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Category — Malloy, Ken

Bradley’s Political Capitalism Project (Part IV: Who is John Galt?)

In the closing act, we have the protagonist foisting on the world a set of insights, which we proceeded to dissect in Act II and Act III. Is there a happy ending to our play? Alas, it is a tragedy.

The Bradley Project, which can be overviewed at his website Political Capitalism,  brilliantly narrates the ethos of what he calls “Heroic Capitalism” in contrast with “Political Capitalism.” As applied to energy policy, Bradley is largely correct in his insights that the energy industry has become so mixed up with the mixed economy that corporate leaders legitimately fear that capitalist advocacy will be punished.

As an out-of-the-closet energy policy market advocate, I have often been privately besieged to take public positions that corporations were loath to take publicly because of their fear of regulatory retribution.

Thus, we have lost any truly national champions for the views expressed in the Bradley Project. We have bit players. I have run small pro-market energy think tanks for more than a decade, after a career of almost 20 years in government advocating pro-competitive energy policies. Bradley has run the Institute for Energy Research even longer. We have been on the front lines, as have some others in the think tank community, credit the Cato Institute, Heritage Foundation, American Enterprise Institute, and even to some extent, Brookings Institution.

But Bradley names only one nationally recognized corporate advocate of pro-competitive energy policies: Charles Koch. I would argue, however, that while Mr. Koch has applied his pro-competitive thinking to his company and has generously supported some think tank efforts, he has not really taken on the mantle of the national leader of a free-market-in-energy movement. [Read more →]

February 5, 2012   2 Comments

Bradley’s Political Capitalism Project (Part III: The Place for Government Intervention)

Act I finds the protagonist boldly proclaiming an original and bold explication of the economics and history of the gas and electric industries. In Act II, we use the weapons developed by our protagonist to render much that passes for sound energy policy both tragic and comedic.

In Act III, we search deeply within ourselves to discern if the protagonist provides answers to the modern vexations that ail us. Come let us listen to Friedman Milton as he disarms the protagonist.

Black and White–or Gray?

The Bradley Project seems to dichotomize the world into free market capitalism and political capitalism. To paraphrase George Orwell, free markets good; political markets bad.

I have no quarrel with Bradley’s conclusion that both energy generally and natural gas and electricity in particular have been victims of political capitalism in all its hoary forms. I disagree, however, with the Bradley Project’s hostility to addressing market failures.

The energy industry, more than any other industry I can think of, has some serious market failures in the classic sense defined by economists. For example:

· Market power problems in gas and electric transportation and distribution;

· Externalities in every supply option, including renewables;

· Public goods issues in basic research and some free rider problems;

· Information asymmetries in various industry segments (let a marketer try to get customer load information from a regulated utility).

Finding the right policy in light of these market failures, while not compromising market forces, is what makes energy policy so treacherous and complex. [Read more →]

February 4, 2012   8 Comments

Bradley’s Political Capitalism Project (Part II: Energy Policy Today)

Yesterday, I fawningly reviewed Robert Bradley’s Political Capitalism Project for providing information and insight to where much of our economy has gone wrong in the last 80 years, i.e., allowing companies to succeed by using political muscle instead of free market acumen.

The Bradley Project provides a sturdy worldview for thinking about energy policy. Today, I will critique both recent and historical energy policy by relying on Bradley’s framework for assessing the implications of political versus market capitalism. Tomorrow I will argue the legitimate role of government in energy markets and give an example where active government policy is needed.

Back to 1973

The modern era of energy policy began on October 17, 1973, the day that OPEC announced an oil embargo against the U.S. With very few exceptions, since that day, energy policy, on both sides of political aisle, deteriorated until finally, and literally, it fell off a cliff with the Obama Administration’s embrace of the “green economy” and its hostility to carbon energy.

We have had our share of “energy crises,” and I would agree with the Bradley Project that all have been self-inflicted by bad government policy advocated and adopted on a bipartisan basis, Democrats supporting distortions on a soft path and Republicans on a hard path.

Unfortunately, we are headed for more crises in energy markets. Washington makes two fundamental mistakes when it comes to energy policy. The first is it focuses on problems that don’t exist (today’s discussion). The second is it ignores problems that do exist (tomorrow’s discussion).

Washington’s Energy Meddling

The Bradley Project does an excellent job of providing the intellectual framework that shows that many of the things that Washington is focusing on are not problems. Here is a brief list: [Read more →]

February 3, 2012   2 Comments

Bradley’s Political Capitalism Project (Part I: Introduction)

Edison to Enron … [is] the second part of a three-volume series on the history of American energy, told through the distinction between productive and predatory capitalism.  Bradley is a very much underrated economic historian, largely because of his ‘amateur’ [nonacadmic] status, but there is a remarkable amount of learning in his books.”

- Tyler Cowen, ‘What I’ve Been Reading,’ Marginal Revolution, November 15, 2011.

Last Friday afternoon in our nation’s capital, Robert L. Bradley, Jr., a prominent figure in the esoterica of energy markets, unveiled the Project on which he has labored for a decade before a full room at the American Enterprise Institute. Kenneth Green moderated, and comments were provided by Stephen Hayward and yours truly. My formal remarks follow.

The Project

Enter stage right, our protagonist with The Bradley Project. He has three arrows in his quiver, a trilogy of books that will be the authoritative commentary on American political capitalism and energy policy inspired by the rise and fall of Enron (where Bradley worked for 16 years).

He artfully aims his first arrow, (Capitalism at Work: Business, Government, and Energy) a political economy text that forges a path for his second onslaught (Edison to Enron: Energy Markets and Political Strategies), a history text that applies the economic principles of Book 1 to the natural gas and electric industries from their 19thcentury inception to about 1985.

Both books are dense and lengthy–but very readable. Bradley tackles the vast literature behind subjects and provides hundreds of pages of documentation. For the most serious scholars (are there many anymore?), he provides Internet appendices per chapter, no less than 52 for Book 1 and 74 for Book 2. The extra mile seems to have been run in virtually all instances.

His actions set the economic, political, and historical stage for his yet unleashed third arrow, a text that will mine the Enron debacle and its aftermath for trenchant insights that will help both academics and energy professionals better understand what happened but more importantly, develop insight for the future regarding the nexus of politics and the market economy.

· Act I (today): the Bradley Project is brilliantly conceived, brilliantly executed, and will stand the test of time.

· Act II (tomorrow): his perspective pierces the veil that hides the excrescence that passes as the current sorry state of energy policy.

· Act III (Saturday): dare we venture that there is such a thing as sound government intervention, heretical as that may be in this crowd.

· Act IV (Sunday): the future or, who is John Galt? [Read more →]

February 2, 2012   1 Comment