We remember Thomas Edison as the inventor of the incandescent light
bulb, but he deserves credit for something much larger, an even more
singular invention that profoundly changed the way the world works: the
modern electric utility industry. Edison's light bulb was the first to
work within a system where a utility generated electricity and
distributed it to customers for lighting. The story of how electric
utilities went within one generation from prototype to an indispensable
part of most Americans' lives is a story about the relationships between
political and technological change.
John L. Neufeld offers a comprehensive historical treatment of the
economics that shaped electric utilities. Compared with most industries,
the organization of the electric utility industry is not--and cannot
be--economically efficient. Most industries are kept by law in a state
of fair competition, but the capital necessary to start an electric
company--generators, transmission and distribution systems, and land and
buildings--is so substantial that few companies can enter the market and
compete. Therefore, the natural state of the electric utility industry
since its inception has been a monopoly subject to government oversight.
These characteristics of electric utilities--and electricity's
importance--have created over time sharp political controversies, and
changing public policies have dramatically changed the industry's
structure to an extent matched by few other industries. Neufeld outlines
the struggles that shaped the industry's development, and shows how the
experience of electric utilities provides insight into the design of
economic institutions, including today's new large-scale markets.
