Re:Small cities in America’s Mountain West are booming
by dredmorbius on Tuesday April 20, 2021 @02:11PM
(#26878509)
Speculation is one mechanism.
Risk assessment (actuarial, engineering, policy, financial) is another. The insurance industry generally is a vehicle for manifesting dispersed or time-variant risks in a predictable fashion, enabling both proper accounting and (as discussed in my earlier comment) management.
Speculation alone cannot do that, though it is also a component of the risk sector.
(My somewhat unorthodox view is that the FIRE sectore, finance, insurance, and real estate, are all fundamentally about risk, in ways other economic activity is not.)
And that means that someone has to pay the costs of doing that. In a free market economy, the people who do the preparing in advance are called "speculators", and they are rewarded or penalized by standard market mechanisms according to how well they prepare. Those standard market mechanisms include being able to charge a higher price during periods of scarcity according to the natural laws of supply and demand.
The alternative is to have some central planning organization that sets requirements and doles out rewards and penalties. And that alternative has all of the same flaws as every other central planning solution--as the very example you give, ERCOT, shows.