Paul Krugman names the enemy that shut out the lights: deregulation. Under the old system, he says, it was easy to keep the system going and upgraded because power companies “would catch the flak if something went wrong” (funny how that incentive didn’t work in the Soviet Union). But deregulation took away the incentive to keep the system upgraded. How? Why? “Because regulation limited their profits, they had little financial incentive to invest in maintaining and upgrading the system.” He therefore concludes: “This nation needs to invest billions in its power grid, yet given recent history, it’s crucial that this investment not be simply another occasion for energy-industry profiteering.” And yet from his own account, it was the prohitions on profiteering that caused the blackout in the first place. Why not allow more? The root issue for Krugman is this: he doesn’t believe that “effective competition” is possible in power generation and delivery, proving that he knows nothing about regulation history and the role of competing electric companies.
