ernie_lynch – Member

He was banned baynned.

FTFY

and the entire water industry: if I think my water company is too expensive how do I change companies to one cheaper? They are local monopolies so should not exist in a so-called free-market economy

for households there is little point in competition to be the provider as the costs would outweigh any potential gain

fo non-household the arguements are different and there is a strong case for a competitive market as the incumbent water company doesnot seek to provide the cheapest service for the customer rather they seek to perpetuate the status quo

there are efficiencies to be made in supply and in retail activities that would not occur without a fundamental change which requires a competitive market to be created.

However it tends to be the bigger companies that benefit (national billing, bespoke supply agreements) and the smaller players get squeezed as was shown when Scotland created a retail market and non-household complaints went up by a factor of 4

AdamW– to say you have choice is a bit misleading,a choice of which name is on the bill, whoop de woo, the deliberate use of obfuscationary tariffs is de rigour for all these companies(same as phone cos’)designed so that you can never be sure of what exactly you are paying for. I did ask one of EONs finest to explain it, but he admitted it was a constantly evolving ‘dynamic’–his words !

The truth is that if the french have the cheapest bills, then that would indicate that they have the most efficient system? non

Free the Embra One!

TJ should never have been given that much of a ban.

And that’s coming from one who crossed keyboards with him on far too many occasions. TJ was one of STW’s good guys. Despite his foibles, his inability to argue, he was and is a good person.

Bring him back. Please.

Unfortunately the regulators are toothless puppets of the industries they “regulate”, and all politicians are the same. So we’re all doomed!

you mean like the new Chairman of Ofwat who CEO at AWG when they did whatever they are being investaigated for under the Competition Act?

Flasheart + 1

Whatever he was he was not nasty

The truth is that if the french have the cheapest bills, then that would indicate that they have the most efficient system?

they bill by peak capacity IIRC, which minimises infrastructure requirement that therefore makes the bill cheaper

should be done here as part of the whole climate change policy

+ 2

(well, he could be nasty when he was losing an argument, but he generally only gave as good as he got)

+3

But the enormous increase in site traffic and premier sign-ups suggest that it was good for business.

Ninja-tastic tonight……

I thought there was a “no complaining about banning” rule?

Well that sounds pretty dire if it’s against the rules to express the opinion that you regret that someone has been banned. I haven’t heard of that rule myself.

I think there might be a “no making up the rules rule”

for households there is little point in competition to be the provider as the costs would outweigh any potential gain

So for the home owners it makes no sense to privatise.

fo non-household the arguements are different and there is a strong case for a competitive market as the incumbent water company doesnot seek to provide the cheapest service for the customer rather they seek to perpetuate the status quo

But due to the physical placement of the pipes that is not possible (unless somehow we got a nationalised water grid). So it makes no sense there either.

there are efficiencies to be made in supply and in retail activities that would not occur without a fundamental change which requires a competitive market to be created.

Not sure what this means. There isn’t a competitive market. If so, where’s the competition? Possibly between metering companies or billing operations but that’s nibbling around the edges, its not a truly competitive market. Why does a competitive market produce the efficiencies? What’s to stop a nationalised market making efficiency savings?

However it tends to be the bigger companies that benefit (national billing, bespoke supply agreements) and the smaller players get squeezed as was shown when Scotland created a retail market and non-household complaints went up by a factor of 4

So, if I understand properly, company X buys water company Y and absorbs their billing/retail operations which reduces costs. So they reduce their workforce and increase their profits. And we don’t benefit as it is still a local monopoly. And if they did pass it on it would be in the order of pennies per year.

Unless I’m misunderstanding stuff, which I’ll happily accept if shown.

I’d sooner have the people in work, myself and the profits put back into the utility.

The deregulation of the UK energy market was not a simple competition versus monopoly argument and is not a Thatcherite invention. It is a living example of what economists call a “contestable market” and was driven initially by an economist called Baumol. The idea of lots of buses running round the country is a mis-understanding of this priciple. Google “contestable markets” or Baumol for an explanation.

Energy prices went on a long period of real price declines from the late 1980 and 1990 (leaving out the VAT blip in 1995) due (according to Ofgem) to the price controls of the regulator and the impact of competition. Prices bottomed in 2000 and then started to see a sustained increase in real terms from Autumn 2005. They peaked in 2007 (82% above the 2000 low).

