Deinonychus antirrhopus

The bottom line is that once again, Krugman's "source" doesn't back Krugman's claim. Subtle? Hardly. And quite intentionally misleading.

Not at all, Robin.

I agree with Brian, I think it is subtly misleading. After all, not many people would go out an look for Wolak's testimony and read it. It is boring for the most part.

As for it being intentional or not, I tend to agree with you there. After all, anybody with a modicum of economics training can see quite plainly that Frank Wolak is making a distinction between market manipulation and unilateral market power. Surely somebody of Krugman's intellectual ability should have seen the difference.

If you go back to the original column and try to read it with an open mind, you will see that he's not doing that.

False, Brian.

No, I'm right.

No Brian, you are wrong. For example near the end of the article Krugman writes:

When price-rigging is the problem, price controls actually increase supply...

This is true, but with Wolak's model there is no price rigging--i.e., there is not collusion going on. What you have is a situation where even a small amount of witholding can drive the price very high (Wolak himself points out how as little as witholding 5% could drive up prices 50%).

Krugman does write this,

You don't have to imagine Ken Lay and Dick Cheney sitting in a room, trading sneers, and chortling over the havoc they are wreaking (which isn't to say that this might not have happened!). All it takes is individual firms, acting in their individual self-interest.

But the problem is that this is not market manipulation nor price rigging. Market manipulation and/or price rigging would have Ken Lay and Dick Cheney sitting in a smoke filled room chortling. Krugman is mixing up his message by sloppy use of terms.

Krugman would have been perfectly fine to use the term market power. It wouldn't have changed the length of the article all, but it sure would have changed its tone. From one of something illegal was done, to these guys just took advantage of a golden opportunity...a golden opportunity provided to them by those meddlesome bureaucrats. Of course, Krugman can't do that because in an other article he said it wasn't the meddlesome bureaucrats.

For some reason it has never been cool to talk about what was really happening in California. When the crisis was in full swing, most commentators clung to a story line that blamed meddlesome bureaucrats, not profiteering corporations. When the crisis came to an end, it suddenly became old news.

Maybe our national faith in free markets is so strong that people just don't want to talk about a case in which markets went spectacularly bad. But I'm still puzzled by the lack of attention, not just to the disaster, but to hints of a cover-up. After all, this was the most spectacular abuse of market power since the days of the robber barons — and the feds did nothing to stop it.

First, the meddlesome bureaucrats did play a role, a very important role. They created this market very badly. The reason this marekt failed so spectacularly was because it was designed very badly and the profit maximizing companies took advantage of it. That last part should not be suprising as that is what profit maximizing companies do. Take advantage of situations that make profits.

What happened in California is that the wholesale market was deregulated while the retail market was still capped. My question is why did this happen? Was it venal or stupid? My second question is why do economists keep getting off point? Market manipulation is ad hominem - after the fact. The road blocks were removed long before Enron etal entered the picture.

"Krugman is mixing up his message by sloppy use of terms."

There are two far more likely explainations. One is that, because he's writing for a general audience, he wanted to make this is as accessible as possible. The second is that some editor changed a word or two.

First, I don't believe the editor changed a word or two bit. Second, market power is phrase most (if not all) of his audience would understand.

Second, the point is that market manipulation is illegal, so is price rigging. By using those terms Krugman is suggesting something illegal was done. Wolak on the other hand has not gone anywhere near that far. In fact, he has argued that while illegal actions might have been taken, unilateral market power and the exercising thereof is not illegal. Big difference, IMO.

Try again Brian.

Sparky,

My guess, I wasn't involved in the designing of the market structure--I got into the biz right after that in 1998, was stupidity, or at least a lack of foresight and being too close to the issue. The utilities, for example, seemed very concerned about recovering their stranded costs fully. They probably also expected the ISO and FERC would handle such market power problems, or they'd be fixed before they became too large.

Oy vey. Let's try to take this a few steps at a time.

Are Wolak and the others federal regulators?

Gee Brian, why don't you tell me? It'll be good for you to look that information up.

Well, the impression that I've gotten is that they are state regulators, not federal regulators.

You mean...you don't know!?!?!

I'm shocked!

Oh, please, Steve. Stop being so asinine.

As far as I can tell, none of them are federal regulators. Do you have something that says something different?

