Tuesday, August 31, 2010

Er...no.

I am a regular reader of Jack Bog's Blog.  It is a good place to get a handle on the local political scene as he seems to be well connected.  He is mostly a cranky dude however, full of criticism and bereft of constructive alternatives.  And when he ventures into economics, I cringe, as he is almost always confused and regularly wrong.  For a tax law professor, this surprises me, as I thought the law and economics nexus was pretty well established at this point.

Anyway, here is an example from today that I use as a teachable moment:

"...the public utility companies. These cash cows are regulated, at least to a degree, on the theory that their service is a matter of life and death, particularly to people of limited means, and their opportunities for profit-taking should be limited."

No.  They are regulated because the very high fixed costs of their operation make them natural monopolists  and monopolists have long been known to be subject to the incentive to limit output to increase profits, which reduces overall social welfare.  For people of limited means the government does many other things like earned income tax credits and specific residential energy tax credits.

3 comments:

Jack Bog said...

Government regulation of electric and gas utilities is aimed at ensuring safe operation, reasonable rates, and service on equal terms to all customers. If that's what your econ mumbo-jumbo means, I agree with it. Otherwise, no.

In any event, you now hold the record for the shortest time anyone has ever been on my blogroll. Take care.

Patrick Emerson said...

For someone who has fashioned his blog persona as a rabble rouser unafraid to speak truth to power, I am quite surprised to find you have such a thin skin.

I don't think you should be so criticism-averse given the nature of your blog. I hope that when I make a tax law blunder, you'll call me out on it, too.

Steve Buckstein said...

Patrick, while the law and economics nexus might be pretty well established at this point, apparently the tax law and economic nexus is a bit more tenuous.