Image credit: wikipedia, Financial Express
In a capitalistic society there perpetually exists a market for any type of commodity – be it in information technology, food, clothing, transport, art, entertainment, and food. All these fields are defined by cutting edge products, highly processed pieces of raw material that has been cut and changed to the way of our needs, and most importantly, the money to be made in these fields are cushioned by massive margins. Goods can be overpriced, as it caters to the wants of the masses. But energy does not fall under that. It cannot. Energy, like food and water and basic health and education cannot be over charged. It is a need for the masses, not a want. Ethically, it would be incorrect to overcharge or make it a profitable industry.
Would the solar and wind industry that are in a constantly dire need of innovation and injection of money to engineer the solution to the climate crisis ever receive the required amount of attention, money, and direction of the enablers of capitalism? The clean energy field is being predicted as the next big thing to invest in and that it would also be an investment that does “good” to humanity in general. But what if these barriers will ultimately block it, just due to the human nature of our wants and needs?
Relevant Question. Is there something to learn from Medical and Education domains? Where we have both public and private enterprises? Private pharmaceutical companies? Where Government intervention (read: public) intervention is required to make sure there are accessibility and social equity. Wouldn’t say the model is working well, there is room for improvement, but an example domain to learn – what works and what doesn’t.
Private enterprise in medical is private like any other industry. They don’t want to hurt other life if they are behaving with human values but they don’t show mercy at the mercy of thier business. Let’s say a scan machine is 2Cr and scan charge is 2000 rupees per person. Let say they want break even after 5years for thier investment. From electricity charge, lab technician salary, doctor commission, tax, real estate cost all included, they need 20k patients ie, 20k *2k = 4Cr that is 11 person per day. Just do math how that is possible? It says what’s reality. Govt runs but not acts, acts but not active. What’s the point of spending 1.2% to 1.6%. Of budget? They don’t spend on input cost ie., I mean R&D, Medical college for Doctor per person.
Good I’m not a doctor. These days doctors can’t have empathy specially if you are in private.
To paraphrase Thomas Sowell, the most basic question is not what is human need and what is human want; but who shall decide what is human need and what is human want.
Hi VSS,
Thanks for the fundamental insight. I have never read any of Thomas Sowell’s books, barring few articles by him. Any recommendation (wiki says he has written nearly 45 books) of a book by him to start with?
Dear Rad,
I haven’t read any of Thomas Sowell’s books. I have watched a few of his youtube interviews and read a few of his articles. His thoughts are similar to Milton Friedman’s. Their thought process is classified as Austrian economics.
The following is my understanding :
Modern economics taught in universities is all pseudo social science. Especially Keynesian (=deficit spending) economics. Even the Nobel Prize in economics doesn’t mean any knowledge.
Austrian economics is common sense economics.
A good example of Austrian economics would be the USA before the creation of the federal reserve in 1913.
Key theme there is :
1. Currency is hard (=Gold or Something which is hard to create)
2. Non existent taxes
What that implies is, the Government won’t have any money and can’t create new money by increasing the money supply.
I am a simple man. I don’t know all the implications of this. My intuition is, Keynesian economics can’t be right, and it is on its last leg in the current decade.
When I replied I didn’t realize that it was Ranjith’s post. And I thought it was your writing.
Don’t take my reply/opinion seriously.
It is just like a random pleasant conversation that we would have with an evening coffee. Nothing more, Cheers. 🙂
Hi VSS,
We should have more of the random coffee sessions. Any conversation with you is enriching and enlightening. You are one of the few who brings in a perspective which makes me go ‘wow…how I never thought of that from that angle’.
I don’t agree with the title totally.
Energy – is also a capitalist dream, if the market and potential is properly understood.
When the commodity is a basic amenity then cost will be capped but the demand is at high volume. But overall profit will be realised by the impact of volumn.
Problem of solor/wind energy is lack of demand. Ie they lack market penetration because of inital cost.
Even phone was a luxury at a point but now?
Telecom companies are not getting profit because of fast phase of technology upgrade.
Nowadays Boardband data offer capacity is used less than 50%. Similarly wireless technology upgrade will also reach a saturation relative to user’s data demand then telecom companies will get time to push thier margin up after inital cost recovery.
Solar/wind energy is at a very nascent stage to say it’s not a capitalist dream. It will take 10-15 years to see the impact.
Let’s say every household is using 150 units on average then for a country like india with 27Cr familys, say 10 rupee profit out of 150 units then it’s 270cr. Say a unit cost is 6Rupee then 10 Rs profit 10/(6*150) ie, 1.1% margin. If margin is 20% then overall profit is 5400cr. Same if margin is 50% then profit is 13,500cr. Add public and private enterprises consumption revenue 30kcr
Next question how come we will hit 50% margin? Solar or wind energy are initial capital intensive but once initial captial is recovered then margin goes up.
We have to see the type of investment/business
1. Immediate or long term profit/loss generator
Ex: food-immediate, transport/energy -long term
2. Easy/tough market penetration ie competitors
Ex: Coal/nuclear
3. Input cost- technology/equipments/generation cost.