On Sat, 7 Apr 2001, Bob Morris wrote:
> OK, LBO'ers. The conservatives say that price caps are only a
> short-term fix, that, under price caps, the price tends to rise to the
> capped price and stay there, and thus costs more. Plus, under price
> caps, out of state suppliers may stop selling to California if they
> can get higher rates elsewhere. What's a good Leftie rebuttal to
> this?
If the shortage has been caused by gaming the system, capping prices will actually increase supply by bringing generators on line. Currently power suppliers have a huge incentive to keep generators off line; it increases their profits geometrically. In a capped set-up, they have the opposite incentive -- each generator they bring on line increases their profits arithmetically.
This argument was made a few weeks ago in the New York Times by Paul Krugman, a probable future winner of the nobel prize in economics, and not exactly a screaming leftist. He said that if the system *wasn't* being presently being gamed, it would violate the laws of economics.
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com