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I suppose we've come full circle and stopped trusting in free markets to fully solve all problems. Does anyone know of hybrid central planning / market approac

I suppose we've come full circle and stopped trusting in free markets to fully solve all problems. Does anyone know of hybrid central planning / market approaches? Maybe a central planner with a market trying to predict whether the planner is making good decisions?

wsinks 5y ago
Wasn't this the promise of 'prediction markets'? https://www.predictit.org https://www.predictit.org (you can read promise as 'value prop' too, I don't know much about these, just that they exist and are a recent creation)
- cosmojg 5y ago
  There are better prediction markets out there now with more markets on more things. See, for example: https://kalshi.com/ https://kalshi.com/ (if you're in the US) https://polymarket.com/ https://polymarket.com/ (if you're elsewhere) Also, if you just want to get your feet wet, this one utilizes a system of reputation rather than money: https://www.metaculus.com/ https://www.metaculus.com/
- thephyber 5y ago
  PredictIt has two large limitations it created to appease the SEC: a max $USD per player per market and a max number of players per market. Markets need a much less restrictive environment to be liquid enough to have accurate predictions. Also, the granularity of bets is in 1/100 units and there is a huge market tax on withdrawing funds. There may have been lots of promise, but there is a lot of friction which explains why PredictIt didn’t live up to that hype.
selectodude 5y ago
If something is required to survive, it is by definition not a free market. Texas either needs to go all the way and let people freeze to death without getting bailed out or they need to re-regulate. This middle ground where the market is free until there's a market failure is simply moral hazard.
- MisterBastahrd 5y ago
  Even not quite so extreme, going without power for an extended period of time basically forces you to throw all your refrigerated and frozen food away. It takes months each times this happens for the supply chain to catch up with the new and unexpected demand.
  - sokoloff 5y ago
    If it’s -2°F outside, many people can figure out a way to save their frozen food.
    - seanmcdirmid 5y ago
      Small hole in the wall stores in Harbin don’t bother putting ice cream in freezer sun the winter.
- ryan93 5y ago
  How are you so sure that regulators would have required protection against a once in a hundred year storm? What doesnt the Democratic republic of the Congo regulate the poverty out of existence? Hindsight is 20/20
  - simfree 5y ago
    Rolling blackouts occured during the Groundhog Day Blizzard in 2011 as well: https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#Background https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#Back... Competent regulators can see the past and prepare for things that happened a decade ago to reoccur.
  - xxpor 5y ago
    ERCOT/TX explicitly creating their own grid so they're not regulated by FERC (which covers literally the entire rest of the country) suggests that perhaps they don't have ratepayer's best interests at heart. I'd love to know if anyone's written anything about say, FERC vs ERCOT's gas pipeline winterization requirements.
wmf 5y ago
It has been suggested that a capacity market would have solved the Texas problem.
nine_zeros 5y ago
A hybrid planning approach IS a national grid approach. A state grid can draw from the national grid when required. The draw can also be preplanned and game dayed before actual disasters.
enragedcacti 5y ago
You could give The People's Republic of Walmart a read. Full disclosure, I haven't read it, I've just read/listened to media talking about it. > For the left and the right, major multinational companies are held up as the ultimate expressions of free-market capitalism. Their remarkable success appears to vindicate the old idea that modern society is too complex to be subjected to a plan. And yet, as Leigh Phillips and Michal Rozworski argue, much of the economy of the West is centrally planned at present. Not only is planning on vast scales possible, we already have it and it works. The real question is whether planning can be democratic. Can it be transformed to work for us? https://www.amazon.com/Peoples-Republic-Walmart-Corporations-Foundation/dp/178663516X https://www.amazon.com/Peoples-Republic-Walmart-Corporations...
maxerickson 5y ago
Is your first paragraph about Texas specifically or something? Utilities in most places are pretty heavily regulated. In like that last 20 years we have had ~0 gas outages and probably less than 10 days of power outages here. The weather event in Texas had the problem of being rather extreme, but it sure wasn't unimaginable or anything like that.
- bcrl 5y ago
  10 days worth of power outages in 20 years is not something to brag about. I lived in Toronto where we had maybe 1 hour of power outages in 5 years (my Linux box had >485 days of uptime on wall power with no UPS until I had to move). Well, that was until the 2003 blackout hit and took out power for 24+ hours.
  - maxerickson 5y ago
    It's not a brag, it's a data free guess intended to not be wrong low. A transformer at a substation that serves much of the town blew up a few years ago causing a several day outage, so it definitely isn't a few hours. They had rolling black outs in place in less than a day and had power back in less than 3 days (there was not a spare on site).
  - mardifoufs 5y ago
    Even grids designed around winter can fail, hard. Quebec's grid is extremely important to the province, and it's actually a source of pride here yet it also failed in a catastrophic way in 1998. And I've had 3 outages this year in Montréal too. I don't know why everyone seems to be judging the soundness of the Texas grid based on single event that happened last year. Yes it was catastrophic, but so was what happened in 1998 here in quebec or the outages that occured in 2004 in Ontario or even the perpetual mess that's California's grid.
