Knowledge Problem

The 'Knowledge Problem' Substack explores concepts in economics, regulation, technology, and governance with a focus on electricity markets, market failure theory, economic growth, and the role of institutions. It critically examines policy analyses, regulatory practices, and the interplay between technology and market dynamics.

Economics Regulation Technology Governance Electricity Markets Market Failure Economic Growth Institutional Design Public Policy Environmental Economics

The hottest Substack posts of Knowledge Problem

And their main takeaways

Markets as Error Correction Processes

196 implied HN points • 01 Feb 24
💼 Business Economics Markets Institutions Behavioral Economics Entrepreneurship
  1. Markets are error correction processes that help us adapt to changing conditions and create value.
  2. Individual adjustments in response to price signals lead to error correction in markets.
  3. Through adaptation, decentralized coordination, knowledge ecosystems, and error correction, markets enable us to achieve more and flourish compared to other social institutional frameworks.

What Are You Reading?

196 implied HN points • 03 Jan 24
📚 Literature Fiction Nonfiction Essays
  1. The author had a good reading year in 2023, enjoying a variety of books and essays.
  2. The author recommends interesting works in fiction, nonfiction, and essays, sharing insights on different topics and genres.
  3. The author highlights the joy and value found in specific books, like 'The Individualists' and 'The Corporation and the Twentieth Century'.

A brief hiatus

157 implied HN points • 07 Dec 23
🏥 Health & Wellness Wellness
  1. The author is taking a break due to an eye issue affecting their writing.
  2. The author plans to undergo a laser procedure for treatment.
  3. The author hopes to write one more post before Christmas.
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The Continuing Relevance of Adam Smith's "Man of System"

137 implied HN points • 29 Nov 23
📖 Philosophy Morality Epistemology Political Philosophy Ethics
  1. Adam Smith criticizes interventionist approaches in government that disregard individual preferences and autonomy.
  2. Smith highlights the knowledge problem, emphasizing that individuals have unique preferences and societal systems cannot easily override them.
  3. The 'man of system' imposes his ideals regardless of objections, whereas Smith's analyses focus on systems where participation is voluntary and based on mutual agreement.

The Knowledge Problem and Institutions

196 implied HN points • 25 Oct 23
🚌 Education Institutions Knowledge Economics Regulation Analysis
  1. The knowledge problem is pervasive among individuals and socially, impacting coordination and decision-making among agents.
  2. Different types of knowledge problems exist, such as complexity and contextual knowledge problems, affecting decision-making and outcomes.
  3. Institutional design should consider the knowledge problem, as institutions interact with preferences and the environment to shape individual actions and interactions.

Governing the Commons

137 implied HN points • 15 Nov 23
🚌 Education Economics Policy Governance Resource Management
  1. Understanding the importance of property rights in economic exchange and market function
  2. Exploring Elinor Ostrom's work on managing shared resources through governance frameworks
  3. Recognizing the value of polycentric governance for addressing collective action problems in complex systems

The Misuse and Abuse of "Market Failure"

314 implied HN points • 10 Aug 23
🚌 Education Economics Public Policy Regulation Markets Government intervention
  1. Market failure is often casually used to criticize outcomes not liked, but in economics, it has specific technical meanings like external costs or benefits.
  2. The concept of market failure is misused and misunderstood in policy analysis, leading to inaccurate criticisms of market outcomes.
  3. Critiques of market failure should consider the imperfections of government interventions as well, and focus on reducing transactions costs to enhance resource allocation.

The New York Times on Electricity Pricing

550 implied HN points • 10 Jan 23
  1. Electric systems are complicated and involve multiple factors like technology, economics, and public policy.
  2. The term 'deregulation' is inaccurately used and oversimplified in describing the changes in the electricity industry.
  3. Wholesale and retail markets in the electricity industry are distinct and often misunderstood, leading to misconceptions in analysis.

Anatomy of Market Failure IV: Ostrom and Governance

137 implied HN points • 20 Sep 23
🔬 Science Market failure Property Rights Governance
  1. Property rights play a crucial role in discussions about market failure and influence institutional choices.
  2. Common-pool resources often have ill-defined property rights, leading to governance challenges but offering opportunities for diverse institutional solutions.
  3. Elinor Ostrom's work emphasizes the importance of recognizing and addressing ill-defined property rights to achieve effective environmental policy outcomes.