Well, did you find out what kind of regulator (if he's a regulator at all) Frank Wolak is? C'mon, a little research should be a snap for you, you're still in college.

He's a state regulator.

Really, what agency?

CAISO or CAISMO, whatever the acronym is.

Really?

Actually, no he is not a regulator. He is the Chairman of the CAISO's Market Surveillance Committee. His position is more of an advisor position vs. a regulatory one. That is he makes suggestions, not regulations like say Commissioner Pat Wood at FERC or Loreta Lynch at the CPUC.

Well then, I was wrong, but I'm not worried.

Would you mind explaining this paragraph?

"Oh, but that's one little instance? Oh no, Krugman new about the problems in 1999 and even the problems in 1998. Don't believe me? Click here

Does this really happen? A recent National Bureau of Economic Research working paper by Severin Borenstein, James Bushnell and Frank Wolak cites evidence that exactly this kind of market manipulation took place in Britain before 1996 and in California during the summers of 1998 and 1999.

Krugman is lying to you...blatantly and openly. See, in 1998 and 1999, the electricity producers were manipulating prices becasue Bush was going to be President.....errr yeah. That's the theory according the Krugman."

In the year 2000 (in December in fact) Krugman new that there was evidence there was a problem prior to the meltdown in August 2000. He referenced an NBER working paper from 2000 that provided this evidence that there was an exercise of marekt power (in 1998 and 1999). So when Krugman is implying that Bush was going to put the fix in for his energy cronies, the implication is that the fix (in terms of the election) was in back in 1999 maybe even 1998.

Does Krugman actually believe this? I don't know. He has become more wild eyed over the months. But it certainly is something he left dangling there for his readers to zero in on. Like I said, Krugman doesn't peddle cheap easy to spot lies. He doesn't say, "Up is down and black is white." Now, he'll dangle something like that out there for his readers to nibble at and maybe bite on. If called on it, he can always weasel his way out by saying, "Hey, I said it was just a conspiracy theory."

Okay, we'll go with that. So the problems in 2000 were as bad as the ones in 1999 and 1998?

Where did I say that?

I don't believe you've mentioned it in this particular part of the site, but answer the question.

Maybe you should make sure I have written it. Have you tried the search engine?

I'm doing a few different things right now. Just answer the question.

Oh you don't like it when I dance around your questions? Hmmmm....gee wonder where I picked that trick up.

How about this Brian, the answer is, no. 1998 and 1999 were not worse. In fact, I implied that when I wrote the market had a meltdown in August 2000.

Its like a car. You are driving along and the engine is getting hotter and hotter. You ignore the temperature gage. Then after several more miles your engine splutters, sputters and dies. The engine is basically ruined as it siezes up.

Not a perfect analogy, but pretty close for our purposes. 1998 and 1999 were when the gage was indicating things were getting to a problem point.

I didn't think you were dancing around the question, but rather, that you were mostly trying to imply that I was lazy for not using the search. Whatever.

So then, Krugman wasn't far off when he said that things exploded after the election in 2000?

So then, Krugman wasn't far off when he said that things exploded after the election in 2000?

Wrong again Brian.

Why don't you go the Frank Wolak's site and actually read some of his writings.

As I have tried hammering through your skull, things got really bad in August. So, are Presidential elections held in July?

Well, I don't remember seeing anything for comparing the situation in August to the situation right after the election. Perhaps, to an outsider, the situation looked like it really started to unwind after the election. But like I said, perhaps.

Now, what part of Wolak's testimony are you referring to in this particular instance?

You know Brian, Wolak has a site...with lots of material on there. You can find it on google.

Now, I could be a nice guy and point you directly to the PDF that has some interesting data, but given your inability to answer direct questions...I think I'll be the dick now.

I looked at that .pdf file that you listed above, but I'm not positive about what you are referring to in particular. That's why I asked.

Sigh....Brain,

I'm not trying to be a jerk here, but damn your own inability to try and learn and improve yourself is very disheartening.

Here is Frank Wolak's website

Here is a specific paper you should read

On that last one, please look at page 7. While the prices were indeed higher in December than in August, note that the market power measure (the right hand most column) is the highest in August of 2000 and the second highest month was June of 2000.

