Crisis of Public Utility Deregulation

Title: Crisis of Public Utility Deregulation

Research Question: How do deregulatory policies for public utility industries affect the political feasibility and economic viability of regulatory designs, particularly in the context of the welfare state?

Methodology: The study uses a combination of economic and political analysis to examine the implications of deregulation on public utility industries. It employs a framework developed by the author to examine the political feasibility problems encountered by attempts to address regulatory changes. The study uses case studies, such as the electricity crisis in California and the passage and implementation of the Telecommunications Act of 1996, to illustrate the challenges faced in satisfying both political feasibility and economic viability constraints under a deregulatory regime.

Results: The study finds that deregulatory policies create substantial political obstacles, particularly when it comes to addressing issues related to universal service funding and low residential retail rates. These obstacles are further complicated for the telecommunications industry due to the pressures to expand or extend other dimensions of the welfare state. The study also highlights the societal trade-offs of monopoly versus deregulatory policies and the need for a reevaluation of these trade-offs in light of the instability created by the greater difficulties in satisfying both political feasibility and economic viability constraints under a deregulatory regime.

Implications: The study suggests that the successful achievement of public policies requires a careful consideration of both political feasibility and economic viability. It emphasizes the importance of understanding the constraints posed by the economic viability needs of firms and industries on public policy goals and associated regulatory designs. The study also underscores the need for a more nuanced approach to deregulation, taking into account the unique challenges faced by different industries and the potential for negative consequences if these challenges are not adequately addressed.

Link to Article: https://arxiv.org/abs/0109038v1 Authors: arXiv ID: 0109038v1