The 3 Rs: Regulation, risk and responsibility in British utilities since 1945

Abstract

Before privatisation, required rates of return and test discount rates were being applied to utility and other nationalised industries. One effect of this new approach was to promote more marginal-cost based tariffs which could fall particularly heavily on low-income groups. This trend was reinforced by privatisation which, when accompanied by market liberalisation, increased uncertainty about the likely returns on capital investment projects. Both of these issues, the treatment of poverty and coping with uncertainty, were of long-standing concern to the Austrian school of economics. Where Austrian economists differed from liberalising governments was in their locating of responsibility.

Keywords:

• regulation
• risk
• responsibility
• Austrian economics
• privatisation

Notes

1. The National Archives, Kew, London. CAB 21/2208, Lord President's Office, Extract from minutes of (S.I.M.)(46) 9th meeting, 22 May 1946.

2. For reasons of space I have omitted discussion of Ramsey pricing. To an extent, Ramsey pricing is a response to financial break-even requirements in which price inelasticity is exploited, rather than a direct response to future capacity resource requirements in current output prices.

3. In 1991 there were 19,000 disconnections for non-payment of the gas bill and 16,000 in 1992.

4. Hicks distinguished between Menger's theory as one of economics in time and Böhm-Bawerk's as an economics of time (Hicks, 1976).

5. Richardson sees Menger's chapter on The Theory of Money in his Principles of economics as anticipating some of the much later analysis provided by J.M. Keynes in The general theory of employment, interest and money.

6. Praxeology is the science of the means used in action to achieve some subjectively determined end. It is not the science of ends and cannot be a normative science as ends are determined by individual subjective choice.