10-02-2003 09:46									#31
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quote: Originally posted by Asher IEEE fellows are people they deem as making important contributions to the field of engineering science, in what way does this classify them as experts in privatizing electricity grids?

You don't think people who have made important contributions to the field of power generation have some good understanding of economics as well?

	10-02-2003 09:48									#32
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quote: Originally posted by Urban Ranger You don't think people who have made important contributions to the field of power generation have some good understanding of economics as well?

Not necessarily, especially when they've been making these contributions in markets that aren't open or free markets. They were making them under legal monopolies, what would force them to know anything about economics?

I'm not saying they're stupid, I'm just saying they're hardly experts when it comes to deregulation just because some of them know how to design a power plant.

	10-02-2003 09:54									#33
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quote: Originally posted by Berzerker UR - If you're part of a consortium of investors building a railway among a group of cities, it sure does matter if you're taxed to support a politically connected competitor.

You are talking about a completely different situation. When I said tax, I said one that would be applied to every company, not just some companies. I think you are comparing apples and oranges. Unless you can prove that this is the general case with power generations.

quote: Originally posted by Berzerker The reason we see only a few rail systems now is because the government subsidised airlines while regulating the hell out of the railroads once they were built. Government decided how much railroads could charge and many went out of business because they couldn't charge what the market required.

1. How much good deregulation did to the airline industry? It's sucking up all the same. It's not like it's thriving.

2. Even during the haydays of US railroads, there were just a few companies. You had the Big 3 (UP, CP, and SP) and a few medium sized ones. Not exactly a very competitive market.

quote: Originally posted by Berzerker That's why private concerns are reluctant to invest in power production, politicians will effectively nationalise their investments via regulation...

You also forgot to include the fact that the power market is pretty inelastic. Just because you slash prices, people won't start using more. On the other hand, people will use less if you raise prices.

	10-02-2003 09:59									#34
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quote: Originally posted by Asher Not necessarily, especially when they've been making these contributions in markets that aren't open or free markets. They were making them under legal monopolies, what would force them to know anything about economics? I'm not saying they're stupid, I'm just saying they're hardly experts when it comes to deregulation just because some of them know how to design a power plant.

Unless they are academics, engineers in the industries will eventually move up into management, acquring new knowledge and skills along the way. A rule of thumb is an engineer will become an operational manager in 5-10 years and senior management in 20 years. Consider Andrew Grove as a prime example.

	10-02-2003 10:01									#35
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quote: Originally posted by Urban Ranger Unless they are academics, engineers in the industries will eventually move up into management, acquring new knowledge and skills along the way. A rule of thumb is an engineer will become an operational manager in 5-10 years and senior management in 20 years. Consider Andrew Grove as a prime example.

That doesn't brand them as an expert.

	10-02-2003 10:41									#36
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quote: Originally posted by DanS I was "touched" by the general in charge of US forces in NK crying on national TV.

He must have the smallest command of the entire US army.

	10-02-2003 10:56									#37
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quote: Originally posted by DanS I was "touched" by the general in charge of US forces in NK crying on national TV.

Damn, things are moving faster than I thought!

	10-02-2003 10:57									#38
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Beat you to it, you bastard.

	10-02-2003 11:11									#39
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Jeez...where to start??


Economics

A natural monopoly occurs when there is not room for two efficient-sized firms in the same market.

Electricity

Power generation is not a natural monopoly. You can build any number of generating plants which feed the electric grid at about the same cost. Nor is it terribly expensive to build a new plant. There are very few big huge expensive coal or nuke plants being built anymore. Most new plants are combined cycle gas-turbine generating plants, which have very low fixed cost per KWH. In addition, many large industrial firms (eg, steel or paper mills) are building generating plants to make use of heat that would otherwise be wasted.

Power transmission may or may not be a natural monopoly, depending on the size of the market. Most large metro areas could probably be served by a couple of different transmission lines. This might not be true for smaller areas.

Power distribution is a natural monopoly. Having two competing sets of electric wires going into individual houses would be much more costly than just having one set. Because distribution is a natural monopoly, local electric utilities tend to be regulated.

