Western Swing is dead! Long live Western Swing!

Michael Giberson

Turkey, Texas: Home of Bob Wills
Turkey, Texas: Home of Bob Wills

The Texas Playboys play for the crowd at Bob Wills Day
The Texas Playboys play at Bob Wills Day

Last Saturday my youngest son and I traveled up the road to Turkey, Texas, to catch a part of the annual Bob Wills Day celebration.

Bob Wills is credited along with Milton Brown with pioneering Western Swing in the 1930s. To a degree Wills and Brown and others in the genre were just playing popular dance music in the 1930s – a mix of Swing and big band jazz popular at the time, only doing it in the Southwestern U.S.  Since they were in Texas and Oklahoma and thereabouts, the audiences and the musicians had experience and expectations for music connected to the area’s folk music and cowboy music, so when the bands played popular music it sounded a little different than it did elsewhere.  Sort of a regional accent that grew into a distinct dialect.

Western Swing was a big deal for a while, and not just in the Southwest. Wills spent much of the 1940s living in Hollywood, appearing in and supplying music for popular movies. Nobody really does Western Swing anymore, except as a sort of musical museum piece. Looking around the audience at the afternoon performance of the Texas Playboys, in Turkey, I was younger than most of the crowd by a good twenty years or so. Most of the performers, many of whom had played with Bob Wills in years past, were as old or older than the audience. The demographics don’t look good for the art.

I couldn’t help but feel that Western Swing, if not dead yet, is all but dead. I’m headed to Jazzfest in New Orleans this coming weekend, and some jazz in New Orleans gets performed as museum pieces – dixieland and ragtime the way they did it all those years ago. But jazz is not dead, not dying even. Sure, jazz is no longer the popular music, as it was in the 1930s, but jazz keeps growing and dividing, spawning new music among the dead carcasses of what used to be played.

While Western Swing may be dead as a category of current music, the children of Western Swing are still out there.  No one had played drums on the stage of the Grand Ol’ Opry until Bob Wills came to town and refused to let his band play without them. Now drums are part of Country music. Honky tonk, Americana, and some forms of country rock can be counted as descendants of Western Swing.

Old English is a dead language, but no doubt many language innovations that came about in Old English are still with us.  Western Swing is like that. The art form is dead, but the innovations of Bob Wills and Milton Brown and their many companions live on.

A problem with market-based approaches to emission reductions

Michael Giberson

Market-based approaches to regulating emissions are the new conventional wisdom, according to Robert Stavins, and it would be hard to disagree. Among proponents of regulating greenhouse gasses in the United States, the big debate is over which of two market-based approaches to regulating emissions should be pursued: emission tax or cap-and-trade. Is anyone proposing “best available control technology”? Market-based approaches have become favored in part because of some high profile successes, notably the cap-and-trade program for SO2, seen as achieving its goal at a considerable cost savings compared to alternative approaches to regulation.

The primary strength of market-based approaches comes from the decentralizing of compliance decision-making, which enables each entity responsible for compliance to pursue the lowest-cost means of meeting the requirement. This strength, though, may also be the biggest problem with market-based approaches, at least when proponents of regulation hope to achieve goals beyond efficiently addressing externalities associated with emissions.

At TNR’s THE VINE, Bradford Plumer asks, “If Carbon Caps Are Coming, Why Mandate Renewables?“, and reports some of the responses he received.  Rich Sweeny asked the same question at Common Tragedies a while back.  In both cases it appears to be the case that proponents of greenhouse gas regulation are worried we might achieve the targeted reductions too easily, i.e. while still burning a lot of coal, not cutting back on consumption, and not garnering enough market share for renewable power. That is to say, some proponents of regulating greenhouse gasses hope to not only to reduce externalities, they have additional preferences about other people’s future energy choices that they want to control through the public policy process.

From Plumer:

Hummel explained that in wholesale electricity markets, the price of carbon would need to get very high—around $60/ton—before pushing dirty coal out onto the margins. So a renewable standard is a good way to manage a steady transition away from coal long before reaching that point.

In the comments responding to Sweeny’s discussion:

Cap and trade purists don’t seem to understand that there is something out here in the real world called an electricity market, and that under any politically viable national cap, coal use is barely touched.

