7.07.2008

HIGHER ELECTRICITY BILLS ARE ON THE WAY

My parents taught me not to waste stuff. Turn off lights, turn off the faucet, turn off the car. As an adult, I now appreciate that in addition to avoiding waste, energy conservation also helps the environment and helps my pocketbook.

And as an economist, I now appreciate that a more accurate price for energy means less inefficiencies associated with the extent to which energy consumption leads to negative externalities. So I may be the only one on my block that cheered this front page headline: "Region Braces for Energy Rate Hike."

These state-imposed rate caps were pointed out to me by a speaker at a conference I attended earlier this year. To the extent that government intervention has led to inaccurately low energy prices, people have behaved according to those prices, and as a result, we've consumed more energy than is optimal. And just as higher gas prices have led to good things - people bundling trips, selling their SUVs, and talking about big changes that need to happen in our economy - so will more correct energy prices lead to good things - less wasteful consumption, more motivation to do "green" construction, the increased attractiveness of energy-efficient appliances.

To be sure, we may need to ladder these increases, and/or provide special programming for those who are least economically able to cope with the new prices. But if the price is wrong, the best solution isn't to keep it wrong - that just leads to more inefficiency and puts us on a dangerous global parh - but rather to facilitate as quickly and as painlessly as possible the transition to an overall economy and millions of consumers that is based on a price that is right.
Post a Comment