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June 17, 2008



Well, *I* was never snookered. I agree with Krugman that this is hardly a 180 for senator Obama. Like Mr. Obama, I have a healthy respect for free markets. That's not incompatible with a strong belief in social justice and/or a healthy distaste for many corporate practices.

Obama has shown that he's very comfortable having dissenting voices around him. I don't see this as a bad thing. Rather than judge him by views or actions of his advisors, I'll judge him by his own statements and the policies he has outlined. For instance, I thought his speech in New York on proposed reforms in the financial markets was an absolute home run.

As an aside, I don't think you remember the California power crisis correctly. My understanding was that individual Californians never paid the inflated prices. The price charged to CONSUMERS was capped, but the wholesale price bought by the utilities was not. This half-deregulation was what opened the door to wild market speculation. It was this disconnect, between prices paid and charged by the power company, that led to the power shortages and the rolling blackouts.


The state used tax money to pay the overcost, so we paid just not in the monthly bill.
O being from the house that Uncle Milton built could be the final blow to the American worker.
Everything is on schedule, please move along.



You're quite right of course; Californian citizens ended up paying the price in the end. But it was the wholesale/consumer price disconnect that turned a classic supply-and-demand situation into a tragedy of the commons. In stead of paying that extra premium if you used more power, you paid a fraction of a penny in extra taxes. Of course, millions of people were behaving that same way, so those slivers of pennies added up.

If people had paid higher rates on their BILLS, then the rising prices would have led to reduced consumption, and the price would have stabilized. But since the utilities were legally required to charge a fixed rate, the only way they were able to control the wholesale price was by limiting supply - ergo, rolling blackouts.

A few unscrupulous people realized that the Californian energy plan was a ticking time bomb which could be set off by a moderate price shock. When real-world situations led to a rise in demand, those folks were able to exploit the wholesale/consumer price disconnect to run up the wholesale price and make a lot of money speculating.

I've always felt that California's crisis was not a failure of deregulation in principle, but a great example of how not to deregulate.


Here's an interesting analysis of "Obamanomics", from an outstanding blog I discovered about a month ago:



How are you?

There are degrees of "free market" theology that certainly are averse to social justice. The Chicago School (and I knew about it from having read up on the field called "Law and Economics" some years ago) is notorious for seeking the degree that doesn't include social justice.

As for Obama, I can't tell where he is exactly. My gut says that he's saying one thing to secure one group of votes and a different thing to secure another. I don't know what he really thinks.

I read the article that you linked for Joe6pack. The writer's opinions/interps haven't cleared up anything for me.

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