Posts tagged ‘Update Exercise’

What Happens When You Abandon The Price Mechanism to Allocate Resources

When the government does not allow prices to float in real time in response to changes in supply and demand, then gluts and shortages are inevitable.  When shortages occur, due to prices that are capped or not allowed to move upwards sufficiently quickly, queues and/or spot shortages occur.  When the government decides it does not like this, the jack-booted thugs step in and we have government-enforced rationing.  California, famous for its stupidity in letting wholesale electricity prices float while capping retail prices and thus creating an economic disaster several years ago, is at it again in the electricity market:

What should be controversial in the proposed revisions to Title 24 is
the requirement for what is called a "programmable communicating
thermostat" or PCT. Every new home and every change to existing homes'
central heating and air conditioning systems will required to be fitted
with a PCT beginning next year following the issuance of the revision.
Each PCT will be fitted with a "non-removable " FM receiver that will
allow the power authorities to increase your air conditioning
temperature setpoint or decrease your heater temperature setpoint to
any value they chose. During "price events" those changes are limited
to /- four degrees F and you would be able to manually override the
changes. During "emergency events" the new setpoints can be whatever
the power authority desires and you would not be able to alter them.

other words, the temperature of your home will no longer be yours to
control. Your desires and needs can and will be overridden by the state
of California through its public and private utility organizations. All
this is for the common good, of course.

I can't think of anything that better illustrates the tie between free exchange and freedom.  And by the way, how long before the greenies in the legislature suggest using this mechanism even when there are not shortages to turn down everyone's air conditioner, just because they can.

Update: Exercise for the reader -- Figure out how, once this policy goes bad, the state of California will again blame Enron for their failure.