Flattery; And More On Competitive Transmission

So I was catching up on my reading this AM over breakfast, and saw the header on Robert Prather’s post titled “beneficial complexity”. Very cool, I thought, sounds right up my alley. And then to find that the post was a link to me! Jiminy, that’s pretty exciting, thanks! I love the phrase beneficial complexity; it succinctly captures the myriad benefits attending market processes.

Now, to provide further enticement in this notion of possible competition in electricity transmission, think about this: the means of competing with a monopoly network grid are diverse. Building a parallel network is NOT, repeat NOT, the only option. Electricity illustrates this beautifully, because distributed generation technology that makes small-scale, local generation more feasible and economical for more consumers, also makes the grid contestable because it provides consumers with alternatives to using the monopoly network.

I’ve actually written some about this. The most extensive formulation of the argument is in this Reason Public Policy Institute study entitled “Movin’ Juice: Making Electricity Transmission More Competitive”.

Examples abound in telephony and computing too. I think the punchline is this: don’t make policy decisions based on static notions of what constitutes a natural monopoly. Technology changes those categories, and changes what types of economic activities fit into those categories, and because our regulatory environment is not sufficiently flexible and adaptive to be robust to the dynamic effects of technological change, we’re all worse off.

One thought on “Flattery; And More On Competitive Transmission

  1. I’m guilty of having static notions of natural monopoly. I have really taken it as an article of faith even when Unicom/ComEd/Exelon has been selling these little turbo-generators that can use natural gas to power a Walgreens or the like.

    Likewise, transponders have made road privatization possible in most cases. Neighborhood roads would likely remain government projects and connectors between neighborhoods might need to be busted up to keep people from driving through residential areas just to avoid tolls. Even so, I think it can be done and would be desirable.

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