTE ]
On a related note, is it ever possible for there to be a "shortage" in the free market?

[/ QUOTE ]

Sure. Sometimes there are non-governmental barriers to entering the market for suppliers. Like if consumers want a certain kind of wine that only grows in a certain area. Is that what youi are talking about?

[/ QUOTE ]

there are other more obvious barriers to entry. Proprietary technology, cartel control of supply, capital intensive cost of duplicating infrastucture (eg proprietary electrical lines already routed to existing
businesses/houses, natural limitations (eg control of a seaport) and so on.