Archive for January, 2008

Older Entries »
h1

Research roundtable on innovation

January 31, 2008

Lynne Kiesling

Geez, do I feel like a blog binge-purge bulimic … I get on a roll and then I’m in radio silence. In large part that’s because I’m still digging out from my work backlog while I focused on my book manuscript and the the Texas edited volume and conference.

The next couple of days I’ll be participating in an interesting research roundtable on the law and economics of innovation at the Searle Center on Law, Regulation, and Economic Growth at Northwestern. The papers are quite interesting. I am particularly happy that Phil Weiser and Dale Hatfield have written the paper about spectrum property rights that I’ve always wanted to write! So check it, and the others, out.

Posted in Economics | Comments Off

h1

Am I a pathetic late adopter, or just a curmudgeon?

January 29, 2008

Lynne Kiesling

I pride myself on being a version 2.0 adopter, an early-but-not-bleeding edge adopter. I’m also a happy Mac user. Why, therefore, have I (of all people!) not bought an iPhone?

Grant McCracken’s recent musings on his newly-acquired iPhone are what prompt my question:

The question is “what took me so long?” My wife has owned an iPhone for months and she loves it. Friends rave about it. But I would not budge. The problem, I think, is that for me Apple products have an air of specialness about them. I don’t resent this air. I just feel that it doesn’t belong to me. I prefer to think of myself as a “plain style” kind of guy. (This may be a way of saying “I’m special” because, “behold, I am not special.” It wouldn’t be the first time a social vocabulary has coded “x” as “not x.” Protestants, they’re just plain sneaky.)

I don’t have that excuse; the Apple design aesthetic sits so squarely inside of my preferences that it’s spooky.

Why don’t I have an iPhone? Because I hold incumbent monopoly grudges for a long time, and I refuse to give AT&T my business. I’m not so attached to mobile telephony that I can overcome the disutility I associate with doing business with the former 800-pound gorilla, and when I’ve done business with them in the past for wireless, I’ve been less than thrilled with the service (and they are my local wires provider at home, so you can just imagine how thrilled I am about that …).

I tell you this not to reveal how mean-spirited I can be and how long I can hold grudges, but to raise a question about new technology adoption when the new technology is bundled in with other parts of the value chain. Even if you’ve got the lates, greatest, must-have app or device, if you bundle it exclusively with something that at least some part of your target market dislikes, you are going to suppress adoption.

I am holding out for either the unlocking of the iPhone, iPhones being offered by other providers (not that they’re all that great), and/or the adaptation of Apple’s design features in other phones from other manufacturers. If that makes me a late adopter here, so be it.

Posted in Economics | 4 Comments »

h1

How do you know if a prediction market is any good?

January 28, 2008

Michael Giberson

If you have a long political memory — say going back about two weeks, which now seems like ages ago — you might remember the furor over the “failure” of polls and prediction markets when Hillary Clinton won the New Hampshire Democratic primary. Prediction markets, the boastful new kid on the block, were singled out for special abuse by some pundits.

Were the prediction markets wrong? How should the market numbers be read, and how can the accuracy of these markets be judged?

Prediction market consultant Jed Christiansen provides the most thoughtful post-New Hampshire guide to reading the political prediction markets, with generous links to other sources.

(HT to Chris Masse at Midas Oracle, and Caveat Bettor, and Alex Kirtland at UsableMarkets.)

Posted in Economics, Politics | 1 Comment »

h1

What institutional framework for electric power transmission?

January 28, 2008

Michael Giberson

From the EU Energy Policy Blog, Thomas-Olivier Léautier contemplates the factors that contribute to efficient investment and management of transmission systems:

As power engineers and economists have known for a long-time, the transmission grid is essential to the operation of well-functioning electric power markets. Yet, grid expansion in several regions has been nil or slow. By reviewing the main prescriptions from academic literature and comparing them with case studies from over 16 jurisdictions we find that unless the governance structure is appropriate and specific incentives are provided, grid expansion proves elusive.

