ISO/RTO Gaming: “Ketchup Caddy” Gets Caught

By Robert Bradley Jr. -- February 29, 2024 No Comments

“[Philip] Mango told FERC staff he planned to ‘[d]o this for just a couple of years, make a bunch of money to put kids through school and do all those things, and no one’s hurt’ …. Ketchup Caddy [was] a corporate entity that Mango had created to sell an in-car ketchup holder he invented….” (Utility Drive, below)

Why do the worst often get on top where political entrepreneurship replaces market entrepreneurship? Why does regulation invite gaming where (at best) entrepreneurship is superfluous?

Consider the 1970s oil trading boom, where price-controlled oil was bid up to market levels without any value-added. Robert Sutton, a former trunk salesman, became a regulatory millionaire on that one.

Remember Enron’s gaming of the California hyper-regulated electricity market in 2000/2001? Three authors wrote in Business History Review:

Enron’s traders used their knowledge of the newly designed markets to artificially increase or decrease wholesale prices in their favor, which often involved submitting false supply-and-demand information, withholding available electricity, or scheduling energy they did not have.

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The Craziest Regulatory Episode in US History: The 1970s Oil Reselling Boom

By Robert Bradley Jr. -- April 25, 2018 2 Comments

“When President Reagan decontrolled prices in January 1981, the regulatory arbitrage was over…. The strangest regulatory episode in US history was done.”

Economist Robert Murphy has summarized what I believe is the most unique, confounding, consequential regulatory episode in American history in his piece: “The Crazy Crude Oil Price Controls of the 1970s.” [1]

Yes, it happened some decades ago. But if you want to know why no economist in recent history has espoused price controls for crude oil and petroleum products, this experience rings loud today.

Basically, a large group of opportunistic middlemen seized profits that federal price and allocation regulation kept from the rightful industry parties (wellhead producers, in particular). It is the story of the unintended consequences of government intervention. Or entrepreneurial gaming in the face of regulatory constraints (with positive social outcomes in this case)–what Israel Kirzner called superfluous entrepreneurship.…

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