Market Design and Negative Prices

78 implied HN points • 02 Nov 23
💼 Business Market design
  1. Power markets face criticism due to inherent design and governance issues.
  2. Negative prices indicate market disruptions caused by startup costs, congestion, or government policies.
  3. Market design must adapt to handle subsidies ensuring price signals align with efficiency goals.

Epistemology and Synthetic Market Design: Examples from Ecosystem Services

176 implied HN points • 30 Jun 23
📖 Philosophy Epistemology Market design Institutions Policy
  1. Some of the most illuminating work in market design has been in payment for ecosystem services (PES).
  2. Synthetic markets and deliberate institutional design are criticized for being epistemic and teleological.
  3. Testing is essential in synthetic market design to understand how people respond to incentives in different institutional frameworks.

Supply AND Demand

235 implied HN points • 05 May 23
🔬 Science Energy Technology Economics Environment Digital
  1. Market value is determined by the interaction of supply and demand, allowing for price discovery.
  2. The traditional assumption in the electricity industry of fixed supply catering to demand is becoming obsolete due to digital technologies enabling flexible demand.
  3. Digital technologies and dynamic pricing are empowering consumers to have more control over their electricity bills and contribute to a greener future.

Should regulated utilities be prevented from owning EV charging assets?

196 implied HN points • 23 Feb 23
💼 Business Regulation Competition Infrastructure Innovation
  1. The default presumption should be to quarantine the monopoly in regulated utilities owning EV charging assets to prevent anti-competitive practices.
  2. Regulated utilities entering competitive EV charging markets may have unfair advantages by leveraging their regulated status.
  3. Allowing regulated utilities to own EV charging assets could stifle innovation and competition in the market compared to independent firms.

Electric-Gas Interdependence: History and Transaction Cost Economics

117 implied HN points • 13 Jul 23
💰 Finance Energy Regulation Contracts History Economics
  1. The interdependence between electric systems and natural gas systems has been highlighted during severe winter storms.
  2. Over the past century, the objectives for electric service have evolved to include resilience, decarbonization, and reliance on natural gas.
  3. Transaction cost economics can help understand the challenges in coordinating reliable input supply between the electric and gas industries.

The Economist on New Electricity Technologies

176 implied HN points • 14 Apr 23
🕹 Technology Energy Digitalization Innovation Policy Renewables
  1. The Economist reports on new electricity technologies, like high voltage transmission and grid-forming inverters, vital for a cleaner energy future.
  2. Systemic changes in energy infrastructure take time and investment, but are crucial for achieving reliable and sustainable power.
  3. Digitization and renewable energy adoption are reshaping grids, calling for new investments and regulatory adjustments to maintain stability and affordability.

Economic Foundations: Natural Monopoly Theory I

176 implied HN points • 26 Jan 23
  1. Understanding natural monopoly theory helps make better decisions in changing technological conditions.
  2. Natural monopoly theory focuses on high fixed costs and low variable costs, causing firms to consolidate.
  3. The utility business model and regulatory practices have been shaped by the concept of natural monopoly since the early 20th century.

People are People: Public Choice and the Logic of Collective Action

157 implied HN points • 23 Mar 23
  1. Concentrated benefits and diffuse costs explain a lot in collective decision-making.
  2. Public choice emphasizes that individuals behave purposefully both individually and collectively.
  3. In politics, there are mutual gains from cooperating, like the Madisonian project, despite factions and all.

Market Adaptation to Changing Conditions

117 implied HN points • 16 Jun 23
💰 Finance Market design
  1. Electricity markets face challenges from changing conditions like weather patterns and economic growth
  2. Uniform price auctions in power markets provide dynamic incentives for investment and efficiency
  3. Commissioner Christie's suggestion of discriminatory price auctions may not address the existing flaws in wholesale power market designs

Economic Foundations: Natural Monopoly Theory II

137 implied HN points • 09 Feb 23
  1. Natural monopoly theory is important in industries like electricity and technology platforms, impacting consumption and production.
  2. Technological innovation can change the definition of natural monopoly by altering cost structures, economies of scale, and scope.
  3. Contestability theory introduces dynamics into the traditional natural monopoly model, emphasizing the importance of sunk costs and the potential for market competition.

