An Exchange (Unfinished) with Lynne Kiesling – Did You Enjoy It?

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By Robert Bradley Jr. – August 16, 2022

“The propensity for government intervention to cause unintended consequences and extend from its own shortcomings has taken over a vital US industry. The time has come for fundamental, classical-liberal, free-market reform with electricity. “

For a while, I questioned the job of an electrician Lynne Kiesling deals with classical liberalism, market process economics, and Public Choice theory. She wears robes of all three traditions; I believe her approach is the opposite.

There are assumptions and hidden views she doesn’t want to talk about: climate alarmism; forced energy conversion. (Why?) And below, her premise is that “market failure” exists with electricity that requires government intervention. And with this intervention, she fell for the centrally planned approach that demanded a classically liberal autopsy and reversed the policy. (And maybe no one better than her can explain the problem!)

I recently started a productive discussion with her in front of a classically liberal crowd. But things calmed down only when my challenge was heading towards the major inflection points.

In this post, I share that discussion; tomorrowI’ll list a few questions for Kiesling to raise the bar at a time when grid instability (and actual power crises) has hit the United States like never before in history. 140 years of industry.

Social media exchange

The conversation starts with a Facebook post from Austrian economist Peter Boettke:

From the NYT today: “None of these changes have had near-term impact on federal action. But smaller changes can still add up – and even spur broader changes. Consider the vehicle market: By delegating electric vehicles, California and other states will lead automakers to build more vehicles, potentially driving innovation and regulatory economies. tissues will reduce costs for everyone and thus increase their use across the country. “

The part that drives innovation is what I wanted to focus on because it highlights what I think is an elusive but important concept in regulation and intervention theory… Kirzner’s concept of unnecessary discovery. Let’s discuss.

Lynne Kieseling replied:

This question is asked in the work that I do every day. Most people working in the field of energy policy, including academia, reject the argument that new processes can bring about full and fully coordinated action on any question. Ask which policies they are interested in. Many have a top-down view instead of a bottom-up view, or even a combination of the two. Most don’t think about epistemology, and think they know what the “right thing to do” is. When a regulation creates redundancy (and the unintended consequences that come with it), the answer is often “we didn’t do enough” or “we’re limited in how strict a regulation can be.” that we can impose”.

This is why I do what I do, every day, communicating these principles to regulators and others in energy policy and academia. It’s playing a long game and like Michael Munger I could say it’s a guide, not a destiny, but I see many people willing to acknowledge the transient benefits of the market, their error-correcting nature, and the flaws of regulation. In energy policy, I think it will always be a mixed landscape, with a mix of planning and emerging, intervention and markets, top-down and bottom-up. That means adjusting your expectations of what’s possible (again, person-oriented).

I’ve answered:

I question your whole approach to electricity. The [Independent System Operator/Regional Transmission Organization] The mandatory open access-based ISO/RTO model is a centralized planning scheme currently in crisis mode. In Texas, the ERCOT monopoly sets the rules for pricing (how to judge the reliability of prices is a bit confusing!) – and it subsidizes wind and solar in the process.

And now that the Texas grid is being hit hard, the focus shifts to complex demand-side schemes to allocate shortfalls (your work?).

We need fresh blood in the Austrian/Public Choice to explain the failure of this variant of ‘market socialism’ and chronicle the political takeover. I say this not only as a classical liberal defining what I believe classical liberal policy is, but also as a historian explaining the failure of central planning in the modern era. real time.

She replied (#1):

I know you do. Recognize pluralism in classical liberal approaches; your model is not the only model of classical liberal theory *and practice* on energy regulation and policy.

I also invite you to consider the extent to which your reviews fail to incorporate the physical and technical aspects of networking disciplines such as electricity.

And as I suggested to you before, your proposals would benefit from more attention to the grid as a common resource with undefined property rights, with split drawing. further analysis of Ostrom and others developing the IAD framework.

I’ve answered:

Thank you for your comment.

First, is electricity a ‘common problem’? Did Ostrom ever realize it that way?

Yes, there are areas of control because of the idiosyncrasies of electricity, but that only leads to one company controlling one area of ​​the wire – or having contracts with other companies for the same end.

Second, mandatory open access and government-directed wholesale monopolies are about how much non-classical-liberal one can get. Especially when the “market failure” interpretation of electricity is being criticized.

Finally, the idea that a centrally planned wholesale market allows for retail competition (neoclassical competition) and thus yields the insights of Hayek, Schumpeter, Coase, etc. seriously misapplied. (“Planning for Freedom” takes on a new meaning.) This being said, I beg people much smarter than me to participate in the mechanics of this new planning experiment to educate educate us all about what’s going on. I’m afraid that’s all the Mises Interventionist Thesis at Work is all about.

In another comment on the thread, she replied (#2):

And I agree

tell you that TX Lege and PUCT made many bad decisions in their response to Uri.

I’ve answered:

Re ERCOT decision making, it is a case study of government failure over the ages – one of the most severe cases of Mal coordination in American industrial history. (A whole thesis should be suggested on that, Professor Boettke.) And also the Public Choice to get rid of Nirvana’s assumptions about government power policy.

At that point, she became silent.

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I’m less concerned with one’s (mainstream) views on electricity policy than trying to sell them as “classical liberal”. Accepting “the guide, not the guide” is an avoidance; it is wrong direction, wrong destination. The massive power outage in Texas in February 2021 was filled with information and planning errors that were predicted by critics of the government’s approach. And now we have costly, vulnerable networks spread across the United States.

In short, the propensity for government intervention to cause unintended consequences, and to extend from its own shortcomings, has taken over a vital US industry.

The time has come, even now, to take a whole new look at public policy for good or bad for a major US industry. Finally, I have provided a placeholder for what I believe is the correct theory and good history that lies within the classical liberal tradition.