Monday, September 14, 2015

Monopolist next door

David Roberts at relying on the academic work of Northwestern's Lynne Kiesling--says Dinosaurs still walk the earth;
Despite my reputation as a wild-eyed leftie, I'm actually a big fan of well-regulated markets, especially as instruments of innovation, which is what's most needed in the world of electricity right now. For that reason, I favor option No. 3 [in which the utility is not a market participant at all but is instead a "facilitator of the transactions of independent, distributed agents in the electric network."]. The danger of the first two, Kiesling argues, lies in "vertical foreclosure," whereby a monopoly "[fails] to sacrifice market share or to exit when innovation and dynamism become relevant competitors, and regulatory institutions likewise fail to facilitate the diminution of the monopoly." This kind of "failure to exit" has anticompetitive effects on markets largely through "incumbency and consumer inertia."
Another way of putting that is that utilities have every incentive to begrudge competitors, cling to sunk costs, and use access to regulators to keep the game rigged in their favor. As long as a company with a captive set of customers and state-guaranteed returns is participating in energy-service markets, it will distort those markets.
That's the problem, all right. And it's not confined to electric utilities. As the citizens of Seattle are (or ought to be) keenly aware;
There's no school in Seattle for a fourth day Monday as a strike by teachers enters its second week.
The strike, over issues that include pay raises and the length of the school day, has delayed the start of the public school year for about 53,000 students.
Anyone want to place a bet on how readily the monopolist's employees would be to see the monopoly broken up, thus giving them competition for their services?
"We want to get kids back in school, and we want to show good faith," Seattle Education Association Vice President Phyllis Campano said Sunday evening.
How about you, Phyllis?
Seattle Public Schools spokeswoman Stacy Howard said Sunday the strike, which began Sept. 9, will affect the school year calendar, because it has already eaten up the three snow days the district set aside. The district will have to consider shortening holiday breaks or adding days at the end of the school year. Graduation dates could also be delayed, she said.
Stacy, aren't you clinging to your market share? Begrudging charter school competition?
Teacher salaries in Seattle range from about $44,000 to more than $86,000 for more experienced educators with advanced degrees.
Well paid dinosaurs.

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