If regulating the strong doesn't work, just nanny the weak instead

Evan Davis, the telegenic and usually excellent BBC Economicscorespondent, had a heart-stoppingly bad argument this morning on theToday show. Darling is hauling in the gas and power companiesto hear justifications of the 60% price increases we've seen this year.Evan Davis went through A-level oligopoly theory, explaining that"prices are sticky ... energy firms won't reduce prices because theyknow that others will follow them if they do, so doing no good buthurting profits ... and that our energy suppliers know that we don'teasily switch anyway." So much, so (half) true.

Now for the bad bit. Evan Davis next said: "given all this, it is bestto rely on competition, and the best advice to you all is that youswitch supplier." Energy regulation of the past 20 years has been anembarrassing disaster for the Thatcherite theory underlying it. Fromvastly wasteful investments in gas generation in the 1990's, to thecontinuing quasi-monopoly in domestic gas, to the endless and expensivetinkering with a system that was always broke somewhere ... and all ofthis for no apparent gain when compared to the centralised, regulatedFrench or German systems of energy supply ...

The core reason for the failure is that when there's intrinsically nocompetition in the system, "deregulation" becomes a synonym for handingover power to the most organised forces in a market -- the topmanagement of the producers and their bankers in this case.This is the gloomy verdict even of those who at the time wereits staunchest defenders, like John Kay in his recent Prospectretrospective of the privatisation era.

So for Evan Davis, using the voice of the BBC, (the one public utilitythat has so far avoided the fate of that sort of ideologicalreorganisation), to tell us that the problem was not with the model butthat instead we should change our behaviour as consumers seems like abit of Orwellian madness: the State was wrong to do what it did, butbecause we need to say it was right, why not try to re-educateconsumers into the behaviour that does fit the system. Don't design government around who we are, design who we are around what government happens to need. The whole ideology ofderegulation was to "unleash"the power of competition, not coax it into life with propaganda toolswhere none would be expected by any economist anyway.

This kind of message from Big Brother Nanny might actually start makingus wish that the BBC hadn't been spared the great era of destructivecreation in public service provision.