Energy myth five-price signals are insufficient to induce efficient energy investments

Abstract

When policymakers are pressed to defend government interventions in energy markets, they frequently cite the existence of market failures. And rightly so. Economists are almost uniformly of the opinion that markets should be left alone by government unless market failures are discovered. They go on to caution that government intervention will improve efficiency if - and only if - the prospective intervention remedies one or more of those market failures. And even if market failures exist, actual government policies may not improve market operations because politicians rather than economists design the policies.