This post is yet another one that started as a twitter conversation. I was not communicating very well in 140 character bites with my friend and told him I would expand my thoughts to a blog post, and so here it is. It all started as a standard, and oh so common, conversation about private defense agencies. I like “Could Private Defense Be Any Worse?” by Michael S. Rozeff or “The Idea of a Private Law Society” by Hans-Hermann Hoppe as explanations about how private law, courts, and defense could work in the absence of a government monopoly on these services. He asked if a private firm would let your house burn down if you refused to be a customer of theirs and somehow, via an analogy I made, we got onto how electricity would be provided in the absence of government and that is what I promised @schmuckburns that I would write about and expand my thoughts on.
Electricity is a product or service that is a big part of our everyday life. I don’t see how we could maintain our modern life style or support over seven billion people on the planet without electricity. At present the US government has all kinds of rules and regulations concerning the production of electricity and government has been deeply involved in controlling the industry for over a century. There are many favored and protected monopoly firms in the heavily regulated power industry. Even the source of the power, be it coal, nuclear, water, solar, wind, or whatever, is heavily regulated by government and is a very political issue.
I have read a few people on the Internet who write that there just could not be any electricity without government. What utter codswallop that is! Without government interventions we would see competition arise in all aspects of getting electricity to the home, office, and plant. Why on earth would a people who were dealing with each other in a voluntary manner up and decide that they did not want electricity anymore?
I have read that electricity has even been provided in Somalia despite all the challenges of doing so in that country without a government to “make it happen”. If the Somalians can have electricity where a state failed and voluntary cooperation had to grow over time — why would anyone believe Americans could not do so?
The country’s lack of electricity has long been a problem. After 20 years of war laid waste to much of the place’s infrastructure, it was the private sector that stepped in. A study by the World Bank in 2004, when warlords held sway in most of Somalia, found that local entrepreneurs had discovered a way of getting round the dire lack of a functioning electricity grid, payment system or metering. “They have divided cities into manageable quarters and provide electricity locally using second-hand generators bought in Dubai,” said the report. Households fed up with living in the dark had a range of choices: they could pay for electricity during the day, during the evening, or round the clock. They could even be charged by the lightbulb.
The real question that came up in the twitter conversation was about the current situation in the US electric power industry today that is due to our government’s many interventions. Would the existing firms using their position gained via favoritism from the present government dominate the society and charge outrageous rates for their product if there was suddenly an absence of controlling government? Ludwig von Mises handled that sort of question in his book “Human Action” many years ago and concluded that here can be no monopoly maintained in a land without a government providing monopoly privilege. There never has been and there never can be such a monopoly as my friend was worried about that lasts any length of time. If we start off with a few firms in privileged position then they will compete with each other, and over time others will enter the market to compete with them when they see high profits being made. We might even see human inventiveness come up with solutions to our need for power that we can not even imagine right now. Did you see the iPhone coming in 1990?
It is a lesson in human nature to see that people often believe that a thing can not happen if they can not imagine it happening, and yet the free laissez-faire market would allow for billions of our most igneous fellow humans to think about any problem that we have and look for solutions. For example, if the price of electricity via a wire gets too high, I might get myself one of those electric generators and generate my own power. I even read one engineer with a different idea who claimed “micro-generation” of electricity (small power plants near a town) made a lot of sense and would even be competitive to what we do now. I don’t know if he was right or wrong but I know the free market would ultimately decided given no intervention from the government.
Walter Block wrote an amusing little response to this sort of thing once called “Long Thin Things“. In that post Dr. Block points out that the present day distribution firms have a built in advantage in the local neighborhoods they presently serve since they already have the wires strung to provide the service. New subdivisions would be a different story however.
Since the present day “wires and poles” are now owned and controlled by “the people” via their local governments, I suspect that in the absence of government they would become a cooperative or a corporation owned by many (most?) of the people that are served by the wires now. But could a private firm charge confiscatory rates? No. The people would just not pay them. We can all live without the wires and would do so on a large scale until the prices became reasonable.
In summary, the generation of power would be far more efficient due to the absence of government intervention and the distribution of power would be the only problematic part of the puzzle. Even the distribution piece would not be all that hard in my view since the distribution industry is mainly localized right now anyway. Perhaps in some places the rates would cause people to move or generate their own power but the local firms can’t kill off their own customer base and stay in business.