Once we get beyond “internalizing the externality” in economists’ language, or more plainly, once the third party effects of actions are taken care of, the further ambitions of these regulation proponents sound like a bad mix of industrial policy and meddlesome preferences. The problem with market-based approaches, from the point of view of some folks, is that they don’t help enforce these further ambitions for social reform.

Actually, in my view, this “problem” is another great strength of the market-based approach.

Smart grid policy heats up

Lynne Kiesling

Smart grid policy and activity continue to heat up … I will be attending the NIST-EPRI Smart Grid Interoperability Standards Interim Roadmap Workshop Tuesday and Wednesday in DC, and will be co-chair of a track of sessions on business and policy. The focus of the meeting is “high-level principles” for developing smart grid interoperability standards, and part of my objective is to ensure that in discussing those principles, we maintain our focus on the potential value creation from the transactive capabilities and functionality of an intelligent, information-rich electric power network. Furthermore, we will not realize that value unless we have regulatory institutions and policies that enable us to achieve decentralized coordination instead of imposing centralized control on us.

This is probably a good point to insert links to my 5-part smart grid series from a few weeks ago:

And I’m not alone in focusing on smart grid; NPR has started a 10-part series called Power Hungry: Reinventing the U.S. Power Grid. Today they aired the first in the series, in which they discussed the aging electro-mechanical infrastructure, and how the absence of digital communication capabilities limits the value of and potential for renewable energy. It was a good overview, but I will be listening to the ensuing 9 parts with great interest to see if they really do highlight the important potential for consumer value creation and decentralized coordination that comes from the transactive capabilities of smart grid technologies and policies. In fact, one of the commenters on the page of the first part of the series stated that

The “smart grid” is all about control – of those who want to use electricity. Those computer cables that “are being laid right next to the power line” will allow someone in a control station to decide who and what gets power, by sending a signal to the devices in your house or business that use electricity (and maybe, eventually, gas, as well).

That’s only true if you view smart grid as an extension of the existing regulated utility business model. I argue for another vision — smart grid technology is, to use the business jargon, a transformative game changer that can move us away from the old control model and into a coordination model. But the technology can’t do that by itself — achieving this information-rich, value-rich coordination outcome requires regulatory change, especially enabling dynamic pricing, but also opening minds up to the feasibility and value of retail choice and retail competition.

Other smart grid-related stories that have caught my attention recently:

  • Verizon will add energy management functionality to its FIOS fiber-optic network service offerings. This is a great example of the type of innovative product and service bundling that I envision if our regulatory institutions allowed for more retail competition. And, obviously, if consumers can choose dynamic pricing, Verizon’s router would enable making their thermostats, window blinds, etc. transactive.
  • California utilities plug energy-efficient electronics. But, you know what? Consumers would be much more interested in energy-efficient electronics without the utility having to persuade them if consumers faced dynamic pricing. I encourage regulators to stop just treating energy efficiency “programs” as activities to pay the utility for doing, but instead to reduce the barriers facing retail utilities that prevent them from offering dynamic pricing in a menu of retail contracts. Then consumers make the choices instead of paying through their rates for their utility to inveigh them to buy more energy-efficient appliances and devices.

A solar panel, a jug of wine and thou

Michael Giberson

From RenewableEnergyWorld, an news release from solar developer Conergy:

Going Green Reaches Economic Tipping Point at Wine and Shine 2009

Solar Energy Experts Conergy and Three Renowned California Vintners Showcase How Today’s Clean, Renewable Solar Energy Solutions Can Reap Millions In Cash Rebates, Tax Incentives and Energy Savings

PASO ROBLES, CA – April 23, 2009

Going green has reached an economic tipping point – and its epicenter is at the heart of California’s bedazzling central coast. This Earth Week, J. Lohr Vineyards & Wines, Eos Estate Winery & Clautiere Vineyard are affording businesses throughout the region a first-hand look at how they’re spending your tax dollars (ed. note: sorry for the intrusion.) using the solar energy solutions of Conergy to slash energy costs, reap robust financial incentives and harness the persistent power of the sun to fuel their operations as they protect the integrity of one of the most beautiful destinations on Earth: Paso Robles, California.

