Wednesday, July 28, 2010

Power and Economic Development

Sunday night along with 300,000 other Montgomery County residents our house lost power. We hope to have power back sometime on Thursday. The power outage has impacted my productivity. I do normally spend a lot of my day at the library or coffee shops, but with my local coffee shop lacking AC right now, Panera lacking outlets, and the library closed for a couple of days due to the power issues, my productivity for the last week has been reduced. It's more the frustration of trying to find a place to plug in and get online that takes up a few hours than anything else. Although perhaps the extra coffee will counter act this.

My power will be back on soon (hopefully). But loss of electricity can have an impact on economic development. Attracting manufacturing is a key part of most countries development strategy, companies are unlikely to want to open up shop in countries with unreliable electricity grids.

The problem is that utilities are large enough that they create a natural monopoly (an industry with high fixed costs that creates a situation where a monopoly will likely form). Natural monopolies are usually taken over by the government or regulated in some fashion. The problem is that many developing countries also lack good governance meaning the countries electric grid gets even less out of their inferior equipment then they could have.

Infrastructure development has long been a part of the World Bank's and other development agencies mission. But it's hard work given the high costs and governance issues. The impacts are also hard to measure, since unlike education or health programs individuals aren't targeted.

At least the store down the block has electricity to fuel their beer cooler!
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