Book Review - Regulatory Reform: The State of the Regulatory Art, Emerging Concepts and Procedures

This book was designed to complete a series of reviews of British energy options and stresses British examples.However. it provides an excellent discussion of the general deficiencies of an energy self-sufficiency policy.The conclusion is hardly startling.The book's value is in showing clearly that nothing about energy markets justifies departure from the antiprotectionisl tradition of economic analysis.In particular, Marshall and Robinson show that even if market failures exist, protectionism is unlikely to be the best corrective.The core of the discussion is five chapters treating specific aspects of the issuesecurity, prices, macroeconomics, distant generations.and investment policy.This is preceded by background material; first, the history of British energy use, then a review of policy.Estimates are made of the many positions the United Kingdom may assume if no major policy changes are undertaken and then possible policy changes are suggested.The security and price discussions conclude that the main impact of a selfsufficiency policy would he to reenforce the coal industry's position.Workers then could create supply disruptions that might be worse than any abroad.and priceraising wage concessions would then be required Moreover, any direct isolation from the world market would he offset by the repercussions on others of a foreign supply disruption.The danger of higher coal prices is presented as a response lo the most abused claim of the British coal industry (and many other industries as well, e.g., the U.S. steel industry facing import competition) that protection will give time to effect cost reductions.Here, as often happens, the authors mute their case.If investment in eYentual cost reduction were socially desirable, protectionism would not he needed.Sell-sufficiency is also deemed an unfruitful way lor the United Kingdom to put pressures on world oil prices because the impacts of its reduction in consumption would be so small.Private forecasting errors could he in either direction.and the ability of government to make better forecast, is unclear.Thus.no guarantee exists that protection will produce a more efficient capacity level.The authors' macro argument is that protection ultimately lowers total output making it harder to control inflation.Even if the economy is in a slack period, promoling fuel production is not necessarily the best approach.Two chapters deal with the social investment aspects 01 a self-sufficiency strategy.The first considers the environmental and depletion impacts of a coal-and nuclear-based self-sufficiency policy and the economics of a strategy based on renewahlcs and conservation.The authors point out the potential environmental and depletion effects of pushing self-sufficiency and express fears about the high cost of a strategy of renewables.The second chapter deals with the familiar issucs of possible differences among socially efficient interest rates-that used by the private sector and that used by I87