So it depends on what exactly you are looking at. In terms of prices, yes things were really bad in December in 2000, but from a market power stand point they were worse in August and June. Further, there are additional details that could skew these results in favor of December in terms of the price that have nothing to do with the election. But as it is close to lunch I'll leave it to you to ferret these things out.

Do you have something that that describes power shortages, not price, which is what Krugman was talking about?

Sigh. You just don't learn do you Brian?

Yes, the shortages did get worse in the last few months of the year. Do you know why? I do, but let us see if you know the answer.

(By the way, I'm sure Frank Wolak knows too.)

So if Krugman claimed that, why does that make him a lair or a deceiver?

So if Krugman claimed that, why does that make him a lair or a deceiver?

You gonna answer the question I asked?

Nevermind, I know you don't know.

Here is the answer: The reason that there were more blackouts/shortages/emergencies was that the utilities basically stopped paying the generators. A substantial number of these generators are what are called qualifying facilities (in the energy biz they are called, 'QFs'). These are small, usually green power, facilities. When they stopped getting paid, they basically stopped generating. This exacerbated the situation and resulted in the shortages. Now, you might say, so? They are small, how much can they account for in terms of generation capacity in CA? How about 1/4th? Now, does that sound like alot? Does to me.

Now...how do I know this? Well, if you look over on the right of my blog. Yes, there where the links are. Scan down till you come to the Energy links. See it? Good. Now, do you see the one that reads:

C-A-L-I-F-O-R-N-I-A E-N-E-R-G-Y C-O-M-I-S-S-I-O-N?

Well, there you go. Just a few mouse clicks away is knowledge.

Anyhow, getting back to Krugman; we need no conspiracy. No big generators taking even more plants offline. No need to bring in the specter of Dick Cheney.

So how does this make Krugman deceptive? He writes the conspricay theory and then leaves it hanging out there after telling us he knows which experts to call and they confirm his suspicions. It is a carefully crafted bit of bullshit that he can deny any responsibility for. After all is it his fault that his readers are so trusting of him? Is it Krugman's fault if his readers misread what he has actually written? I say it is because that crap was totally unnecessary.

Tell me Brian, do you believe there was a grand conspiracy to rip off the state of California?

"You gonna answer the question I asked?"

You were trying to change focus to a different part of the subject.

You've admitted that things did get worse in the last few months of the year, which is what Krugman claimed. What is the problem?

You've admitted that things did get worse in the last few months of the year, which is what Krugman claimed. What is the problem?

The problem is that Krugman's assertion (one even he probably doesn't believe) was groundless. Further, if he did have a nice long chat with Prof. Wolak, he probably knew this. In other words, he tossed out a bullshit story, one that he quite possibly new was bullshit, and then left it out there. That is irresponsible and deceptive. There was no need to invoke a conspiracy at all...none. Lets run through the time line, okay.

In May of 2002 Krugman describes Wolak's model and notes you don't need a conspiracy.

In September of 2002 once again going back to Wolak, Krugman again discusses market power (calling it market manipulation) and this time casually tosses in the conspiracy theory and then fails to debunk it as he did in May.

You don't see this as deceptive Brian? I do. As you note, Krugman tries to write for the layperson. It is not likely they are going to go find Wolak's work (you didn't) and they are not likely to even try to figure out what a non-cooperative Nash equilibrium is.

By the way, even in non-cooperative games, you can still get collusion. Its called tacit collusion. Trot your butt down the school library and find Jean Tirole's book on industrial organization. Look up tacit collusion and read about it. It is the result of a non-cooperative game. Tacit collusion is illegal. Tacit collusion is a non-cooperative result. So in a technical sense Krugman even blew that.

This is the same problem with the employment data. Its looking like Krugman picked the series he did so he could make his "since Hoover..." claim and for no other reason. Then he portrayed that series as being total civilian employment. Only by looking carefully at what he wrote, reading down into the minutiae of the last BLS Employment Situation Report was I able to figure out what was going on. Do you think the general lay person can do this? You can't even click in a frigging link on my website to better prepare youself to discuss electricity with me, and you are apparently studying economics!

Robin has brought up the issue of the Secretary of the Army and the dubious e-mail. So now we have three instances of Krugman being at the very, very best being deceptive. At worst he is being deliberately dishonest.

At least at one time, Krugman had the academic discipline to work at this level. Its obviously intentional on Krugman's part.

