represented the idea of company-generated state regulation that closed industries and
geographical penetration for newcomers (Bodislav 2014). Stigler also highlighted
that modern regulation is biased toward helping the companies, not the general
public and macro-interest (Peltzman 1976). Peltzman used to see regulation as an
auction, where politicians would “sell” their service to the highest bidder, the bid
being seen as lobby or bribe toward reelection. The best seen solution for regulation
is seen when both parties are optimized (consumers and producers). Niche regulation
most of the time empowers one side of the deal, and regulators shift benefits from
one party to another by using the marginal utility function. Rent-seeking behavior is
present when it comes to opening or creating a new set of rules or regulations, and
political entities try to take their share of the deal.
The only natural element in this situation is that we have competition as equilibrium generator between government regulation and economic efficiency (Taleb
2010). In 1983, Becker realized that regulations create borders and develop inefficiency and help interest groups in pressurizing politicians to act on their behalf.
Peltzman and Becker researched that continuous investment in lobbying creates
some dangerous shifts in policies on the long run, and regulatory behavior is killing
any deregulation present on the market. Peltzman and Becker highlighted that
economic theory uses increased marginal benefits to explain the behavior of politicians and why some interest groups shift from one side to another. Usually deregulation was used to explain why loss-loss situation happened in the past, where
energy producers and consumers had their marginal benefits reduced, and this also
represented the key to shifting toward regulating the economy instead of
deregulating it. The Chicago school of thought and the Austrian way of economic
thought stressed that a regulative economy that uses methodological individualism
and sensitivity in market behavior could help solve the irrational behavior of
governments and ignite to peaks for competition (Bodislav 2014).
9.3 Deregulating Markets: A Path that Could Provide
Long-Term Muddling Through
A counterintuitive example on total deregulation is the state of California and the
timeframe when they deregulated the power grid and energy market. The free trade
generated and based on demand and supply seemed to be a perfect market, especially
when long-term contracts were banned and all transactions were made on the spot
price through an independent system operator (Bodislav 2013a). The system marked
to market only after a volume was reached, a fact that left the door open for suppliers
to manipulate the market and be molded similar to monopoly system. Companies
like Enron and Dynegy profited also from deregulation and also from market
inefficiency. Instead of decreasing prices, the deregulation law spiked the actual
prices and generated regional monopolies inside California that also empowered the
growth of barriers for future suppliers, and this way the market got closed for new
9 Creating Sustainable Energy for Future Generations
147
geographical penetration for newcomers (Bodislav 2014). Stigler also highlighted
that modern regulation is biased toward helping the companies, not the general
public and macro-interest (Peltzman 1976). Peltzman used to see regulation as an
auction, where politicians would “sell” their service to the highest bidder, the bid
being seen as lobby or bribe toward reelection. The best seen solution for regulation
is seen when both parties are optimized (consumers and producers). Niche regulation
most of the time empowers one side of the deal, and regulators shift benefits from
one party to another by using the marginal utility function. Rent-seeking behavior is
present when it comes to opening or creating a new set of rules or regulations, and
political entities try to take their share of the deal.
The only natural element in this situation is that we have competition as equilibrium generator between government regulation and economic efficiency (Taleb
2010). In 1983, Becker realized that regulations create borders and develop inefficiency and help interest groups in pressurizing politicians to act on their behalf.
Peltzman and Becker researched that continuous investment in lobbying creates
some dangerous shifts in policies on the long run, and regulatory behavior is killing
any deregulation present on the market. Peltzman and Becker highlighted that
economic theory uses increased marginal benefits to explain the behavior of politicians and why some interest groups shift from one side to another. Usually deregulation was used to explain why loss-loss situation happened in the past, where
energy producers and consumers had their marginal benefits reduced, and this also
represented the key to shifting toward regulating the economy instead of
deregulating it. The Chicago school of thought and the Austrian way of economic
thought stressed that a regulative economy that uses methodological individualism
and sensitivity in market behavior could help solve the irrational behavior of
governments and ignite to peaks for competition (Bodislav 2014).
9.3 Deregulating Markets: A Path that Could Provide
Long-Term Muddling Through
A counterintuitive example on total deregulation is the state of California and the
timeframe when they deregulated the power grid and energy market. The free trade
generated and based on demand and supply seemed to be a perfect market, especially
when long-term contracts were banned and all transactions were made on the spot
price through an independent system operator (Bodislav 2013a). The system marked
to market only after a volume was reached, a fact that left the door open for suppliers
to manipulate the market and be molded similar to monopoly system. Companies
like Enron and Dynegy profited also from deregulation and also from market
inefficiency. Instead of decreasing prices, the deregulation law spiked the actual
prices and generated regional monopolies inside California that also empowered the
growth of barriers for future suppliers, and this way the market got closed for new
9 Creating Sustainable Energy for Future Generations
147