ShackledAI

117 implied HN points • 16 May 23
🕹 Technology AI Regulation Ethics Innovation Policy Artificial Intelligence
  1. Both optimism and caution are important when dealing with new technologies like AI with significant capabilities.
  2. Regulation of AI is necessary but needs to be balanced to avoid stifling innovation.
  3. Consideration of existing laws and industry self-governance can be key in addressing risks associated with AI.

Market Design in Regulated Industries

39 implied HN points • 19 Oct 23
💼 Business Market design
  1. Transitioning from heavily regulated industries to organic market processes is unlikely to be organic due to embedded special interests.
  2. In regulated industries like electricity, designing market rules is necessary to prevent favoring existing incumbents.
  3. Market institutions need to be deliberately designed in less-than-organic circumstances, introducing a political dimension to the process.

Vertical Integration and Wholesale Power Markets

117 implied HN points • 10 Mar 23
💰 Finance Regulation Markets Innovation Governance Technology
  1. Edison's vertically integrated electric service model faced challenges from dynamic technology innovation in power generation.
  2. Transaction costs and economies of scale are key drivers for vertical integration in the electricity sector.
  3. Wholesale power markets emerged in the 1990s, leading to cost reductions, innovation in clean energy, but also governance and reliability challenges.

Is Network Reliability a Public Good?

117 implied HN points • 30 Mar 23
🔬 Science Networks Economics Policy Reliability
  1. Club goods are goods that can be consumed non-rivalrously but can exclude non-payers.
  2. Network reliability is not necessarily a public good; not everything valuable to the public is a public good.
  3. Investments in reliability may benefit others but can still be individually worthwhile, leading to efficient outcomes without the need for heavy central coordination.

Have Electricity Prices Risen Due to Market Power?

117 implied HN points • 19 Jan 23
  1. A recent working paper analyzes the impact of regulatory restructuring on electricity prices and market power
  2. In restructured states, utilities show higher markups over costs, possibly due to supplier market power
  3. The paper suggests focusing on procurement contracts, T&D charges, and institutional details to better understand market power sources

Water, Water Everywhere, and Nary a Drop to Trade

78 implied HN points • 31 May 23
  1. Water allocation problems in the Colorado River Basin are hindered by a lack of water trading due to non-market regulatory institutions.
  2. Defining and enforcing property rights in river water is difficult, leading to overuse and misallocation of this shared resource.
  3. The Colorado River Compact failed to address water scarcity, tribal water rights, and environmental protection, highlighting the need for water markets and price discovery.

Vertical Integration and the Make-or-Buy Decision: Electricity and Cruise Boats

78 implied HN points • 02 Mar 23
💼 Business
  1. Asset specificity plays a key role in determining firm boundaries and decisions on vertical integration or contracting out.
  2. The consideration of asset specific costs and transaction costs affects the make-or-buy decision for firms.
  3. Using existing assets can be a cost-effective solution for firms, reducing the need for specialized assets and influencing decisions on vertical integration.

Disruptive Innovation and the Regulated Utility

58 implied HN points • 28 Apr 23
💼 Business Innovation Regulation
  1. Regulated systems need to adapt to changing conditions like disruptive innovation.
  2. Unbundling generation and retail from monopoly utilities could boost solar PV investment.
  3. Distributed generation challenges the traditional utility business model and calls for new market designs.

Coase GPT

58 implied HN points • 06 Apr 23
🚌 Education Research Academic Interdisciplinary Analysis Theory
  1. Large language models like ChatGPT and Google Bard struggle with interpreting academic research questions accurately.
  2. Coase's analysis in 'The Problem of Social Cost' emphasizes the importance of well-defined property rights and bargaining in resolving externalities.
  3. Specific, focused queries help improve the accuracy of responses from large language models.

Join me on Notes

58 implied HN points • 11 Apr 23
🕹 Technology Social media Community Building Substack
  1. There's a new space called Notes on Substack for sharing various content like links, short posts, and more.
  2. As a subscriber to Knowledge Problem, you can automatically see the author's notes where you can like, reply, or share them around.
  3. Readers can also share their own notes on this platform and it's envisioned as a space for sharing thoughts and ideas.