Wine and Shine 2009 is a behind-the-scenes tour of the leading-edge solar solutions these sustainable brands are employing to not only protect the integrity of the lands they harvest, but establish their brands as eco-smart solutions that can inspire vintners, growers, public agencies, water authorities and entrepreneurs with energy-intensive businesses throughout the West. It also presents an enticing opportunity to enjoy a tasting of the sun-kissed fruits of J. Lohr Vineyards & Wines, Eos Estate Winery & Clautiere Vineyard’s award-winning vines….

A number of jokes are suggested by the combination of “wine” and “tipping point.” Imagine one of those jokes. Laugh.

A number of very serious issues are raised by taxpayer subsidies of energy costs at wineries. Imagine one of those issues. Bang head against the wall.

Pirates paying for music

Michael Giberson

Freakonomics links to a post at Gizmodo which cites a recent study out of Norway that says people who download free music are 10x more likely to pay for music than people who don’t.

Gizmodo is relying on Google translations from the Norwegian, which can be a little rough around the betalingsvilje, if you know what I mean. (I don’t, since I don’t know what “betalingsvilje” means, and apparently Google translate doesn’t either because the term is passed into the translated text unchanged.)

But translation issues aside, the conclusion reported above certainly seems believable. Folks who download free music, whether legally or not, are likely people with higher-than-average demand for music. These are the people also most likely to pay, right?

NOTE: A few more minutes online suggests that “betalingsvilje” means something like “willingness to pay.” Source.

ANOTHER NOTE: In the comments at Gizmodo, a writer establishes his credentials to comment on the subject by saying, “I pirate my fair share of music, but…”  Arrrgh! Following the pirate’s code, he be.

LAST NOTE: The main point of the Freakonomics post was to mention a musician who is giving away songs via Twitter.

Lubbock Cycling Chic

Michael Giberson

Tomorrow is the annual “Lowrider/Dream bike” parade on the Texas Tech University campus. The event is part of program in which TTU art students and science and engineering students mentor middle schoolers who assemble and customize a bicycle. There are a lot of very sound pedagogical reasons to think that such hands-on activities are powerful ways to teach abstract problem-solving skills.

Strikes me as a very cool project.

But listen to the video, produced by the TTU communications and marketing department, and what is the primary selling point? Here’s the opening:

For a group of nearly 50 kids at Adkins Middle School, getting a free bike was cool in itself, having the chance to trick it out was even better, but – don’t tell them – they are also acquiring problem solving skills that just could help them on standardized testing ….

Great. The big goal of Texas public education, acquire problem solving skills that “just could help … on standardized testing.” Continue listening and you realize that the standardized testing angle is not just the video producer’s framing, it seems pretty important to the middle school teachers too.

The next four words in the video are “…and in real life.” Oh, real life skills, too, once the standardized testing is taken care of?

That is a relief.

(The post title is a nod to the very stylin’ Copenhagen Cycle Chic.)

Connecticut Attorney General proposes new state energy agency to combat incentives for economic efficiency

Michael Giberson

In economic theory, in lab experiments, in practice – pretty much generally speaking – it is well established in economics that a uniform clearing price auction works better than a pay-as-bid auction in cases such as the spot markets for power operated by the NYISO and ISO-New England (and every similar market in the United States, and most every other similar market internationally).

A week ago we discussed the recent argument to the contrary being tossed about in New York, and it appears that the pay-as-bid camp now has an advocate in neighboring Connecticut as well: the Attorney General. But in Connecticut the AG wants to go one better than a pay-as-bid pricing rule for ISO-New England (the regional power market operator in the Northeast), he wants to create a state power agency to supply power at cost to the state’s utilities.

According to an op-ed by the AG published in the New Haven Register:

A nonprofit, independent energy agency would lower prices by circumventing and short-circuiting irrational federal rules that ISO and FERC refuse to reform. The agency would do so by creating more supply — financing, building and buying power plants — that would sell power at cost to the utilities. It also would purchase power directly from generators, using its market power to negotiate lower rates and cutting out middlemen, such as hedge funds, investment banks and energy traders.

Finally, the authority would reduce costs by encouraging energy conservation and doing long-term planning for the state’s future power needs.

