Is Brownlee Smarter Than The Market?

Press Release by Hon Sir Roger Douglas, ACT New Zealand
Thursday, December 10 2009

ACT New Zealand Economic Spokesman Sir Roger Douglas today expressed concern that the National Government seems to believe that it can centrally plan the electricity market, determine the optimum use of assets, and centrally determine price levels.

"These new reforms are needed because former Labour Minister Pete Hodgson’s central planning failed. His reforms were needed as former National Minister Max Bradford’s central planning failed," Sir Roger said.

"The lesson of history is clear: Government attempts to plan the electricity market tend to increase prices for consumers and destroy the incentives of commercial operators.

"Central planners – whether it is Brownlee, Hodgson, or Bradford - lack the information to determine how resources should be allocated. Worse, once they have interfered with the price mechanism, the decisions of commercial operators are distorted.

"The best way to run any enterprise is with investors and shareholders calling the shots and competing against other commercial enterprises. Investors who risk their own money have greater incentive to use assets as productively as possible. High prices create an incentive to invest in further generation - provided the Government steps aside and lets them do it. Central planning is not needed for a market to work.

"The real problem now is that no commercial enterprise would be willing to enter the market, given the level of uncertainty created by the Government. If the rules of the game change with every Government, why would you bother?

"We need to get rid of the uncertainty. The only way to do that is to get the Government out, and allow entrepreneurs in. Brownlee may be smarter than Bradford, but there’s no way he’s smarter than the decentralised forces of the market," Sir Roger said.

ENDS

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