Railroads

Railroads are a bit more complicated. For any individual line, a railroad hits its minimum cost at about 40 trains per day. (This is known as economies of density, whic applies to a single railroad line.) After that congestion costs start to offset the savings in fixed cost. So if you have any market with less than 80 trains per day, you have no room for two firms, and hence a natural monopoly. Most large railroad markets have two or more efficient competing firms, and so are not natural monopolies. Smaller markets can have a natural monopoly problem, but this can be offset by competition from other modes, such as trucks and barges.

In addition there is the question of scale, which apply to collections of railroad lines. Generally, a minimum cost railroad firm will have about 20,000 miles of line, a shade smaller than the four really large US systems have today. When railroads were deregulated in 1980, there were something line 32 major railroads in the US. Today there are four really large railroads, another half a dozen medium sized railroads (about 3,000 miles each), and a whole bunch of small niche carriers. One of the many problems with railroad regulation prior to 1980 was that it kept many of the original 32 railroads from merging into efficient sized competitors.

Lastly, land grants to railroad were not corporate give-aways. They were in-kind loans, which the railroads repaid by hauling government freight at free or reduced rates for a set number of years, through and including WWII. It turns out that the government actually made money on the deal. The volume of land grants wasa vastly overstated for two reasons. First, most maps of railroad land grants were produced by Grange organizations, which had a political stake in battling railroads. The area affected by grants was about half of what the Grange maps showed. Second, the grants were given out in a checkerboard pattern, with the railroad getting one half, and the government the other. This reduced the remaining portion of the affected area by half. All that said, land grants were probably not necessary to build railroads. One transcontinental railroad (James J. Hill's Great Northern) was built entirely without land grants, and was the only transcontinental railroad to survive the financial panic of 1893.

Disclaimers

I worked in the railroad industry for almost 20 years. However, I will defer in advance to MtG's superior wisdom and experience in the electric power industry.

Full Disclosure: I provided expert testimony defending a railroad in a rate case brought by Montana Power. Montana Power is an absolute scumball company which richly deserves to lose this case. Too bad I can't bill for the cost of decontamination after being in the same room as these guys. The lead attorney said it was an occupational hazard, so I have to pick up the tab.

	10-02-2003 11:43									#40
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Damn, things are moving faster than I thought!



If I could make it happen without incredible loss of life and property, I would.

	10-02-2003 15:21									#41
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UR -

quote: You are talking about a completely different situation. When I said tax, I said one that would be applied to every company, not just some companies. I think you are comparing apples and oranges. Unless you can prove that this is the general case with power generations.

The reason the tax code numbers thousands of pages is because special interests have favors written into the code, all companies are not treated the same and haven't been for more than a century. The transcontinental railroad is a good example of how government corruption - political favors for the politically connected - crowded out private concerns. So equal treatment via the tax and regulatory codes are non-existent and have been for a very long time...

quote: 1. How much good deregulation did to the airline industry? It's sucking up all the same. It's not like it's thriving.

I'm talking ~1930's-1950's when the airlines were starting to grab marketshare and the railroads began to decline. Obviously this was bound to happen to a degree just as motor traffic also took a bite out of the railroads marketshare, but the rails were snubbed by government.

quote: 2. Even during the haydays of US railroads, there were just a few companies. You had the Big 3 (UP, CP, and SP) and a few medium sized ones. Not exactly a very competitive market.

And? It's not like the rail systems were built free of government corruption to begin with. There was massive corruption with congressmen actually investing in the very rail companies that were getting government subsidies. How was a private company supposed to compete with that?

quote: You also forgot to include the fact that the power market is pretty inelastic. Just because you slash prices, people won't start using more. On the other hand, people will use less if you raise prices.

I'm not sure what this has to do with our discussion.

Adam Smith -

quote: Lastly, land grants to railroad were not corporate give-aways. They were in-kind loans, which the railroads repaid by hauling government freight at free or reduced rates for a set number of years, through and including WWII. It turns out that the government actually made money on the deal.

When were these contracts made? If the government made money, doesn't that mean the railroads lost money putting them at a dis-advantage with motor and airline traffic?

	11-02-2003 05:00									#42
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Today the paper where I live (Cumberland, Maine) ran an article about a pro United Sates protest in S. Korea. News stories can be very one sided and I was wondering if a vote was held today in the South on whether the U.S should withdraw do you think most would say yes? I have feeling most would vote to keep us.