The utilities have been squeezed to the point of bankruptcy. And Silicon Valley may yet see its liquid crystal displays go dark. California's energy usage has increased by 30 percent during the past decade while generated power has increased only 6 percent. Producers have had little incentive to run the environmentalists' gauntlet to build new plants because prices were fixed not by the market but by politicians in Sacramento. California is suffering shortages.
Consumers buy less and producers make more when prices rise.
But if the price is not permitted to rise, consumers don't get the information that the commodity is scarce and do not conserve, and producers have no incentive to make it less so. One might have thought that with the fall of the Soviet Union, these debates about government interference in the market had been settled. Nothing for ten years and then a shortage of sand. But that object lesson was missed, as was the more recent reminder in the form of the S and L crisis. Recall that the federal government limited the interest S and Ls could charge for loans while interest rates were rising.