Yesterday I had a lovely conversation with Don Luskin while he was working on his National Review Online column and his blog post on Paul Krugman’s silly column on the blackout. It was a delightful chat about deregulation, the benefits of being more interconnected, and the value creation that comes through markets. Don said it more succintly than I have been able to:
What she means is that, without price signals to tell producers what to supply and at what level of reliability, and to tell consumers what to demand and with what usage patterns, we really have no idea how to design an electricity industry. In Kiesling’s framework, the challenge is to develop an environment in which an electricity industry can safely design itself.