    - bcrl 5y ago
      The 1998 ice storm was something that had not happened before. Montreal was in particularly bad shape because numerous towers for something like 2 of the 3 transmission lines going into the city collapsed under the weight of the ice (please forgive my foggy memory for the exact numbers and details). My family in eastern Ontario was without power for 8 days in 1998, and another friend was without power for 17 days. Ontario had failed to enforce proper engineering standards for pole lines, and as a direct result of the review of standards after the '98 ice storm, ESA regulation 22/04 significantly improved standards for these systems. Regulation 22/04 wasn't fully implemented by Hydro One and Bell until 2007-2008, and one consequence of 22/04 is that the cost of installing new fibre on old pole lines increased massively at that time as permitting process went from being handshake deals to requiring detailed engineering work. Those of us trying to deploy broadband in some areas simply cannot afford to replace every single pole in some areas as is required by modern engineering standards. I have personally encountered quite a number of class 5 - 35 foot poles with 3 phases of power on them that were installed in 1948! Survey work in the past month even found a couple of poles from 1929!!! Those poles are effectively toothpicks at this point in their lifecycle. Granted, the older poles that were treated with creosote last a heck of a lot longer than the more modern "environmentally friendly" CCA-PEG treated poles, but they're pretty small and often have glass insulators that you really don't want to be anywhere near when that pole starts swaying due to the movement of a cable lasher. Learning about all of this telecom and electrical domain knowlegde has been kinda fun in its own way. =-)
willis936 5y ago
Markets have never been free. Policy has always dictated the winners and losers, even in cases of state deregulated markets (who gets federal subsidies, who makes out better given lack of state regulation, who paid for that regulation, etc.) The ideal of a free market is simply not compatible with reality.
caf 5y ago
I've on occasion idly wondered whether modern information processing technology would enable a centrally-planned economy that worked better than the failed 20th century examples.
- throwaway0a5e 5y ago
  Marginally better? Probably Better enough that in the long term the people in charge of it don't have to resort to authoritarian measures to avoid getting shot in the hole they just dug? I'm not gonna pretend to have a good answer for that one.
- jabl 5y ago
  A couple of books on this topic: Cockshott, Cottrell: Towards a New Socialism, brief synopsis as well as a link to the PDF version at https://en.wikipedia.org/wiki/Towards_a_New_Socialism https://en.wikipedia.org/wiki/Towards_a_New_Socialism Phillips, Rozworski: People's Republic of Walmart, https://www.versobooks.com/books/2822-the-people-s-republic-of-walmart https://www.versobooks.com/books/2822-the-people-s-republic-... Disclaimer, I've only skimmed through the first and not read the second. I'm not personally super-convinced as I think markets are in many ways a pretty good decentralized economical information sharing mechanism (in the sense of prices conveying information about scarcity etc.). That being said, there are of course numerous examples of market failure where some kind of state intervention is needed. And in some cases the market failures in question might be so severe and so hard and expensive to work around that a socialist model might in fact work better. Like health care or much of public infrastructure. But that doesn't IMHO mean that market mechanisms must be entirely abolished everywhere. To get back on the topic of electrical grids, yes I think a mechanism of dispatching based on marginal costs is a good idea, as that means the lowest cost producers to meet the required demand are used. But also note that this is a pretty "synthetic" market, with a central planner deciding on which generators are dispatched, and customers are buying from that market rather than some kind of "natural" market where they'd go directly to the producers. And of course few end customers have their rates tied to the spot price, which sort of destroys the idea of demand response where the end users would react to high prices. And the variability of the electricity price is only going to get more dramatic as more zero-marginal cost variable producers like wind, solar come online. In a simplified model with zero marginal cost producers and inelastic demand you'd either have a cost of zero when production is higher than demand and the administratively decided ceiling price (or infinity if such a ceiling hasn't been set) when demand is higher than production. Which doesn't really sound like a functioning market. So maybe we'll over time go towards a model where some kind of capacity market is responsible for the majority of generator income (and customer cost) and the wholesale spot market reduces in importance, mostly deciding the merit order for dispatching generators.
bsder 5y ago
> free markets You cannot "free market" infrastructure that is expensive to duplicate and uses up scarce resources. A "second grid" that is 100% reliable, for example, would be terribly wasteful of the physical space required to run it. In addition, "free market" didn't give us universal electrification to begin with. Why would you assume that it can run it? At this point, we have run the "deregulation" experiments in California and Texas (and elsewhere). They have failed. Critical infrastructure needs to be managed by a political process.

