As I've said before, certain types of goods -- public goods -- simply cannot be allocated efficiently through market mechanisms alone, even if we get prices right. Now this is not a "government good/private sector bad" post. It is a suggestion, as was my original post on this subject, that a market system requires not only regulation but large-scale public investment, and that one of the places we are making way too few public investments is energy infrastructure.
Again, this is not to say that public investment is the way to run everything; just as there are public goods, there are private goods. But we are trying to meet needs that are clearly public goods via private means. Full social pricing, though needed, will not change that.
Before focusing on energy, consider health insurance. The U.S. spends more on healthcare than any other nation, and gets worse results. There are various reasons for this, but one is that a competitive market in health insurance tends to provide more insurance and less healthcare than public insurance mechanisms. (When I gave this example back in October, biodiversivist argued that our healthcare system "does not resemble any free market I know of." That does not change the fact that our healthcare system is less regulated than healthcare systems in any other rich nation.)
Every intervention that can be cited as possible government over-involvement in our medical system can be found in other systems that spend much less on healthcare and get far better results. If I have to, I'll do a whole post on healthcare -- but the bottom line is that moving a large part of the health insurance system from private to public spending would improve efficiency. Note that we are talking health insurance, not health care.
A major part of fighting global warming will consist of switching from polluting to clean energy. That is largely a matter of major infrastructure, and infrastructure, at least since the fall of feudalism, has always required large public investment, not just regulation.
Railroads, automobile roads, seaports, airports, phone lines, fiber-optic cable, the electric grid, and the airwaves of radio, television, and wireless communication all require allocation -- the giving away or selling of public rights of way. In many cases, such as the internet or Tports or utility lines, much of that infrastructure was directly built by the public, and the public paid for much of the rest. Similarly, garbage, water, sewer, fire, and postal services are all examples where the core service is a public good.
Yes, there are cases where water and sewer systems and such are privatized. In many of those cases, privatization is a failure, and it ends up with the infrastructure bought back by the public. Water privatization in general has been responsible for radical political changes and near-revolutions in several cases. But even when public services are successfully contracted out, they are still paid for publicly.
Even cases like successful water and garbage privatization in France do not involve individual customers purchasing services in a truly competitive market, with a variety of suppliers and open entry and exit for suppliers from the market. Also, a lot of cases of "successful" privatization involve selling infrastructure developed over a long time at public expense to private corporations -- often at way below its value.
Utilities of all types (including so-called deregulated ones) are examples of public goods. If you don't want to generate 100% of your own power, there is only one grid to connect to. And multiple competing grids would be highly inefficient (and still require access to public rights of way).
But I'm going to make biodiversivist mad again by pointing out that post-deregulation utilities perform worse than pre-deregulation ones in the U.S., and publicly owned utilities in the U.S. perform better than regulated monopoly private utilities. Regulation of utilities was significantly reduced when it came to generation; you now have open entry and exit for people who wish to open generating facilities, and (for large generators) meaningful negotiation as to what price they will be paid for what they produce. (Small power generators of course take what they are given -- disclosed in advance. But it is generally true in markets with both big and small players that small players adapt to conditions rather than making them.)
Post-deregulation electrical generation is not more reliable than pre-deregulation. It is not cheaper than pre-deregulation (and was not even when fossil fuels were cheap). It is not less polluting than pre-deregulation. Nor has the rate of deterioration in any of these things slowed down at all. In many cases, such as California, large corporations gamed the system -- turning deregulation into a disaster for consumers and citizens. In the best examples it managed not to make things worse.
In another post I'll make the case specifically for much more public investment in efficiency and clean-energy supply -- hopefully to be posted by hump day of next week.
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Comments
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Jon Rynn Posted 5:44 am
30 Jan 2008
There are also untold numbers of jobs and myriad societal benefits to be reaped from a sustained, good-faith effort to achieve energy self-sufficiency. Think Manhattan Project.
The possibilities are limitless. We could create an entire generation of new jobs and build a bigger and fairer economy for the 21st century. If only we were serious.
So, a "green collar" jobs economy should be part of a new "infrastructure-industrial" complex.
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sindark Posted 7:29 am
30 Jan 2008
The change in infrastructure needs to go way beyond electrical generation. It must take into account the transportation sector and agriculture; it must alter our land and forest management practices. People can then broadly continue to do what they have been: eat meat, drive SUVs, etc, while producing far fewer emissions in the process. We shouldn't underestimate the scale of the changes required. Moving from a high-carbon society to a low-carbon one is a Herculean task - especially if you are trying to do it in a way that does not produce major social disruption or highly intrusive changes in lifestyles.
a sibilant intake of breath
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racc Posted 8:37 am
30 Jan 2008
Dramatic changes in lifestyle will happen anyway. Might as well consume less and live more. Alternative energy sources will just create their own set of problems, maybe worse than what we have today. Just look how the "environmentally sound" alternative to the horse, the automobile worked out.
So cheer up and have hope. Studies have shown that people that are overly optimist have a greater chance of succeeding in tasks.
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stopgreenpath Posted 8:57 am
30 Jan 2008
Utilities need it because building their awful plants and lines takes too long, and they've got RPS deadlines. Even though they get massive corporate welfare, i think they will appreciate not needing to make the capital outlays required (and face the wrath of REAL environmentalists) for their utility-scale projects.
We do, indeed need massive "infrastructure," but it must be DECENTRALIZED (prevents blackouts and terr'ist attacks), LOCAL (why transmit across huge distances?), RENEWABLE (duh) only on PREVIOUSLY DEVELOPED LAND (no killing wilderness allowed!). "A panel on every roof" is the new "a chicken in every pot."
the greenest energy is that which you needn't ever produce.
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Sam Wells Posted 12:13 pm
30 Jan 2008
As out city and town facilities crumble, it will only get worse because in a recession like this, it is hard to raise bond money ... we even have entire towns threatened with insolvency because they invested "rainy day" funds in sub-prime accounts.
Then take a look at fairly good infrastructure, like New York and its subway system: if it rains more than an inch, the entire lower levels become flooded and unusable. No telling if climate change will bring more or less rain to NYC but they're in deep trouble just as it is.
I'm not going to diss the private sector but they serve corporate investors and not the public at large. If they default they dissolve the company, pull out, abandon the all local projects, and mysteriously appear to some other state or country.
The municipal bond market acts just like the stock and private sector except that traditionally such bonds were deemed to be very safe, a wise investment over the long haul. This is no longer true in all cases. Think about that ... shouldn't we be able to float bonds in a safe manner for investments in public infrastructure, perhaps including clean energy initiatives? /sammie
Onward through the fog
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mateosf Posted 4:07 pm
31 Jan 2008
California's embarked on what could be the solution: Community Choice Aggregation. By leveraging public finance/municipal bonds to pay for clean energy projects - projects built by the private sector, and operated for a profit - CCA reduces the cost of capital and makes the sustainabilty issue what it really is: an infrastructure project. Communities, counties and cities throughout California are looking at CCA's with renewable portfolios upwards of 50%, financed with tax-free municipal bonds. Can you say 2-cent a kWh wind power? Peaking solar at 10 cents a kWH? I thought so.
Great post, hope to see more like it in the future.
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