"The problem is that Krugman's assertion (one even he probably doesn't believe) was groundless. Further, if he did have a nice long chat with Prof. Wolak, he probably knew this. In other words, he tossed out a bullshit story, one that he quite possibly new was bullshit, and then left it out there. That is irresponsible and deceptive. There was no need to invoke a conspiracy at all...none. Lets run through the time line, okay."

You've already admitted that the situation was worse in the final months of 2000, so again, how is Krugman wrong in making such a claim?

"In May of 2002 Krugman describes Wolak's model and notes you don't need a conspiracy."

Where?

"You don't see this as deceptive Brian? I do. As you note, Krugman tries to write for the layperson. It is not likely they are going to go find Wolak's work (you didn't) and they are not likely to even try to figure out what a non-cooperative Nash equilibrium is."

You haven't proven that he's been deceptive.

"In September of 2002 once again going back to Wolak, Krugman again discusses market power (calling it market manipulation) and this time casually tosses in the conspiracy theory and then fails to debunk it as he did in May."

You're not making sense. He merely explored the possibility of wrongdoing, among other things. What did he fail to debunk?

"This is the same problem with the employment data."

"You can't even click in a frigging link on my website to better prepare youself to discuss electricity with me..."

That's inaccurate.

"At worst he is being deliberately dishonest."

No.

No.

"At least at one time, Krugman had the academic discipline to work at this level. Its obviously intentional on Krugman's part."

How can you make such a comment?

Brain,

It is time you grew up. You are acting like a child. Go read his articles on electricity from May of 2002 and September of 2002. I have links to them in various posts. I have quoted the relevant sections. It is not my fault you have nto read Krugman and/or cannot retain/recall what has been discussed before.

Krugman basically floated this notion of a conspiracy which previously he had indicated was not at all necessary. This is an indisputable fact.

You're not making sense. He merely explored the possibility of wrongdoing, among other things. What did he fail to debunk?

Read what I write. It is quite clear.

May 2002: Krugman describes Wolak's model, notes you don't need a conspiracy. Link

From the article:

The really striking thing, of course, is that there is excess capacity in the system - yet the price goes sky-high. And with a little realistic friction added, you could easily imagine blackouts and brownouts as part of the picture. Let me also stress that this is a non-cooperative equilibrium - it doesn't involve collusion, let alone conspiracy, among the generators. You don't have to imagine Ken Lay and Dick Cheney sitting in a room, trading sneers, and chortling over the havoc they are wreaking (which isn't to say that this might not have happened!). All it takes is individual firms, acting in their individual self-interest.

September 2002: Krugman again returns to Wolak's model and this time tosses out the conspiracy, but instead of debunking it, moves on to another point. Link

From the article:

One answer might be that the apparent malefactors are very big contributors to the Republican Party. Some analysts have suggested that energy companies felt free to manipulate markets because they believed they had bought protection from federal regulation — the conspiracy-minded point out that severe power shortages began just after the 2000 election, and ended when Democrats gained control of the Senate.

As for the employment data the facts of the case point that you are idealogue who has trouble following logical arguments, understanding data, and doing basic research. The only data set for which Krugman can make his claim is the non-farm data set (series). He doesn't tell his readers that, instead he calls it "employment" giving the false impression it is total civilian employment.

I have also posted a note from a highly respected economist who takes Krugman to task for writing while "pissed off" and apparently who failed to research what he was popping off about.

These are all facts Brian. Verifiable facts. Yet you keep playing dumb. In fact, you have done such a good job of it, no I'm begining to think maybe you aren't playing.

"It is time you grew up. You are acting like a child. Go read his articles on electricity from May of 2002 and September of 2002. I have links to them in various posts. I have quoted the relevant sections. It is not my fault you have nto read Krugman and/or cannot retain/recall what has been discussed before."

I thought it was a column, I went and looked in that section and didn't see anything. Now I see that what you were referring to was in another section.

"Krugman basically floated this notion of a conspiracy which previously he had indicated was not at all necessary. This is an indisputable fact."

Well, if you look at that column, it seems he was merely discussing what some believed.

As for the first link, did you not catch the following part? "...(which isn't to say that this might not have happened!)."