In international terms, energy prices in the UK are relatively low and ofgem concludes that “the UK has long had among the cheapest domestic gas in the EU”. Fuel poverty fell markedly between 1996 and 2004 but has risen since then but remains below 1996 levels.

The rise in prices is driven by five factors – wholesale costs, supply costs, gov costs, VAT and margins. Not surprisingly it is the first one that is most important. Inconveniently for those who argue that in the deregulated market we are being massively ripped off, is the fact that supply margins account for only 5-6% of total cost. Plus Ofgem recently concluded (the Energy Supply Probe) “there was no evidence that price rises were passed on more quickly than price cuts and no evidence that the big suppliers were acting as a cartel.”

Wow. There’s a lot of anger in there THM.

So there ought to be. The country needs a proper oppostion to the coalition not “we’ll do much the same but be slightly nicer” Ed.

Anger? What anger? Just clarifying the driving force behind UK energy market design and giving some facts to support the debate. Its actually a very interesting case study for A level Economics student and often examined (along with buses, rail, etc). If you study some of the material, you may just want to readjust your initial conclusion slightly and you did ask for evidence.

It was just the Thatcherite comments (don’t think anyone has mentioned her).

Disagree partly, however. Markets can only be good if you have more than one vendor… 😀

But, as shown by the massive financial collapse since 2008, we all know that markets don’t work. They break things over and over and over and over again. And give Economists something to hypothesise over.

So, we need to try something different.

Adam – are you being serious? In the OP and afterwards on the first page. Like many things, giving Thatcher the credit, or otherwise, for the idea of contestable markets is stretching the truth somewhat. She may have taken this on board, but she didn’t come up with the idea.

Disagree partly, however. Markets can only be good if you have more than one vendor…

Actually not true in either theory or practice. Under certain circumstances, monopolies can be better for consumers than lots of competition. Again basic A level economics.

DD – yes markets do not work in all circumstances which is why we have mixed economies ie, a combination of state and market allocation of resources. The financial crisis was not simply a failure of markets, indeed if you watched Stefanie Flanders program on BBC2 last week, some would argue (eg Hayek) that it was a caused specifically because markets were not allow to operate. Just how free is/was the supply of money/price of money for example?

She is presenting Marx tonight, so we can have an alternative explanation to the crisis. A good series all-in-all – Keynes, Hayek and Marx presented well and related to the current crisis.

So, we need to try something different.

Unfortunately for us, the only answer from these muppets seems to be ‘more privatisation’. Only we’ll turbo-charge it this time. Hell… why not? Its all gone so well, so far. Lets get G4S or Serco running the NHS. What could possibly go wrong?

The terminal lack of imagination, and slavish adherence to a completely discredited economic philosophy, by all parties, at the moment is truly tragic

Amen.

It’s the same old same old. When markets fail and make the lives of millions a misery, it’s because they’re not “true” markets. It’s because government interferes with them. Or all the parties are not given the same information. Blah, blah, blah. It’s honestly very tiring to hear people who earn their money by moving a set of figures on one screen to another, and shouting boo-ya while high-fiving the guy sat staring at ten screens on the other side of the desk defending “markets”.

Whatever way they’re structured, whatever information the participants have, whatever level of guvvermint interference there is, they fail. Over and over and over and over and over and over and over again.

So, in essence, we need to try something different.

Adam – are you being serious? In the OP and afterwards on the first page.

Apologies – I tend to not read the whole lot and this page hadn’t gone on about Thatcher.

Like many things, giving Thatcher the credit, or otherwise, for the idea of contestable markets is stretching the truth somewhat. She may have taken this on board, but she didn’t come up with the idea.

Don’t really care about that. Didn’t like the policies of the woman but have modified my views slightly based upon whether it is good for the consumer or not. Again I still wonder how a monopoly that has a profit motive can be good for the customer.

Disagree partly, however. Markets can only be good if you have more than one vendor…

Actually not true in either theory or practice. Under certain circumstances, monopolies can be better for consumers than lots of competition. Again basic A level economics.

