Smart Meters and Consumer Choices

The drive to let consumer-level electricity prices float as prices do in innumerable other markets has been stunted by complaints about so-called “smart meters” that would give consumers the ability to respond to fluctuations in the realtime price of electricity.

When the California Energy Commission attempted to put these kinds of meters into new buildings, the knee-jerk reaction consisted largely of complaints about the government “taking over” consumers’ electricity consumption in the case of a looming blackout. For more on why these concerns lacked some essential context, listen to the podcast with Peter Van Doren on the case of the CEC.

As I discussed with economist Lynne Kiesling at Cato University, consumer-side responses to varying electricity prices could take many forms, from smarter appliances plugged into the same pricing information to battery technology to take advantage of times of low electricity demand. What’s more, dynamic pricing could someday let consumers turn the product of electricity into the service of electricity by allowing consumers to pay a premium for costlier but “greener” methods of electricity generation.

Here’s more from Kiesling on smart meters.

Be Wary of ‘Pro-Business’ Politicians

Rick Perry is an unapologetic “pro-business” candidate for President. Columnist Tim Carney unpacks what Perry might mean when he says that:

Perry promises to “get Americans back to work,” but his policies — from backroom drug company giveaways to green energy subsidies — eerily mirror the unseemly big business-big government collusion that has characterized President Obama’s presidency. Judging by his record in Texas, Perrynomics might just be low-tax Obamanomics.

Corporate welfare king Boeing provided a formative experience for Perry. Weeks after Perry took over the governorship in 2001, the jet maker announced it was moving its corporate headquarters out of Seattle and was considering Chicago, Denver and Dallas. Undoubtedly, Texas provided the best business environment: lower taxes, less regulation, better weather, less traffic. But Chicago won because Mayor Richard Daley and Gov. George Ryan offered Boeing $63 million in “incentives,” including a $1 million buyout to a tenant who was occupying Boeing’s preferred office space.

One problem: Texas’ slower legislative process prevented the state from making a counteroffer. Perry was determined to fix this inefficiency so he would never be out-corporate-welfared again.

In his next State of the State address, Perry pushed the Legislature to create the Texas Enterprise Fund, giving the governor, lieutenant governor and House speaker the power to hand out multimillion-dollar grants to businesses seeking to relocate to or expand within the state. Two years later, Perry and the Legislature created another subsidy bank, called the Texas Emerging Technology Fund, using taxpayer money to invest in high-tech companies. Perry made government a venture capital fund.

Muckrakers at the Los Angeles Times and the Austin American Statesman have shown a strong correlation between Perry’s biggest campaign contributors and the money handled by these funds and Perry’s other public-private partnership. Almost half of Perry’s “mega-donors,” according to the Times, have received profitable favors from the Texas government. Poultry magnate Joe Sanderson, for instance, gave Perry’s campaign $165,000 and received $500,000 from the Texas Enterprise Fund to open a facility in Waco, the Times reports.

I’d continue quoting, but you should really just read the whole thing. Of course, no politician should be “pro-business” when it means that consumers pay the price. Even the father of economics, Adam Smith, wasn’t pro-business. He was, like any credible economist, pro-market. Markets are what deliver benefits to consumers by allowing prices to float freely and giving entrepreneurs the signals they need to put their resources where they can do the most good.

Perhaps not surprisingly, Kentucky governor Steve Beshear’s re-election campaign reminds me a great deal of Perry’s self-promotion. Beshear’s campaign seems largely designed to tout the kind of special interest tax “incentives” he’s given to businesses throughout the state. Beshear wouldn’t apologize for that because it makes some political sense, but he should know that businesses without political connections don’t much care for that kind of favoritism.

Beshear, like Perry, perhaps believes that he has the Midas touch when it comes to picking winners and losers in the marketplace. Beshear, after all, can point to the winners he picks. But it’s not as if Beshear is investing his own money in these businesses. He’s making bets on and rewarding the activities of some businesses as the direct expense of every other taxpayer in the commonwealth.