… An energy authority would neutralize FERC’s irrational rules by adding a big new player, acting in the public interest, that would use its market power and new plants to force down prices.

The “irrational federal rules that ISO and FERC refuse to reform” are rules in which, the AG said, the “highest, not the lowest, price sets the market. That formulation of the pricing rule omits an important detail – it is the highest accepted offer price that fixes the market price – not the highest offer price. I assume that the AG assumed the reader would grasp that point, but I make it explicit because that detail makes a big difference.

In a competitive market using a uniform clearing price paying the highest accepted offer, suppliers have strong incentives to bid near or at their marginal cost of production. When suppliers bid near their cost of production, then the market will naturally end up selecting the most efficient producers available to supply power. The market design also provides strong incentives to invest into the most efficient kinds of power plants. If the market is not competitive, then a uniform clearing price auction can enhance incentives to exercise market power, so these markets generally have extensive market power monitoring and mitigation schemes, too, for non-competitive periods.

In a competitive market using a pay-as-bid price rule, there are strong incentives for suppliers to bid at or just below their best guess at what the highest accepted market price will be. A low cost supplier that bids below the highest accepted market price is throwing away profit opportunities. The result is that the suppliers who guess (and so offer) the lowest prices get selected, not necessarily the low cost suppliers. In fact, as shown in economic experiments, (ungated version here) under pay-as-bid rules and competitive conditions, prices tend to drift as high as in uniform clearing price auctions with market power. (In the experiments cited, the researchers did not bother running the planned auctions under pay-as-bid rules and non-competitive conditions because the market performed so badly under pay-as-bid and competitive conditions it was clear that things could not get much worse.)

If prices under pay-as-bid do match uniform clearing price levels, then pay-as-bid will provide incentives to invest in the most efficient kinds of power plants. But, if the hopes and dreams for the pricing rule of pay-as-bid rule proponents come true:  suppliers bid their true costs, then incentives for investing in efficient plants are nearly eliminated.

There are a few other wrinkles in the comparison of pay-as-bid and uniform clearing price rules. In the testimony to the New York state assembly committee that I cited last week, David Patton summarized as follows:

While the pay-as-offered market design is superficially appealing, it would result in:

  • Higher overall costs to consumers;
  • Substantial inefficiencies in the operation of the system;
  • Distortions in the incentives to invest in new generation and transmission assets;
  • Additional costs that would harm relatively small suppliers; and
  • Enhanced opportunities for suppliers to engage in market power abuses and manipulation.

Similarly, in a recent overview of the view of the issue by power systems engineer Ross Baldick, he said:

Despite the compelling reasons for using the single market-clearing price for electricity, alternative pricing rules are sometimes proposed. One such alternative proposal is “pay-as-bid,” where each accepted offer is paid its offer price. However, there is no empirical or experimental evidence that pay-as-bid or other alternatives would reduce prices significantly compared to a single market-clearing price design. In fact, some evidence suggests that pay-as-bid would increase prices compared to explicitly setting the single market-clearing price. Moreover, pay-as-bid has some significant drawbacks.

In a forward to Baldick’s study, prominent auction design economist Peter Cramton said, “the clearing-price auction maximizes gains from trade: consumption comes from demand with the highest values and production comes from supply with the lowest cost. This is perhaps the most celebrated result in economics.”

Eight years ago, a “blue ribbon panel” – Cramton along with Edward Kahn, Richard Tabors, and Robert Porter – addressed the same issue in California. Then, as now, the analysts came to the conclusion that uniform clearing price rules are better, and pay-as-bid would: forstall efficiencies expected from the market, introduce additional inefficiencies in operations, weaken competition, and impede investment in demand-side responsiveness.

Not good enough for the AG in Connecticut. He wants a new state power agency empowered to fight these market rules and their incentives for economic efficiency. While I subscribe to the conventional wisdom of economists on this issue – uniform clearing prices work best – every so often it is worthwhile for advocates of failed policies to give the failed policies another chance to fail again. And the more public and transparent the failure the better.

Efficient markets may serve as good examples, but sometimes it is even more educational to have a “horrible warning” to point to. I’m not an electric power ratepayer nor taxpayer in Connecticult; I say, “Go for it!”