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Does deregulation work?

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imported_Lothar

Diamond Member
Aug 10, 2006
4,559
1
0
Originally posted by: JD50
Originally posted by: Lothar
Why don't you ask the people of Texas?
Texans are paying 19-25% more for electricity than the national average and the price of electricity is expected to rise by 24% this time next year.
Power costs have climbed more than 80 percent since the retail electricity market was deregulated in 2002 by Gov. Rick Perry.


Why don't you ask the people of Baltimore, MD who almost got a 72% rate hike in Summer '06 from BGE?
Since I am from MD I can answer your second question, which is very dishonest to say the least. BGE customers are now paying market rates, the price was held down well below market rates for about 10 years due to the regulation and the ineptitude of the Maryland legislature.
There is nothing dishonest about my post.
The deregulation passed by Parris Glendening's administration, including all republicans and a majority of dems in the legislature was supposed to lower prices by increasing competition.
Instead it increased prices absurdly, because BGE is pretty much a monopoly.


The entire purpose of deregulation is to "reduce prices by increasing competition", not "force citizens to pay market rates".
That was how the bill was advertised and paraded around in the legislature.
If they said "pay market prices" from the very beginning, I won't have a problem with it.
 

First

Lifer
Jun 3, 2002
10,518
271
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Originally posted by: glenn1
Common Courtesy hit the nail on the head. Essentially, gov't regulation can lead to price ceilings (like rent control), which is contrary to a healthy, competitive marketplace. You want your supply and demand to be in as much equilibrium as possible, and gov't regulation via price controls usually isn't going to get you there versus the superior open market alternative.
While this is true, it also ignores that economic issues aren't mere abstractions and can have real impacts to market participants. It's easy to point out the shortcomings of environments where price controls are in place, namely that it delays discovery of marginal utility such that price signals won't be able to reliably indicate shortages, surpluses, or consumer preferences. However, economics is worthless without a moral component - you can't feed a starving child by proudly pointing to a supply/demand equilibrium undistorted by a central-planning authority.
Oh of course, I didn't mean to insinuate otherwise. I was just saying that, generally, you're going to end up with favorable net benefits with open market conditions vs. strict regulation, at least in competitive markets; monopolist markets are the exception of course.
 

JD50

Lifer
Sep 4, 2005
11,107
477
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Originally posted by: Lothar
Originally posted by: JD50
Originally posted by: Lothar
Why don't you ask the people of Texas?
Texans are paying 19-25% more for electricity than the national average and the price of electricity is expected to rise by 24% this time next year.
Power costs have climbed more than 80 percent since the retail electricity market was deregulated in 2002 by Gov. Rick Perry.


Why don't you ask the people of Baltimore, MD who almost got a 72% rate hike in Summer '06 from BGE?
Since I am from MD I can answer your second question, which is very dishonest to say the least. BGE customers are now paying market rates, the price was held down well below market rates for about 10 years due to the regulation and the ineptitude of the Maryland legislature.
There is nothing dishonest about my post.
The deregulation passed by Parris Glendening's administration, including all republicans and a majority of dems in the legislature was supposed to lower prices by increasing competition.
Instead it increased prices absurdly, because BGE is pretty much a monopoly.


The entire purpose of deregulation is to "reduce prices by increasing competition", not "force citizens to pay market rates".
That was how the bill was advertised and paraded around in the legislature.
If they said "pay market prices" from the very beginning, I won't have a problem with it.

I'm not quite sure how you think that prices would go down, when they were capped at a 1994 (or maybe 1996, I can't remember) level, and then the deregulation doesn't take effect for ANOTHER 10 years. It probably would have worked if they did it right, but you'd have to be very naive (not you specifically) if you think that a company will be able to afford to charge 1994 prices in 2006. As usual, the Maryland government screwed it up big time.
 

Ozoned

Diamond Member
Mar 22, 2004
5,578
0
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Oh please. Please explain why price rises when the government exits the market? It always rises.

Lobbying takes a lot of money, and usually comes out of the net operating cost column.....
 

JD50

Lifer
Sep 4, 2005
11,107
477
126
Originally posted by: Narmer
Originally posted by: JD50
Originally posted by: Lothar
Why don't you ask the people of Texas?
Texans are paying 19-25% more for electricity than the national average and the price of electricity is expected to rise by 24% this time next year.
Power costs have climbed more than 80 percent since the retail electricity market was deregulated in 2002 by Gov. Rick Perry.


Why don't you ask the people of Baltimore, MD who almost got a 72% rate hike in Summer '06 from BGE?
Since I am from MD I can answer your second question, which is very dishonest to say the least. BGE customers are now paying market rates, the price was held down well below market rates for about 10 years due to the regulation and the ineptitude of the Maryland legislature.
And you have a problem with that?
A problem with what?