After a brief examination of how physical limits and operational practices jointly contribute to transmission capacity, Léautier summarizes the results of theoretical and empirical work he did with Véronique Thelen:

The empirical evidence collected in this study appears consistent with theoretical prescriptions: creation of an independent transmission company subject to strong grid expansion incentives lead to congestion alleviation (e.g., England and Wales).

On the other hand, the Independent System Operator (ISO) model pursued in the United States, where operation but not ownership of the grid is vertically unbundled, does not appear to have performed well. This is consistent with “theoretical” predictions: transmission asset owners in the ISO model face mixed incentives for expansion resulting from limited vertical unbundling of the assets.

Posted in Electricity, Networks | Comments Off

h1

Texas electric choice: The power is yours. Use it.

January 28, 2008

Lynne Kiesling

I declare our conference on the experience of electricity restructuring in Texas on Friday at AEI a success! In regulatory policy analysis we usually don’t do a good job of telling the stories of successful institutional change, so I thought it was really important to highlight the Texas experience so that other regulatory organizations could learn from their experience.

The Dallas Morning News had an article Saturday reporting on some of the remarks from the conference, including my comment that residential customers were inertial and slow to switch away from their incumbent retailer, even when natural gas and coal prices rose in 2004 and 2005. I think this consumer inertia is a fruitful area for research: what institutional design features are important for enabling markets to evolve while countering that inertia? You can’t grab consumers by the throat and force them to shop; you also can’t allow their inertia to stifle the development of decentralized market processes that benefit so many other consumers as well as innovative producers. So the institutional design challenge is to reduce the information costs and switching costs that create the inertia. I think the Texas PUC did a lot of that and achieved a lot of success, especially if you evaluate their electricity experience relative to telecom competition.

On a more personal note, due to the generosity of Parviz Adib (of APX and formerly of the Texas PUC), I’ve now got a new, highly-treasured possession:

tx choice pin

The power is ours.

Posted in Economics, Electricity, Energy markets | 1 Comment »

h1

Deregulation, Innovation, and Market Liberalization: Electricity Regulation in a Continually Evolving Environment

January 23, 2008

Lynne Kiesling

I am pleased to announce that I delivered my book manuscript to the publisher a week and a half ago. Here’s a teaser:

Economic growth and technological change have brought the electric industry and its regulation to a crossroads. Technological change from outside the industry has prompted changes in both regulatory institutions and business models, leading to the incremental disaggregation of the vertically-integrated firm in some regions of the U.S. and not in others. Simultaneously, increasing use of market transactions within this vertical value chain provides further strains on the existing institutional environment.

One of the largest challenges facing the electric industry and policymakers today is the mismatch between regulatory and technological inertia within the industry and the vibrant, thriving economic and social dynamism that technological change has helped to create in nearly all other aspects of human society. Is it possible for regulatory institutions to be less inertial, to be more adaptive to unknown and changing conditions like innovation, changes in fuel costs, and changes in environmental policy? This book explores possible answers to that question, focusing particularly on the retail portion of the electricity value chain.

It’s a synthesis of complexity science, Austrian economics, and new institutional economics, focused on how technology enables us to move from centralized control to decentralized coordination.

The manuscript is available for your perusal; the book, published by Routledge, will be available in July.

Posted in Economics, Electricity | 3 Comments »

h1

Lysander Spooner Bicentennial

January 23, 2008

Lynne Kiesling

Randy Barnett reminds us that January 19 was the bicentennial of Lysander Spooner’s birth. His post has pictures, and cake, and useful links to background on Spooner for those of you not familiar with him. He was a stalwart in the early American republic.

I love that his tombstone reads “Champion of Liberty”. One could do much worse. [LK scurries off to earn the moniker herself ...]

Posted in Uncategorized | Comments Off

h1

Market power in Maryland power, and other economics stories in the news

January 22, 2008

Michael Giberson

Columnist Jay Hancock of the Baltimore Sun takes note of a complaint filed at FERC by the Maryland Public Service Commission that alleges local market power in PJM’s wholesale power market added $87.5 million to energy costs in the state. Hancock provides a link to the complaint at FERC for the curious.