wsinks 5y ago

Wasn't this the promise of 'prediction markets'? https://www.predictit.org https://www.predictit.org (you can read promise as 'value prop' too, I don't know much about these, just that they exist and are a recent creation)

cosmojg 5y ago
There are better prediction markets out there now with more markets on more things. See, for example: https://kalshi.com/ https://kalshi.com/ (if you're in the US) https://polymarket.com/ https://polymarket.com/ (if you're elsewhere) Also, if you just want to get your feet wet, this one utilizes a system of reputation rather than money: https://www.metaculus.com/ https://www.metaculus.com/
thephyber 5y ago
PredictIt has two large limitations it created to appease the SEC: a max $USD per player per market and a max number of players per market. Markets need a much less restrictive environment to be liquid enough to have accurate predictions. Also, the granularity of bets is in 1/100 units and there is a huge market tax on withdrawing funds. There may have been lots of promise, but there is a lot of friction which explains why PredictIt didn’t live up to that hype.

selectodude 5y ago

If something is required to survive, it is by definition not a free market. Texas either needs to go all the way and let people freeze to death without getting bailed out or they need to re-regulate. This middle ground where the market is free until there's a market failure is simply moral hazard.

MisterBastahrd 5y ago
Even not quite so extreme, going without power for an extended period of time basically forces you to throw all your refrigerated and frozen food away. It takes months each times this happens for the supply chain to catch up with the new and unexpected demand.
- sokoloff 5y ago
  If it’s -2°F outside, many people can figure out a way to save their frozen food.
  - seanmcdirmid 5y ago
    Small hole in the wall stores in Harbin don’t bother putting ice cream in freezer sun the winter.
ryan93 5y ago
How are you so sure that regulators would have required protection against a once in a hundred year storm? What doesnt the Democratic republic of the Congo regulate the poverty out of existence? Hindsight is 20/20
- simfree 5y ago
  Rolling blackouts occured during the Groundhog Day Blizzard in 2011 as well: https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#Background https://en.m.wikipedia.org/wiki/2021_Texas_power_crisis#Back... Competent regulators can see the past and prepare for things that happened a decade ago to reoccur.
- xxpor 5y ago
  ERCOT/TX explicitly creating their own grid so they're not regulated by FERC (which covers literally the entire rest of the country) suggests that perhaps they don't have ratepayer's best interests at heart. I'd love to know if anyone's written anything about say, FERC vs ERCOT's gas pipeline winterization requirements.

wmf 5y ago

It has been suggested that a capacity market would have solved the Texas problem.

nine_zeros 5y ago

A hybrid planning approach IS a national grid approach. A state grid can draw from the national grid when required. The draw can also be preplanned and game dayed before actual disasters.

enragedcacti 5y ago

You could give The People's Republic of Walmart a read. Full disclosure, I haven't read it, I've just read/listened to media talking about it. > For the left and the right, major multinational companies are held up as the ultimate expressions of free-market capitalism. Their remarkable success appears to vindicate the old idea that modern society is too complex to be subjected to a plan. And yet, as Leigh Phillips and Michal Rozworski argue, much of the economy of the West is centrally planned at present. Not only is planning on vast scales possible, we already have it and it works. The real question is whether planning can be democratic. Can it be transformed to work for us? https://www.amazon.com/Peoples-Republic-Walmart-Corporations-Foundation/dp/178663516X https://www.amazon.com/Peoples-Republic-Walmart-Corporations...

maxerickson 5y ago

Is your first paragraph about Texas specifically or something? Utilities in most places are pretty heavily regulated. In like that last 20 years we have had ~0 gas outages and probably less than 10 days of power outages here. The weather event in Texas had the problem of being rather extreme, but it sure wasn't unimaginable or anything like that.