Deregulation - no, if done properly, I have no problem with it and I have no problem paying market rates.

Price caps holding the price down well below market value for 10 years - Yes I have a problem with that.
 

JD50

Lifer
Sep 4, 2005
11,107
477
126
Originally posted by: Narmer
Originally posted by: Evan Lieb
Common Courtesy hit the nail on the head. Essentially, gov't regulation can lead to price ceilings (like rent control), which is contrary to a healthy, competitive marketplace. You want your supply and demand to be in as much equilibrium as possible, and gov't regulation via price controls usually isn't going to get you there versus the superior open market alternative.
Oh please. Please explain why price rises when the government exits the market? It always rises. I ask Common Courtesy for a counterexample and he couldn't give me any. Can you?
Maryland and BGE is a perfect example of why the prices would rise when the government exits the market. When prices are held artificially low for an extended period of time, of course the prices will rise when the government gets out.
 

dawp

Lifer
Jul 2, 2005
10,669
1,890
126
Originally posted by: Lothar
Why don't you ask the people of Texas?
Texans are paying 19-25% more for electricity than the national average and the price of electricity is expected to rise by 24% this time next year.
Power costs have climbed more than 80 percent since the retail electricity market was deregulated in 2002 by Gov. Rick Perry.


Why don't you ask the people of Baltimore, MD who almost got a 72% rate hike in Summer '06 from BGE?
I agree! I recently moved from DFW area in TX to the KC area in MO and it's like nite and day, my power bill basicly was cut in half. can't argue with that.
 

Narmer

Diamond Member
Aug 27, 2006
5,293
0
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Originally posted by: JD50
Originally posted by: Narmer
Originally posted by: Evan Lieb
Common Courtesy hit the nail on the head. Essentially, gov't regulation can lead to price ceilings (like rent control), which is contrary to a healthy, competitive marketplace. You want your supply and demand to be in as much equilibrium as possible, and gov't regulation via price controls usually isn't going to get you there versus the superior open market alternative.
Oh please. Please explain why price rises when the government exits the market? It always rises. I ask Common Courtesy for a counterexample and he couldn't give me any. Can you?
Maryland and BGE is a perfect example of why the prices would rise when the government exits the market. When prices are held artificially low for an extended period of time, of course the prices will rise when the government gets out.
Can you give an example when the government did everything right and prices went down? Is it always the government's fault? You guys can't give me one example?
 

Siddhartha

Lifer
Oct 17, 1999
12,501
1
81
When it comes to consumer safety, I want more not less government regulation.

Edit: when it comes to safety* in general, I want more not less government regulation.

*food, bolts, concrete, pollution, etc
 

Genx87

Lifer
Apr 8, 2002
41,061
494
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Compare airline tickets from the 1970s to today. Then look at the options at our airports as well.

Govt regulation can carry other burdens. It is possible within the scope of your example the regulation forces costs up artificially. Maybe it has labor agreements, envrionmental taxes, or any other plethora of items put within the regulation that makes the cost go up. Deregulating will bring costs down which increases profit margin.
 

Narmer

Diamond Member
Aug 27, 2006
5,293
0
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Originally posted by: Genx87
Compare airline tickets from the 1970s to today. Then look at the options at our airports as well.

Govt regulation can carry other burdens. It is possible within the scope of your example the regulation forces costs up artificially. Maybe it has labor agreements, envrionmental taxes, or any other plethora of items put within the regulation that makes the cost go up. Deregulating will bring costs down which increases profit margin.
But some of the things you mentioned have social benefits which is good for everybody. When you put it into private hands, those things are quantized (if at all) and priced accordingly. There is something seriously wrong with that.
 

BoberFett

Lifer
Oct 9, 1999
37,563
9
81
Originally posted by: Narmer
I was reading an article regarding foreign investment in Russia in the latest issue of the Economist magazine when I aw this line: "Profits are meagre at present but should increase when prices are deregulated."

This lead me to thinking. When governments talk about deregulation, they always promise lower prices. But the outcome is usually the opposite. So what is the advantage to the public regarding deregulation? Or is it simply a way to transfer wealth from the taxpayer to a few individuals.
It does when there is actual competition. Deregulation in a monopoly market does nothing but raise prices.
 

Narmer

Diamond Member
Aug 27, 2006
5,293
0
0
Originally posted by: BoberFett
Originally posted by: Narmer
I was reading an article regarding foreign investment in Russia in the latest issue of the Economist magazine when I aw this line: "Profits are meagre at present but should increase when prices are deregulated."