Also in Maryland, some customers of Allegheny Power were upset that the utility mailed them two compact fluorescent bulbs. According to reports in the Cumberland Times-News, at first at least some customers thought the bulbs were free and later discovered the utility was tacking on an extra 96 cents a month over a year for the light bulbs. (While a different kind of program, it sounds kind of like the mandatory participation in utility program proposal that has customers upset in California. See Lynne’s post: Programmable Thermostat Regulations in California: Big Brother or Control Freaks?)

Elsewhere, the Dallas Morning News wonders, “Is electricity deregulation a raw deal for Texas?” A follow-up story profiles PUC chairman Barry Smitherman and his efforts to let competition work in Texas. Likely the panelists at this Friday’s conference at AEI will have something to say about competition and electric power in Texas.

Tim Harford provides some commentary on the Google prediction market paper. (See our earlier post: Prediction markets at Google.) By the way, Harford will be in DC promoting his new book, The Logic of Life, on January 24.

At Reason, Brian Doherty interviews New York Times reporter David Cay Johnston about Johnston’s book, Free Lunch. Doherty points out that much of the abuse Johnston ties to a blind faith in free markets actually results from government action, but Doherty nonetheless finds that Johnston does employ some sound market-oriented arguments in the book. Marty Schladen of The Daily News in Galveston, Texas, also reports on the book. A short review of the book recently ran in Mother Jones magazine.

Stan J. Liebowitz and Stephen E. Margolis, bring us “Bundles of Joy: The Ubiquity and Efficiency of Bundles in New Technology Markets.” (HT to the Antitrust & Competition Law Blog.)

UPDATE: In the comments, David Cay Johnston writes:

Your commentary on the Reason interview bollixes the facts.

In Free Lunch I cite hard data and a fascinating experiment by computer science professor, as well as tell a story, of how government created what might be called faux markets since they drive prices up. Free Lunch shows over three chapters that governments adopted laws, drafted by Enron, that created asymmetrical “markets.”

Posted in Economics, Electricity, Politics | 4 Comments »

h1

Geeky Friday fun: chocolate chips are distributed Poisson

January 18, 2008

Lynne Kiesling

Did you know that the numerical distribution of chocolate chips in commercially baked cookies is Poisson?

Posted in Humor, Miscellany | 6 Comments »

h1

Upcoming AEI Conference: Texas Electricity Restructuring

January 18, 2008

Lynne Kiesling

My colleague Andy Kleit and I are co-editing a book on electricity restructuring in Texas:

A number of states have recently sought to increase competition in the electricity industry to drive down prices, increase supply, and improve service quality. Yet in the aftermath of the rolling blackouts and power shortages that afflicted California in 2000 and 2001, many jurisdictions have been reluctant to break with the status quo. Electricity deregulation is strewn with pitfalls, and the events in California demonstrate that chaos from poorly-designed regulatory schemes can easily result.

Unlike several other states, Texas has pressed ahead with its program of deregulation. It has unbundled the production of electricity from the distribution infrastructure and from retail sales, removed controls on electricity rates, and allowed customers to switch between competitive retail electric providers. Using an innovative basket of regulatory instruments, Texas offers a distinct track record that produces important lessons for policymakers, regulators, and researchers who seek to evaluate the merits of a more competitive approach to energy policy.

Please join us on January 25 for a conference at which nine research papers investigating the impact of Texas electricity deregulation will be presented and discussed.

The other authors and I will be participating in a day-long conference to present our chapters on Friday 25 January, 2008, at the American Enterprise Institute in Washington, DC. If you are in the area and interested in electricity policy, I encourage you to attend.

Posted in Economics, Electricity, Energy markets, Environmental policy | 1 Comment »

Older Entries »
Follow

Get every new post delivered to your Inbox.

Join 50 other followers