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 Tuesday, July 22, 2008

Niles on Property Rights and the Electrical Grid

By Paul Hsieh @ 11:33 AM

I just finished reading the featured article in the Summer 2008 issue of The Objective Standard, "Property Rights and the Crisis of the Electric Grid" by Raymond Niles, and I can whole-heartedly recommend it.

I had always wondered how the electrical utilities evolved into their current dysfunctional state as quasi-governmental entities, and never understood why utilities didn't function more like private providers of essential goods (like grocery stores or airlines). Niles traces the history of the electrical utilities from the 1880's to the present time, and shows how the current problems with the electrical industry are the result of government interference with basic property rights from the very inception.

I was particularly interested in his account of the California "deregulation" fiasco of 2000-2001. Diana and I lived in San Diego at that time, so we experienced this crisis of skyrocketing costs and rolling blackouts first-hand. However, I couldn't make sense of the newspaper accounts at the time, which generally blamed the "free market" for the problems. (For a typical portrayal of the events, this Wikipedia entry on the "California Electricity Crisis" is a good example of the conventional wisdom).

Fortunately, Niles is able to reduce this complex topic to its essentials, using property rights as the unifying theme. As an industry analyst, he has tremendous knowledge of the history, and is able to communicate it clearly to a lay audience. And besides offering a critique of the current system, he also articulates a positive alternative vision of a free market electrical system in which property rights are genuinely respected, and the benefits it could bring to producers and consumers alike.

Because his article is the featured free article, it is available to both subscribers and non-subscribers. So read the whole thing.

(On a personal note, I had the pleasure of meeting Ray Niles at the OCON 2008 conference a few weeks ago, and found him to be a thorougly intelligent, articulate, and pleasant dinner companion.)

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 Comments

Tuesday, July 22, 2008 at 11:42:48 mst
Comment ID: #1
Name: Galileo Blogs
E-mail: rayniles(at)rcniles.com
URL: http://galileoblogs.blogspot.com

At the risk of blowing my pseudonymity, thank you for your comments. I will throw in some additional color on electricity deregulation from my blog:

http://galileoblogs.blogspot.com/search/label/electric%20utilities

And my two favorite blog posts on the industry, which capture the evil of regulation on a psychological level, in terms of what it does to CEOs:

http://galileoblogs.blogspot.com/2006/11/regulation-destroys-as-inv ...

http://galileoblogs.blogspot.com/2007/01/divided-and-conquered-wall ...

(Next time you and Diana are in New York, let's do dinner!)


Tuesday, July 22, 2008 at 19:29:36 mst
Comment ID: #2
Name: Richard
E-mail: rbramwell(at)sympatico.ca

1) Thanks for blowing your pseudonymity Ray!

2) Paul, now we can all watch for parallels in Health Care... or you could just look here in Canada:
* 24 hr waits in Emerge'
* Entire wards closed in some busy hospitals, while patients are lying on gurneys in the hallways.
* Patients waiting for major surgery dying of 'heart failure' (actually from Univeral Health Care) as they wait on those same gurneys.
* Physician earnings caps and, most evil of all, "clawbacks" â€"if a physician has surpassed his cap one year, the money is deducted from his earnings the following year.
* A variable, "failure to pay claims" by physicians by the Min. of Health. The physician has to pursue his claims to the Min of Health to get paid. Some report that they have had to pursue as much as ten percent of a year's legitimate earnings (i.e. earnings that are _within_ cap limits). This is particularly onerous because the task is usually left to a medical secretary who processes each patient's account and makes the claims. He or she must therefore repeat the claim process. So, in addition to not being paid, the physician's secretary's time is wasted in reprocessing claims.
* New physicians are unable to set up practice in the more lucrative and comfortable populated areas, because they cannot get hospital affiliation. They usually end up practicing in 'northern' regions, often having to travel to Indian Reserves and the like to service the scattered population there. This is viewed as laudable, because it demands that the physician be altruistic.
* Due to caps, tens of thousands of Ontario citizens cannot get a Family Physician, who gains nothing by increasing his or her patient list.
* Walk in clinics proliferate. But the MD's at these clinics come and go, do not know you, and only treat immediate problems, having no awareness of the general trends of your health.
* New procedures and drugs are not covered, either because they are not PROVEN to be safe, or they are pricey and are left off the list of those that are insured.
* Large sums of health care dollars are spent on the crisis du jour. Here, two of these have been West Nile Fever (from mosquitos) which is actually no more deadly than ordinary flu, and Asian Bird Flu which has killed several dozen people. Both received far more attention and funding than such more deadly epidemiological concerns as Breast Cancer and Heart Failure.

That is all I have off the top of my head... and I am NOT associated with the medical field in any way.


Tuesday, July 22, 2008 at 21:46:52 mst
Comment ID: #3
Name: Jeff Montgomery
E-mail: jamontgom(at)hotmail.com

Yes, great article. The whole TOS issue is excellent -- as usual! I am an unabashed booster for that journal.

It doesn't matter how regulated an industry is, freedom-haters will always find a way to blame markets for any problem. Businessmen could be in leg irons and in prison, and they'd *still* blame markets. I call it blaming water for being poured out of a bucket. And reality forbid someone should try to make A PROFIT (gasp!).

The whole thing is so Atlas Shrugged.


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