And in the second link, I ask you the same question: did you not catch this part? "But only in the last few weeks, with a series of damning reports and judgments, has conventional wisdom grudgingly accepted the obvious."

"As for the employment data the facts of the case point that you are idealogue who has trouble following logical arguments, understanding data, and doing basic research."

No.

"I have also posted a note from a highly respected economist who takes Krugman to task for writing while "pissed off" and apparently who failed to research what he was popping off about."

I don't remember this controversy as well as I would have hoped, but I did go to pkarchive.org and found this: www.pkarchive.org/cranks/Brian.html

It seems like the "pissed off" remark was taken out of context, even to a slight degree.

"These are all facts Brian. Verifiable facts. Yet you keep playing dumb. In fact, you have done such a good job of it, no I'm begining to think maybe you aren't playing."

I do like the fact that you felt it was necessary to insult me.

Brian, that was another entry in your "Pot meet Kettle" contest? After all, you are the one posting "Steve is an idiot".

Well, if you look at that column, it seems he was merely discussing what some believed.

Correct, he is tossing it out there and then leaving there. Even when he knows it is totally un-necessary to obtain the types of results we saw. The truth is probably more messy. There probably was some levels of collusion and most of the behavior was simple rational profit maximizing behavior without collusion.

Let me demonstrate. In a perfectly competitive equilibirum every single firm charges the exact same price. Is this collusion? No, absolutely not. Seeing similar behavior in firms is absolutely not evidence of any collusive behavior. Any undergrad in economics should be able to articulate this idea. A professor of economics at Princeton with a PhD from MIT should also be able to articulate this idea.

"But only in the last few weeks, with a series of damning reports and judgments, has conventional wisdom grudgingly accepted the obvious."

Have you even bothered to read Frank Wolak's stuff? He is the expert not Krugman. Wolak is not saying this, and he sees far more of this information/data than Krugman does. The above is semantical bullshit. Right now FERC is going through that information and trying to figure out what was illegal and what wasn't. Some of it probably was, but not all of it. Further, there didn't need to be a conspiracy with the White House.

Have you heard of the concept of parsimony Brian? It means your model should have no unnecessary variables in it. A similar concept is Ockham's Razor, which holds that unnecessary variables should not be added to a model. Another version of it is, explain alot with a little. The conspiracy angle is an unnecessary variable.

Regardin Arrow:

But Nobel laureates, who have wide responsibilities and much on their mind, are not necessarily on top of what has been going on in research outside their usual field.

Did you read that Brian. If we are to believe Krugman we should conclude he doesn't know what he is talking about when it comes to electricity. Now, if we don't believe this, then the Arrow letter stands on its own. So, I'll let you pick.

I happen to know of one laureate who, circa 1991, was quite unaware that anyone had thought about increasing returns in either growth or trade. Did you try talking to anyone else--say, to one of the economists who are the straight men in the stories you tell? For example, your book starts with the story of Arthur's meeting in 1987 with Al Fishlow at Berkeley, in which Fishlow supposedly said, "We know that increasing returns can't exist"--and Arthur went away in despair over the unwillingness of economists to think the unthinkable. Did you call Fishlow to ask whether he said it, and what he meant? Since by 1987 Paul Romer's 1986 papers on increasing returns and growth had started an avalanche of derivative work, he was certainly joking--what he probably meant was "Oh no, not you too."

Here we have Krugman the asshole mind reader. Christ what an insufferable jerk.

In fact, that page looks like Krugman basically complaining, "Why wasn't an article written about me."

"The above is semantical bullshit."

Oh, really?

"The conspiracy angle is an unnecessary variable."

Maybe, maybe not.

"If we are to believe Krugman we should conclude he doesn't know what he is talking about when it comes to electricity."

I did read that, but you're not applying that quote correctly.

"Here we have Krugman the asshole mind reader. Christ what an insufferable jerk."

Nonsense.

"In fact, that page looks like Krugman basically complaining, 'Why wasn't an article written about me.'"

In some ways, that's a somewhat fair statement.

Oh, good grief.

Hi. I'd like to have an argument with you. I'm sure I'm right, but in order for me to win, I'll have to back my assertions with some fact. Do you mind telling me where the facts are, and while you're at it, help me with my arguments?

If you don't, I'm going to just disagree with you relentlessly until you give in.

Thanks.