The Rational Egoist

President Bush has responded to the massive blackout in the east by saying that the electricity grid “must be modernized.”

Who is going to modernize the power grid Mr. President? The United States government completely controls the energy industry, thus completely eliminating competition and thus eliminating the vast majority of technological innovation, increase in productivity, and increase in the quality of the product that the energy market creates.

It is ultimately the government that is at fault for this blackout, and the response by the majority of government officials so far is not to eliminate the crippling government controls on the energy industry but rather to INCREASE THEM. One such example is current Governor of New Mexico, former energy secretary, Bill Richardson, who suggested that the government pass a massive energy bill that includes mandatory standards of efficiency that energy companies must abide by. Not only does Bill Richardson want to dictate to the energy companies WHERE they provide service, but now he also wants to dictate to the energy companies HOW they will provide service.

This is the attitude that is prevalent among politicians regarding our nation’s energy. They believe, that SOMEHOW, by enslaving the individuals who produce and distribute energy, the energy market will be the most efficient and the product (distributed energy) will be at its highest level of excellence. When the energy distribution begins to fail major cities, these politicians, instead of blaming their crippling government controls, advocate that the government hasn’t controlled the market enough and must introduce new and more crippling controls on the market.
The results of such a policy will be the further crippling of the energy market and a national energy crisis within a decade or so, but only IF such a policy is continued. The government has the ability to release its crippling controls on the energy market and thus open it to competition.
But how does competition yield an increase in productivity, efficiency, wealth, quality of the product, etc? In a free market, a number of individuals are free to join together and form a business venture with the purpose of creating and selling a given product in order to reap a profit and benefit their own lives. Generally, consumers will favor a product that is of the highest quality and the lowest price. Thus, in order to make the most profits, a business must strive to produce their product at the highest quality and the lowest price, and their product must be in demand by consumers.

When another business venture attempts to create the same product that the original business created, and is striving to do so at an even higher quality and lower price, competition ensues. Remember, in order to achieve the best profits a business generally needs to produce the highest quality product at the lowest price. When a number of different businesses are all attempting to out do one another, the result is a gradual increase in product quality, and a gradual decrease in product price.

Competition greatly benefits not only the owners of these businesses but the consumers as well. When a number of businesses are all competing to provide the same or similar product, they are all fighting to provide the consumer with the highest quality product at the lowest price, which as I said, results in the gradual increase of product quality and the gradual decrease of product price. This in itself is an enormous benefit to the consumers who gradually (and sometimes drastically) have the ability to buy a product at a lower and lower price and a higher and higher quality. But also, competition GREATLY affects the overall quality of living of the people in a given market as well by decreasing the costs of important products, increasing their quality, increasing the wages that the successful companies pay its workers, and massive amounts of technological innovation (see the past 100 years of America’s progress for evidence of this).

What is the precondition of competition? Freedom. In order for competition to exist, every group of individuals who create these businesses must have the freedom to take whatever actions they deem necessary for the benefit of their own lives. If the government intervenes in a given market, that market will lose competition to the extent that the government controls it. In a government controlled market, which companies succeed is not determined by their ability to create the highest quality product at the lowest price but rather how much political pull the companies have to the whims of politicians. In a government-controlled market, ability does not create success but rather PULL does. Political pull in an economic market is the ability to persuade politicians to give a certain business unfair governmental favors (such as money) and to restrict competition by striking down the companies that are the best at it (an example of this is the antitrust laws).

Thus, in a government regulated market, the way that a business competes with others is NOT by having the best product but rather by having the most political pull designed to eliminate competition. The result of such a policy? In a government-regulated market, it is not beneficial for a business to create the highest quality product at the lowest price; so, most either do not attempt to do so or are unable to. As a result, all of the stated benefits of competition disappear in such a market, which are replaced by eventual stagnation and recession.

This is what has happened in the energy market. The government has regulated it so much that competition is virtually non-existent. As a result, technological innovation, the increase in product quality, and the decrease in product cost have disappeared. This has also occurred in all of the other utilities such as water, gas, railroads, and the airlines (if some politicians get their way).

The solution? Eliminate the government controls that destroy competition in favor of political pull. Let the energy market be free to compete with each other, thereby gradually increasing the quality of their product and gradually decreasing the cost of their product. More government controls will only cripple the market and result in further stagnation and recession, resulting in an energy crisis if that policy is not reversed.

Mr. President, the only thing that will “modernize” the electricity grid, and prevent the likelihood of these blackouts from occurring again is the full de-regulation of the energy market.