Ayn Rand’s 1957 philosophical novel Atlas Shrugged may not be a literary masterpiece or the last word in political theory, but it does hold some lessons. It tells the story of very productive and creative individuals who, harassed by politicians and bureaucrats, shrugged and retired in their own secret anarchic community. The rest of the world suffered.
These days, more than one million Californians have suffered from prophylactic power cuts meant to prevent falling electric lines from starting wildfires. Some fires did break out anyway. In Venezuela and other centrally planned countries, power cuts are staged for other reasons.
An editorial in the Wall Street Journal (“California’s Dark Ages,” October 10, 2019) writes about PG&E, the main electric utility involved:
For years the utility skimped on safety upgrades and repairs while pumping billions into green energy and electric-car subsidies to please its overlords in Sacramento. Credit Suisse has estimated that long-term contracts with renewable developers cost the utility $2.2 billion annually more than current market power rates.
Environmentalists will claim that the high winds that fall power lines are a result of climate change. That may be true, but the scapegoat is a bit too convenient. As Occam wrote, numquam ponenda est pluralitas sine necessitate (personnally and aesthetically, I prefer the neater, apocryphal but equivalent, entia non sunt ponenda sine necessitate). So perhaps, more simply, Atlas shrugged—and just started following the political mob and obeying the state master.
READER COMMENTS
Thomas Sewell
Oct 12 2019 at 7:48pm
Climate change has nothing to do with the current winds and dry seasons in CA. The level of summer precipitation there hasn’t changed in hundreds of years.
PG&E was sued and fined into bankruptcy as part of the regulatory blame game for power lines starting wildfires. So now instead of taking any risks of a fire, they just shut the power down. The power companies in California are following the incentives set for them by the State regulators.
Pierre Lemieux
Oct 12 2019 at 10:10pm
That makes much sense, Thomas, and adds to the WSJ’s remark.
Robert Pound
Oct 13 2019 at 12:43am
You are correct about the current level of summer precipitation. in CA being the same as it ever was, however there was a SEVEN year drought that killed tens of millions of trees, combined with over a century of heavy fire suppression leading to excess overgrowth of the under-stories in forests and limited controlled burns to reduce that, mainly because they get out of hand too quick. but PG&E has long given shareholders and CEO’s big benefits and neglected it’s infrastructure maintenance. We also have 33 million acres of forest to manage and that is a massive job. Really too massive to do well. And with a burgeoning population of 40 million people, many are building in or next to the forests.
Thomas Sewell
Oct 16 2019 at 10:53pm
The entity failing to properly manage the millions of acres which burned should share in the blame for wildfires on their property which get out of control.
Instead, they blame PG&E (which isn’t totally blameless, don’t get me wrong), campers, cigarette butts, lightning strikes, etc…
But because of the mountains and the directions of the wind, the fires are a risk every year. The people managing the property don’t do enough to stop that predictable, routine event from spreading across their land.
It’s one thing to blame someone whose actions or negligence caused a fire in one specific location, but blame also needs to attach to those who year after year allow fires like that to spread across their land until they’re uncontrollable and threatening lives and homes.
Thaomas
Oct 13 2019 at 10:15am
Tort remedies are an alternative to regulation in many cases. I think it needs more analysis how the specific tort + regulation structure led the firm to (arguably) sub-optimal decisions in order to propose a better structure.
Jon Murphy
Oct 13 2019 at 10:40am
Be careful: the trade-off is not just between tort and regulation. If both the tort and the regulation are based off the same improperly/poorly defined property rights assignment, then a third alternative presents itself: reform the property rights regime.
Thus, we wouldn’t even need to do an analysis on tort vs regulation. Rather, it’s an analysis of property rights. In this case, they do appear to be poorly assigned, or at least, poorly enforced.
Thaomas
Oct 14 2019 at 11:24am
I thought the idea was that over time tort law created the definition of property rights if litigation costs were small enough?
But that was a side point anyway. That to learn something from blackout incident will require a detailed examination of the regulatory-tax-litigation and (good point) definition of property rights.
Tom DeMeo
Oct 14 2019 at 10:25am
Mr. Sewell:
What do you mean by “regulatory blame game for power lines starting wildfires”?
