Pricing solar energy – the marginal cost factor

 The costs of solar energy are falling quickly and will probably soon be cheaper than more conventional sources.  Does this mean we will once again have large quantities of cheap energy and a return to economic growth?  Maybe and maybe not.

There may not be an immediate drop in the consumer price of power.

The maybe is because of the economic principle that price is equal to the marginal cost of the last unit produced and sold.This means solar will not influence the grid price until the whole current power infrastructure has been replaced. Until then the price will be set by whatever is the most expensive conventional power still being produced.  

It also means firms producing solar power for the grid  will be able to reap some windfall  profits as their costs of production will be lower and falling. Given the current corporate culture that firms have an obligation to maximize their profits regardless we have to anticipate most firms will take full advantage of the windfall. We observe that lots of oil reserves can be extracted at costs much lower than the current marginal cost for more expensive oil. This means some firms and/or governments are reaping windfall profits

The bright spot will be if and when the cost of solar falls enough for small units to be economical and for consumers to be able to afford them.

A further complication is the debt factor.  How much of the debt used to build the current infrastructure is outstanding?  If a large amount has to be written off, it will probably come out of what is called high power money.  If this declines rapidly  it could affect the money supply and cause some economic decline.

As the price of solar falls no doubt lots of large companies will get involved but sadly most if benefits may go to the one per cent in profits and the rest of us will be left out in the cold.  Expect turmoil rather than growth.

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Health care greed

This post was inspired by a rather long article on why health care in the United States is so expensive.

As I read the first section I was thinking that when it comes to greed some health care people make Wall Street bankers look like amateurs.  By my values the bankers are higher on the ethical ladder than some medical people because the bankers are conning people who are just as greedy.  Medical people are exploiting people when they are sick and at their most vulnerable.

metalmarious_Medicine_and_a_StethoscopeOne of the more interesting university courses I took was sociology of work in which the professor talked about the professional encounter.  We go to a professional when we are in a crisis situation and because the professional has specialized knowledge which can be used to get us out of the crisis.

This gives the professional a great deal of power over us and according to the article it appears some in the he medical profession take full advantage of it.

How do we protect ourselves from medical exploitation?  Normally I would say increase competition.  But one probably doesn’t want to take time to compare prices when having a heart attack.

 

To some extent we can choose a family doctor.  More competition would make this easier.  We might get a little more competition if health people were to be certified by associations rather than licensed by governments in that associations could certify more practitioners and more different types of practitioner.

Maybe the best way to protect ourselves is to live a healthy lifestyle – exercise, eat mostly healthy foods and practice defensive driving.  Even so it is hard to imagine anyone getting through life without interacting with the medical profession.

Adam Smith and election funding

For some time I have been saying capitalism as we practice it should be defined as a system in which governments pass legislation which allows some people to make profits by restricting competition.

I hate to admit it but I have never read Adam Smith’s Wealth of Nations although some years ago I purchased a second-hand copy.

Therefore I perked up when I read a column in The Guardian that Adam Smith said something similar.

 

However, what is less well known is that Smith shared some of the key concerns of today’s critics of neoliberalism. His most famous work, The Wealth of Nations, offered a powerful political critique of the “one per cent” of his day, to borrow the terminology of the Occupy movement. In what he himself described as a “very violent attack” on an unjust status quo, Smith repeatedly emphasised the role of power, influence and class in distorting economic policy to serve the interests of a narrow elite.

 

Smith noted that the “English legislature has been peculiarly attentive to the interests of commerce” because policymakers were continually “imposed upon by the sophistry of merchants”. The vested interests “like an overgrown standing army … have become formidable to the government, and upon many occasions intimidate the legislature”. They argue their case “with all the passionate confidence of interested falsehood”, predicting national ruin if their demands are not met.

 

Now take a look at this item from The Huffington Post which reports on some aspects of financing for the current U.S. election.  It appears a lot of people with an interest in restricting competition are putting a lot of money into the election campaign.

I figure one of the most neglected features of the perfect competition model is that there should be perfect knowledge.

Therefore rather than restricting election financing I would suggest all parts of the campaign should include the source of funding and what legislation the source is interested in influencing or retaining.

I have now downloaded Adam Smith’s book onto my ereader.  That was a lot quicker than trying to find the hard copy.

 

Women in the boardroom and real power

An article in this week’s The Economist discusses the “problem” of so few women in the boardrooms of European companies.

It may be that there are so few women in the boardroom and at higher management levels because women are smarter than men in that they don’t want the stress and responsibility.

I figure that if you look at society as a whole rather than just the business world we live in a highly matriarchal society.

Most women realize that the real power is in values and relationships and this is where they really dominate.  When little girls play with dolls they learn that they can have relationships in which they have total control over the thoughts and actions of the other  party.

It is a lot less stressful to leave business to the men and put the pressure on them.  That is smart.

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