I've read this a couple times and trying to understand it. Economics usually takes some mental digestion for me.
In market/product isolation? If it's a mixed market, then much of that private good will be met by the private providers. So Reliability will be provided by generators and increasingly battery storage. The high reliability segments exit the mixed market and it moves toward a public good thereby decreasing Scale. So equilibrium is a less efficient Public segment.
There haven't been great substitutes, but now PV/battery are reaching cost parity, we start risking a downward spiral that damages the electricity industry. Forward looking utilities are concerned and should be.
Understanding Externalities and lowering Transaction cost make sense. But many of those externalities impact Productivity or public safety which isn't rationalized well. And many utilities aren't behaving rationally, or for personal short-term benefit. It's mind blowing a certain utility has somehow had 2 of America's top 10 bankruptcies.
I must be missing and mangling the argument. But Classic Economics makes a re-occurring error by evaluating complex, social systems in isolation/idealism.
Reliability is most efficiently delivered as a public good, with some exceptions like data centers and hospitals, etc. Agents often don't choose to "self-internalize the relevant, inevitable, value effects of their interdependence." Even when rationally they should. Human nature.
Thanks for the thoughtful piece Lynne. I'm very much enjoying your writing and pay better attention to these areas.
Hi Byron, thanks for your very kind and thoughtful comment. I think you've hit on a profound insight when you say that "Classic Economics makes a re-occurring error by evaluating complex, social systems in isolation/idealism" – economics is very reductionist (as are all sciences to some extent) because we've worked hard to formulate tractable theories and models that we can use to understand the fundamentals of phenomena that we know are more complex than we can comprehend. That reductionism has pros and cons.
Thanks again Lynne for giving me the chance to think about these topics. That one sparked a good 2 day internal debate before life moved on.. :) For me Public/Private Goods is one of the most powerful economic concepts and seems often neglected or ideologically displaced. Cheers.
I've read this a couple times and trying to understand it. Economics usually takes some mental digestion for me.
In market/product isolation? If it's a mixed market, then much of that private good will be met by the private providers. So Reliability will be provided by generators and increasingly battery storage. The high reliability segments exit the mixed market and it moves toward a public good thereby decreasing Scale. So equilibrium is a less efficient Public segment.
There haven't been great substitutes, but now PV/battery are reaching cost parity, we start risking a downward spiral that damages the electricity industry. Forward looking utilities are concerned and should be.
Understanding Externalities and lowering Transaction cost make sense. But many of those externalities impact Productivity or public safety which isn't rationalized well. And many utilities aren't behaving rationally, or for personal short-term benefit. It's mind blowing a certain utility has somehow had 2 of America's top 10 bankruptcies.
I must be missing and mangling the argument. But Classic Economics makes a re-occurring error by evaluating complex, social systems in isolation/idealism.
Reliability is most efficiently delivered as a public good, with some exceptions like data centers and hospitals, etc. Agents often don't choose to "self-internalize the relevant, inevitable, value effects of their interdependence." Even when rationally they should. Human nature.
Thanks for the thoughtful piece Lynne. I'm very much enjoying your writing and pay better attention to these areas.
Hi Byron, thanks for your very kind and thoughtful comment. I think you've hit on a profound insight when you say that "Classic Economics makes a re-occurring error by evaluating complex, social systems in isolation/idealism" – economics is very reductionist (as are all sciences to some extent) because we've worked hard to formulate tractable theories and models that we can use to understand the fundamentals of phenomena that we know are more complex than we can comprehend. That reductionism has pros and cons.
Thanks again Lynne for giving me the chance to think about these topics. That one sparked a good 2 day internal debate before life moved on.. :) For me Public/Private Goods is one of the most powerful economic concepts and seems often neglected or ideologically displaced. Cheers.