Wednesday, November 18, 2009

the state: spinning straw from gold

the people's republic of california has decided to ban large screen televisions in an attempt to free up power for household use. because we're so used to the inefficiency of government controlled resources and because most people have a glaring lack of understanding of such things, it seems a little shocking, but otherwise passe.

slightly underneath the surface is the great example of how government turns assets into liabilities. in a market, where assets (such as power grids and power generation) are used to generate profits and are subject to competition, there is every incentive to respond to an increase in demand with an increase in production. more basically, assets under private control must be maintained in a manner conducive to production.

governments, on the other hand, have no such incentive. governments derive their funding through violence. they force consumers to pay for their "services" after eliminating any competition by threat. they don't need the assets under their control to generate revenue. in this situation, these assets become liabilities that must be maintained at the expense of revenue with no added benefit. in other words, because assets are not needed to generate revenue, the cost of their maintenance makes them liabilities. therefore, the incentive is not to maintain them. this is readily seen in roads, sewers, power grids, etc, where maintenance is always poor and the services are highly unresponsive to demand.

the fact that california is banning certain televisions in order to reduce demand for power should come as no surprise. the state has no incentive to increase production and has the means to use force to curb power consumption. by enacting these laws, they will not have to take the necessary steps upgrade power generation assets which does nothing but drag on the revenue of the government. this is why california experienced the blackouts of a few years ago and why they will continue to have power generations problems for the foreseeable future.

the solution? simple. get such assets out of the hands of government and into the hands of private companies in an unregulated power market.

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