Friday, February 15, 2013

A Natural Experiment on the Value of Electricity

Back in the 1990s, academic economists had a great time publishing "natural experiments" papers.   In a similar spirit, take a look at this article about the Cruise Line with no electricity.   The structural industrial organization economists can write about their attempts to measure the consumer surplus from new products but I'd suggest that we gain plenty of benefits from "old products" (such as electricity).   The cruise line disaster provides a case study of what happens to a city's quality of life when the power goes out and basic sewage services are lost.    A cruise ship is like a floating city and we now take for granted the basic services that our cities provide us with (I should caveat that statement by noting that as a LADWP customer that I'm used to losing electric power for a few hours a day every month or two).   The cruise ship's problems offer a counter-factual about day to day life.