A wiser tax policy would be to eliminate all special interest tax breaks, lower overall rates (dare I say eliminate some taxes completely?) and therefore send a beacon to would-be entrepreneurs that Kentucky is the place to be. But I doubt that kind of reasoning fits too neatly in a 30-second campaign commercial.

(Thanks to Ryan Young for the tip.)

Three Wars

AP: The Pentagon said the U.S. has flown nearly 1,200 strike operations over Libya, dropping bombs 242 times since April 1. There have been 92 Predator strikes since late April.

The Day My Friend Aaron Got Trapped in His Model

Yeah, I remember that day. Aaron started on about the frictionless movements of goods and services instantly from one place to another. Then it was that markets instantly take full account of all available information. He said that entrepreneurs could somehow costlessly enter and exit markets hundreds of times a day. And it was “widget this” and “widget that” for the rest of the time. I knew it was bad when I told him about a $20 bill I’d found. Get this. He called me a liar, arguing that “if it had really been there, someone else would have gotten to it first.” By then he was rocking back and forth.

What’s that? No, I don’t visit him in the hospital, but not a day goes by that I don’t miss him. He was a good friend.



Seeking a jolt for a wilting economy, President Barack Obama will give a major speech in early September to unveil new ideas for speeding up job growth and helping the struggling poor and middle class, a senior administration official told The Associated Press.

Imposing National Standards

Next month, the Obama Administration will begin granting waivers to states that are not on track to meet proficiency requirements in the No Child Left Behind Act. Education Secretary Arne Duncan will be granting these waivers selectively, based mostly on states’ willingness to abide by new executive branch mandates not included in NCLB, likely including adopting national curriculum standards.

Duncan has the authority under NCLB to grant waivers, but not to compel states to jump through administration hoops in order to earn them, as Neal McCluskey has documented clearly.

As Neal notes in today’s Cato Daily Podcast, essentially imposing national standards – as well as other potential waiver demands – represents a large-scale assertion of federal executive power over local education:

We’ve broken any semblance of a Constitutional balance of power between the executive and the legislative branch. Now the President is just going to dictate to every school what they’re going to teach. And that is a giant threat to freedom and to the American education system.

A broader recognition that the Constitution grants neither Congress nor the President any role in education would go a long way toward fixing these problems. NCLB may be, to quote Arne Duncan, “a slow-motion train wreck,” but using that law to transfer power away from parents, states and Congress is easily a solution worse than the problem.

The Morality of Capitalism

Capitalism deserves a moral defense, but even those who appreciate the moral superiority of capitalism sometimes find themselves ill equipped to offer a clear response to critics.

A new book from the Atlas Economic Research Foundation, Students for Liberty and the John Templeton Foundation aims to provide just that intellectual ammunition. The Morality of Capitalism, edited by Cato Senior Fellow Tom G. Palmer, gathers a diverse group of scholars, writers and business leaders from across the globe to extoll the virtues of capitalism.

I recorded a quick podcast (Subscribe!) with Tom about the book and its authors.

Here’s an excerpt via SFL:

When you look at criticisms of the market, in many cases, what they’re complaining about is interventionism and cronyism, not really capitalism…. On the moral level[, we need to take the offensive and make the case for capitalism. That’s what this book, The Morality of Capitalism, is about…. What distinguishes capitalism is a legal and moral relationship among persons. That people have the right to pursue their dream, the right to do what they want with what is legitimately theirs under a system of the rule of law and equality before the law for everybody, not privileges for some or some have special powers as planners or dictators. But all of us meet in society as moral and legal equals and we trade and exchange. The outcome of that is morally just. It’s not just that it’s more productive… at its base, people have a right to exchange, they have right to transact freely, and the state or self-appointed planners don’t have the right to tell them otherwise.

Student groups can get bulk copies shipped to them from Students for Liberty.