For us to even consider this you must define ‘Under certain circumstances’. Without that your comments can’t really be understood. What do you mean? Based on that sentence we could give the entire country to someone like Serco/Microsoft/Apple/etc. and let them run everything as a monopoly. Or the certain circumstances may mean something which is rarely met so everything should be nationalised.

Socialism is evil, doesn’t work, and corrupts the capitalist system, acting as a bar for the true entrepreneurs and wealth creators to go about their business – ensuring we all benefit from the trickle down economics of continual growth.

Oh…erm…. shit…. we appear to have completely and utterly ****ed up! On a truly biblical scale. All while paying ourselves enormous amounts for our genius, of course. The whole system we created is about to implode, taking the entire countries economy with it. HELP!!!!! Can we have a publicly funded bail out please?

Well… I’m not sure… that sounds a bit… you know…. a bit ‘Socialist’ to me?

Adam – the circumstances: monopolies may achieve substantial economies of scale (large plants, centralised admin, less duplication etc). This may lead to their marginal cost curve being substantially below that achieved in perfectly competitive markets. In this scenario a monopoly may produce more goods at a lower price than a firm in a competitive market. That would be good for the consumer. A second set of circumstances is where a monopoly makes sufficient profit to enable it to invest in R&D and other investment and possibly become more efficient that an firm operating in a more competitive market.

So the basic idea that more competitive markets produce a more efficient allocation of scarce resources is not as watertight as some might believe.

….from which simple beginnings Baumol came up with idea of contestable markets.

Under certain circumstances, monopolies can be better for consumers than lots of competition*. Again basic A level economics

You know I think you don’t even put in any effort to be this patronising. What I don’t know is whether you mean to or whether it is an accident

yes markets do not work in all circumstances

They don’t really work in any circumstance – you can see this by the fact no govt, no matter how right wing, wishes to trust the market so everyone regulates it. Despite this we still get boom and bust. That is basic economics and history 😉

What DD and Binners said
*http://tutor2u.net/economics/revision-notes/a2-micro-monopoly-economic-efficiency.html
If anyone cares – easier if you ignore the graphs at the start for non economists

Adam – the circumstances: monopolies may achieve substantial economies of scale (large plants, centralised admin, less duplication etc). This may lead to their marginal cost curve being substantially below that achieved in perfectly competitive markets. In this scenario a monopoly may produce more goods at a lower price than a firm in a competitive market. That would be good for the consumer. A second set of circumstances is where a monopoly makes sufficient profit to enable it to invest in R&D and other investment and possibly become more efficient that an firm operating in a more competitive market.

Thanks for the clarification! I guess the sticking point would be the price-point at which they sold to the customer, which may need regulation (e.g. specifying they can’t charge more than a certain percentage) else they could create a widget for X but sell it to their monopolised customers at 10X, 100X or 1000X. But this should be the same whether the monopoly is public or private. I would also guess that without competition to create better widgets the monopoly may be able to chuck out many widgets but not improve their product (obviously dependent upon what it is). But that’s most probably a different argument.

They don’t really work in any circumstance – you can see this by the fact no govt, no matter how right wing, wishes to trust the market so everyone regulates it.

In which case, lets stop the arguments that the crisis and the recession are directly the results of market failure. We agree they weren’t.

But good idea to quote the Eton master’s revision site as he concludes “It is important in essays and data questions when you are analyzing imperfectly competitive markets where the concentration ratio is high to mention some of the potential advantages of suppliers having monopoly power.” Neither he, not I are being patronising. Its a basic truth that needs to be pointed out – especially if you want people to score A*s!!

edit for cross post – Adam, that is correct. And the monopoly provider could equally use the the same circumstances to rip you off. Excuse the “basic economics” statement, if that came across incorrectly but this is a cornerstone of the whole idea of contestable markets and it is normally taught in first year economics (AS of A2) – that’s what I mean by basic!

they weren’t.

They were.

Basic A Level Economics I think you’ll find.

A bit too early for panto season DD, so we can agree to disagree!!

In which case, lets stop the arguments that the crisis and the recession are directly the results of market failure. We agree they weren’t.

