Monday, April 27, 2009

Keeping Up With Newt Gingrich

Two years ago, Newt loved cap-and-trade markets. Today, Newt hates cap-and-trade markets.
"Imposing stunningly high taxes on an economy in the middle of a recession is fundamentally wrong, and guarantees that our economic competitors in the global marking will be in a dramatically better economic position. They recognize that artificially capping their economy is the wrong approach for developing their societies."
It's not clear why the change of heart, except that there has been a change of Administrations. So, maybe it's not so much cap-and-trade markets, per se, but who implements them, that's important.

How the rules are determined for markets is oftentimes just as, or more, important than anything that actually happens in the markets themselves. That was something the folks at ENRON realized with California's 1996 electricity deregulation: control the market rules and you control the world! Once California's (lamentably late) Governor Gray Davis finally (tremblingly) asserted California's authority to make long-term electricity contracts, the crisis ended instantly. Because, as ENRON understood, lack of that long-term contractual power was the single key to the entire crisis, and the single source of their Niagara of money.

Decentralized control makes the Internet function much like a market. I just hope that the politicos never fully-control the Internet, and that Internet management remains much as it is now. God knows, the politicos will try to rein the Internet in. And it wouldn't be that hard to do either.

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