This lead me to thinking. When governments talk about deregulation, they always promise lower prices. But the outcome is usually the opposite. So what is the advantage to the public regarding deregulation? Or is it simply a way to transfer wealth from the taxpayer to a few individuals.
It does when there is actual competition. Deregulation in a monopoly market does nothing but raise prices.
Fair enough. Then why is a (private) monopoly allowed to exist when the government is already in charge?
 

imported_Lothar

Diamond Member
Aug 10, 2006
4,559
1
0
Originally posted by: BoberFett
Originally posted by: Narmer
I was reading an article regarding foreign investment in Russia in the latest issue of the Economist magazine when I aw this line: "Profits are meagre at present but should increase when prices are deregulated."

This lead me to thinking. When governments talk about deregulation, they always promise lower prices. But the outcome is usually the opposite. So what is the advantage to the public regarding deregulation? Or is it simply a way to transfer wealth from the taxpayer to a few individuals.
It does when there is actual competition. Deregulation in a monopoly market does nothing but raise prices.
Yup.
 

palehorse

Lifer
Dec 21, 2005
11,521
0
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Originally posted by: Narmer
Can you give a recent example where competition has caused lower prices? The only one I can think of is airlines but the service has gotten much worse.
Operating systems, gaming consoles, TV's, DAP's, PMP's, cellphones, cellphone rates, long-distance rates... everything on Black Friday... oh, wait, I mean nearly everything on the market today! Imagine that!

Competition is the only thing that truly drives innovation and lower prices. Without it, the market would be stagnant, and the products themselves would be sh*t! True deregulation is a win-win for consumers everywhere!

How can airline fairs be the only example you came up with!?

Is your only point of contention that it also drives up profits for those who are doing the innovation and manufacturing?
 

piasabird

Lifer
Feb 6, 2002
17,168
60
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I dont think deragulation works in areas of the economy where there is virtually a monopoly. Take Electricity as an example. Has deregulation raised the prices or lowered them?

I am not talking theory in this case, but actual application.

I think market speculation often just inflates the prices artificially so the guys at the top or the middlemen make more money and the consumer is forced to pay higher prices without justification.
 

Craig234

Lifer
May 1, 2006
38,548
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Here's the summary explanation.

There are parties involved in commerce - consumers, sellers, and some others.

Each has its own interests. The so-called 'free market' first, doesn't exist except in degrees (there can be closer to and further from a 'free market', and second, it can allow for parties to have 'abusive' practices that are not 'good' results, e.g., monopoly as the class example of an unrestrained market.

Regulation can play a positive role in preventing those abuses. For one example off the top of my head, limiting the margin amounts of people investing tends to discourage hyper-speculation which tends to stabilize the market, prevent crashes and benefits the market overall - yes, arguably, especially regarding the levels to use.

So, you start out with a market that's 'too free' and has problems, and want to use regulation to fix the problems. If you have people making the regulations who are trying to fix those issues, then you might get them fixed. But what often happens, is that the most powerful parties, i.e. the 'big businesses', use the regulatory process for their own benefit - corrupting it to give themselves guarantees and little accountability.

It's a bit analogous to, say, a medical business who wants to do something objectionable appointing an 'ethics committee' whose real purpose is to give them cover, not stop them.

On the other hand, poorly done regulation can also be a hindrance - the favorite charge of the right, which is sometimes accurate. It can be used for competitive purposes (one industry stirs up scares about its competitor industry to get excessive regulations in place on it, for example).

So you can't just say 'regulations are good or bad'. They can be either, or even both.

But that doesn't fit well on a bumper sticker, which is the amount you have to work with with right-wingers for the most part, so 'regulation is bad' sticks for them.

One last comment, the 'regulation is bad' ideology is frequently spread by the interested parties who are simply out for themselves to undermine the legitimate public oversight.

Unfortunately, since they have budgets to spread their ideology and the other side doesn't really have one, people are fooled.
 

3chordcharlie

Diamond Member
Mar 30, 2004
9,859
1
81
Originally posted by: piasabird
I dont think deragulation works in areas of the economy where there is virtually a monopoly. Take Electricity as an example. Has deregulation raised the prices or lowered them?

I am not talking theory in this case, but actual application.
Bingo - regulation is useful mostly in cases of natural monopoly, and *shockingly* it is in cases of natural monopoly that the strongest calls for deregulation are heard.

A semi-private monopoly in a regulated price system can just smell the billion-dollar windfall of profits just beyond their grasp, and will do anything they can think of to achieve deregulation.

Last time I checked, no one was regualting the price of naturally competitive goods, except agricultural ones, which is a whole other story (and a long one at that).
 

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