Yes of course that is what i am saying, it perfomed beautifully but was hampered by regulation 😕 Well done have your A star in deliberate internet misconstruing 🙄

Its like speaking to an archbishop about god -and economics requires the same level of faith

Why’s Caroline Flint being broken up into 6 pieces? Seems a bit harsh.

AdamW – Member
Unless I’m misunderstanding stuff, which I’ll happily accept if shown.

So for the home owners it makes no sense to privatise.

privatisation is a different issue to a competitive market, privatisation has enabled off balance sheet funding of UKLtd water and wastewater infrastructure. Compare England and Wales to Scotland and NI for the future issues in getting the funding to improve the infrastructure to meet EU directives

But due to the physical placement of the pipes that is not possible (unless somehow we got a nationalised water grid). So it makes no sense there either.

more than one type of water can be provided,for example there has been little use of incentives to encourage the reuse of treated urban wastewater for industry. You assume that everyone gets potable water they don’t. Additionally legislation exists that allows new sources of water to be introduced in to existing networks and to allow the cross border import of water. The system is based on water resource zones so the molecules of water don’t need to reach the customer from the source.

There isn’t a competitive market.

yes there is AWG are getting investigated for breaching the CA98

If so, where’s the competition? Possibly between metering companies or billing operations but that’s nibbling around the edges, its not a truly competitive market.

example 1: I suggest you look at your water companies water resource management plan which this year requires them to offer others the opportunity to bid to do projects to get more water for example Thames Water OJEU notice

example 2:google “insets”, they are Ofwats favourite form of competition
etc

Why does a competitive market produce the efficiencies?

because nobody likes to lose customers, a quick read of the WICS website shows that they think there have been considerable efficiencies (admittedly they would, it’s their market)in Scotland

What’s to stop a nationalised market making efficiency savings?

because people budget for growth rather than to save their customers money and reduce turnover, the incentive in a competitive market is that if you don’t do it they will switch to someone who does. Nationalised markets lead to cross subsidies and mickey mouse tariffing such as the debacle in the North West with site area charging and the scouts and sports clubs or that household bad debt adds £15 on to everyone’s bill

So, if I understand properly, company X buys water company Y and absorbs their billing/retail operations which reduces costs. So they reduce their workforce and increase their profits. And we don’t benefit as it is still a local monopoly. And if they did pass it on it would be in the order of pennies per year.

a national billing arrangement for a company such as ASDA is worth £100K plus in efficiencies in billing for one utility service.

evidence is also that retail competition incentivises the use of meter data to reduce bills, hence why all public sector premises with a connection 25mm or more can get free datalogging and trend analysis. The real saving for the customer is to get better management of their consumption saving 100% of the cost of water and wastewater (waterin-water out) for the water saved rather than a few % on the tariff

teamhurtnomore–

steph f – “she’s doing Marx tonight, should be interesting”- you not wrong, will be perverted in the extreme 😉

Shall watch with interest to see ‘her’ take on Marxist economics/revolutionary theory

Wonder if she will look at Marx in the round– his economics was part of his revolutionary stance-

Good for Ed Milliband for inviting Michael Sandel to present at the Labour conference. He is an amazing lecturer with one of the most popular course taught at Harvard. As the FT concluded: Harvard Guru outclasses party ranter. There should be more of that thing to enliven political debate. As the FT noted, Sandal was followed by Yvette Cooper and, “Her speech was humourless, ranty, full of fake anger and not worth $100.”

http://www.bbc.co.uk/iplayer/tv/bbc_parliament/watchlive

Rudeboy – that’s not what I meant by “doing”!! Leave that to Ed-squared!! 😉 But I think this has been a really interesting series and three excellent programmes – ok, two so far. But I am sure that tonight will be equally interesting on Marx. Like the others, I expect history, biography, and lessons for causes and, more importantly, the answers to the current crisis.

Do not expect an ‘answer’ to an economic crisis, they are the ebb and flow of a capitalist system– as DD has been asking– we need a new system !

…and that is?

For me it can only be a socialist system , which despite rumours has never been allowed to develop and flower anywhere, as you are aware without a world wide revolution there is little prospect of socialism in ‘one’ state surviving let alone growing.

Trotskys theory of permanent revolution would be apt, but i do not expect many supporters for that on here !