The company admitted it’s equipment probably caused wildfires in Federal court. Do you have any information which indicates that this admission was coerced and not supported by evidence?
Thomas Sewell
Oct 16 2019 at 10:46pm
Who has the most control over how a power utility in California behaves? Who sets the prices, the profit levels, specifies how power is to be generated and transmitted?
There is no real debate about whether electrical sparks from power equipment has lit nearby brush on fire, which is what your comment appears to focus on.
Blame and responsibility are apportioned to individuals who make decisions which lead to consequences. Certainly there is blame related to wildfire death and destruction in California which should attach to specific executives and even (former) owners at PG&E around the question of maintenance and clearing space.
There is also a lot of blame which should attach to the government officials who determined the regulatory framework they operate under and to the officials who failed to plan ahead to prevent or minimize the impact of foreseeable fires (because they happen every year, to a greater or lessor extent) on the residents.
The regulatory blame game is that of answering “who is responsible for what”. The regulators may suggest PG&E’s negligence is 100% responsible for everything. As a result, the courts will conclude they must pay whatever resources remained in the company (the liabilities imposed being greater than the assets).
Others who observe the government’s behavior over time may come to a different conclusion. Who owned and managed the vast majority of the land burned by the various wildfires? Who makes those decisions? Why are they not also being held responsible for neglecting that land in such a way as to make the widespread destruction possible? Santa Ana winds happen every year. They’ve led to massive fires since at least when I grew up in CA, which was several decades ago. This particular property owner every year neglects the fire hazards on their property. Why do they continually get away with that?
Tom DeMeo
Oct 17 2019 at 6:40pm
The specific line you used was “regulatory blame game for power lines starting wildfires”.
There may be any measure of disappointing regulatory behavior surrounding this whole thing, but they are going bankrupt primarily due to an $11BN settlement they decided to agree to with insurance companies to help cover their claims. In the end, this went down between private interests.
Thomas Sewell
Oct 17 2019 at 7:50pm
The settlement is based on a regulatory/legal theory of responsibility for related damages.
Consider the situation if the government doing the regulating had to take care of their responsibilities around limiting the damage wildfires on their land caused.
Without the level of damage their neglect makes possible, you don’t have a settlement (or even a case asking for) billions of dollars.
Tom DeMeo
Oct 18 2019 at 9:42am
Mr. Sewell – so you are in favor of changing law to shift liabilities away from who might started a fire to owners of land, who should expect such fires and should deal with them.
That is a matter of liability law. A large majority of this land is either federal, or privately owned, so the state can’t fix this through land management. Your beef should be with the liability laws and the courts, not the regulators.
Thaomas
Oct 13 2019 at 6:56am
Entering loss-making contracts with “green energy” developers and failing to invest in proper maintenance are business mistakes. How these were made would be a nice HBS case study that presumably both utilities and regulators could learn from.
Thaomas
Oct 13 2019 at 7:10am
Thanks. I had never seen Occam’s razor expressed more or less as William wrote it.
Of course, I don’t think it is “unnecessary” to posit both inadequate CO2 accumulation policy and a sub-optimal regulator-regulee dynamic as contributing to the unsatisfactory outcome.
Matthias Görgens
Oct 14 2019 at 3:31am
It’s somewhat funny that in Atlas Shrugged the weapon of choice is collective action, a strike.
Pierre Lemieux
Oct 14 2019 at 10:56am
That’s an interesting question, @Matthias Görgens, but I am not sure the answer is as clear as what you suggest. A collective action would only be inconsistent with Rand’s framework if it did not bring private benefits (greater than the private costs) to each individual involved–that is, if it required altruism. I haven’t read Atlas Shrugged for quite a while and perhaps somebody can correct me, but Galt’s Gulch seemed to be a fun place to live, and certainly less depressing than the tyrannical outside world. One major drawback as I see it is the lack of women there (as there are not many women in Rand’s novels in general), but this would not have affected homosexuals, Narcissuses, or disincarnated philosophers.
mattb
Oct 14 2019 at 1:31pm
Well the strike in Atlas Shrugged wasn’t the typical union strike that we think of when we hear the work strike. It wasn’t a collective action at all, the “striker’s” each individually made the decision to stop working and quit their jobs and do something else.
Comments are closed.