bcrl 5y ago
10 days worth of power outages in 20 years is not something to brag about. I lived in Toronto where we had maybe 1 hour of power outages in 5 years (my Linux box had >485 days of uptime on wall power with no UPS until I had to move). Well, that was until the 2003 blackout hit and took out power for 24+ hours.
- maxerickson 5y ago
  It's not a brag, it's a data free guess intended to not be wrong low. A transformer at a substation that serves much of the town blew up a few years ago causing a several day outage, so it definitely isn't a few hours. They had rolling black outs in place in less than a day and had power back in less than 3 days (there was not a spare on site).
- mardifoufs 5y ago
  Even grids designed around winter can fail, hard. Quebec's grid is extremely important to the province, and it's actually a source of pride here yet it also failed in a catastrophic way in 1998. And I've had 3 outages this year in Montréal too. I don't know why everyone seems to be judging the soundness of the Texas grid based on single event that happened last year. Yes it was catastrophic, but so was what happened in 1998 here in quebec or the outages that occured in 2004 in Ontario or even the perpetual mess that's California's grid.
  - bcrl 5y ago
    The 1998 ice storm was something that had not happened before. Montreal was in particularly bad shape because numerous towers for something like 2 of the 3 transmission lines going into the city collapsed under the weight of the ice (please forgive my foggy memory for the exact numbers and details). My family in eastern Ontario was without power for 8 days in 1998, and another friend was without power for 17 days. Ontario had failed to enforce proper engineering standards for pole lines, and as a direct result of the review of standards after the '98 ice storm, ESA regulation 22/04 significantly improved standards for these systems. Regulation 22/04 wasn't fully implemented by Hydro One and Bell until 2007-2008, and one consequence of 22/04 is that the cost of installing new fibre on old pole lines increased massively at that time as permitting process went from being handshake deals to requiring detailed engineering work. Those of us trying to deploy broadband in some areas simply cannot afford to replace every single pole in some areas as is required by modern engineering standards. I have personally encountered quite a number of class 5 - 35 foot poles with 3 phases of power on them that were installed in 1948! Survey work in the past month even found a couple of poles from 1929!!! Those poles are effectively toothpicks at this point in their lifecycle. Granted, the older poles that were treated with creosote last a heck of a lot longer than the more modern "environmentally friendly" CCA-PEG treated poles, but they're pretty small and often have glass insulators that you really don't want to be anywhere near when that pole starts swaying due to the movement of a cable lasher. Learning about all of this telecom and electrical domain knowlegde has been kinda fun in its own way. =-)

willis936 5y ago

Markets have never been free. Policy has always dictated the winners and losers, even in cases of state deregulated markets (who gets federal subsidies, who makes out better given lack of state regulation, who paid for that regulation, etc.) The ideal of a free market is simply not compatible with reality.

caf 5y ago

I've on occasion idly wondered whether modern information processing technology would enable a centrally-planned economy that worked better than the failed 20th century examples.

throwaway0a5e 5y ago
Marginally better? Probably Better enough that in the long term the people in charge of it don't have to resort to authoritarian measures to avoid getting shot in the hole they just dug? I'm not gonna pretend to have a good answer for that one.
jabl 5y ago
A couple of books on this topic: Cockshott, Cottrell: Towards a New Socialism, brief synopsis as well as a link to the PDF version at https://en.wikipedia.org/wiki/Towards_a_New_Socialism https://en.wikipedia.org/wiki/Towards_a_New_Socialism Phillips, Rozworski: People's Republic of Walmart, https://www.versobooks.com/books/2822-the-people-s-republic-of-walmart https://www.versobooks.com/books/2822-the-people-s-republic-... Disclaimer, I've only skimmed through the first and not read the second. I'm not personally super-convinced as I think markets are in many ways a pretty good decentralized economical information sharing mechanism (in the sense of prices conveying information about scarcity etc.). That being said, there are of course numerous examples of market failure where some kind of state intervention is needed. And in some cases the market failures in question might be so severe and so hard and expensive to work around that a socialist model might in fact work better. Like health care or much of public infrastructure. But that doesn't IMHO mean that market mechanisms must be entirely abolished everywhere. To get back on the topic of electrical grids, yes I think a mechanism of dispatching based on marginal costs is a good idea, as that means the lowest cost producers to meet the required demand are used. But also note that this is a pretty "synthetic" market, with a central planner deciding on which generators are dispatched, and customers are buying from that market rather than some kind of "natural" market where they'd go directly to the producers. And of course few end customers have their rates tied to the spot price, which sort of destroys the idea of demand response where the end users would react to high prices. And the variability of the electricity price is only going to get more dramatic as more zero-marginal cost variable producers like wind, solar come online. In a simplified model with zero marginal cost producers and inelastic demand you'd either have a cost of zero when production is higher than demand and the administratively decided ceiling price (or infinity if such a ceiling hasn't been set) when demand is higher than production. Which doesn't really sound like a functioning market. So maybe we'll over time go towards a model where some kind of capacity market is responsible for the majority of generator income (and customer cost) and the wholesale spot market reduces in importance, mostly deciding the merit order for dispatching generators.

bsder 5y ago

> free markets You cannot "free market" infrastructure that is expensive to duplicate and uses up scarce resources. A "second grid" that is 100% reliable, for example, would be terribly wasteful of the physical space required to run it. In addition, "free market" didn't give us universal electrification to begin with. Why would you assume that it can run it? At this point, we have run the "deregulation" experiments in California and Texas (and elsewhere). They have failed. Critical infrastructure needs to be managed by a political process.