Page 238 - Sustainable Cities and Communities Design Handbook

212 Sustainable Cities and Communities Design Handbook

The energy system points out the limitations to the conventional economic
models and gives priority to new concepts. Many of the contrasts between the
neoclassical and civic market models are matters of degree and centrality; the
civic issues are “externalities” in the current models used by modern econo-
mists rather than being at the core. Civic market functions must take promi-
nence in framing competition and market economics. The main differences are
as follows:
l Neoclassical economic models are based on concepts of independent firms
competing to gain advantage over other firms because of efficiencies,
product, technology, and price, and thus meeting the public interest
because they better produce what the public wants at the lowest cost. In
contrast today, we better understand that firms are in networks in which
innovation, efficiencies, and price are the result of the interfirm sharing and
cooperation rather than simply competition.
l Neoclassical models assume private sector involvement, whereas the new
system is based on an increasing number of publiceprivate partnerships
and shared responsibility between the public and private sectors. Shared
ownership and management control are at the root of the programs that
blend the public good with private initiative.
l Neoclassical models are based on premises that markets and technological
systems are largely self-regulating and that government’s role is limited to
protecting against market power and unfair competition by enforcing laws
preventing price gouging, protecting patents, enforcing contracts, and
prohibiting malicious misrepresentations or corruption, etc. In contrast, we
now see an expanded role for government that goes well beyond rules to
creating the context for public good in expanding markets, promoting
employment, and protecting the environment.
l Neoclassical models left innovation and technological change to the
marketplace, whereas the new model relies on government leadership to
introduce and stabilize markets for innovations that serve the public good
but may not be in the short-term private interest of market leaders.
l Neoclassical models make minimal distinction between industries where it
is easy for companies to enter or leave, compared with companies in grid
or network industries where control of the grid constitutes a public obli-
gation to serve and a natural monopoly. In fact, barriers to entry in a
number of industries are growing because of increased interdependency
and specialized materials, information, and markets that limit participation
in the industry to those already involved.
The transformation away from the neoclassical and now conventional
economic model that was the basic philosophical and theoretical bases, along
with a bipartisan political agenda, and hence responsible for the deregulation
framework that led to the California energy crisis and to changes in the
electricity system structures in other nations must be discussed in some detail.