California

["John M. Legge" <jlegge@xxxxxxxxxxxxxx>]

The outcome of total deregulation in California would have been bad for its
typical citizens, although outright illegal behaviour played a part:
http://www.latimes.com/business/la-fi-enron18oct18.story

The key problem is that business chases profit, and in electricity supply an
unreliable, expensive supply is more profitable than a reliable, cheap one.
Deregulation releases powerful forces for less reliable, more expensive
supply.

Domestic scale gas powered home energy units are not far off the market, but
they are absolutely expensive compared to an efficiently run regulated
system and the capital poor won't be able to afford them in any case; as
with privatised water in South America, the poor will simply be cut off.
Plenty of economists will be around to explain what a good idea this is;
Sven doesn't need to go first.

As Steve Keen and I have shown, the theoretical argument for market
efficiency is garbage: prices will not fall to a neoclassical P=MC level, or
even a Cournot level.  Intriguingly, empirical research suggests that they
don't rise to the monopoly level either: most businesses, even notoriously
greedy ones in the oil industry, seem to have a view of an "acceptable"
profit level, and having achieved it don't go all out for profit
"maximisation".

This may have been one of the unusual aspects of the California crisis: at
least one player (Enron) was so desperate for cash that they DID try to
profit maximise.  The result was not large profits, but bankruptcy.  I would
describe the whole thing as the natural consequence of the unpredictability
of complex systems, but in Kahneman/Smith terms it was the profit maximising
Enron who was being irrational in following the "rational" profit maximising
path,

JML