How PSEG is “Capturing” the New Jersey Economy

Tom Moran wrote on Sunday that the Murphy administration is facing its first major test: a PSEG subsidy that’s been controversial in wonk circles for months and is finally approaching Murphy’s desk.

The heart of the issue is that nuclear power plants in New Jersey are facing infrastructure challenges. It’s a critical moment for the power industry; will it double down on nuclear power? Will doing so affect solar or other clean energy? How will the increases to electric bills affect communities? Why is New Jersey footing the bill for the entire subsidy when the nuclear plants cover a wide geographic area?

The debate reminded me of a recent book by Lindsey and Teles The Captured Economy. I first heard about the book through Russ Robert’s Econtalk Podcast (embedded below). The book is fascinating: co-authored by a liberal and a libertarian, and focused on the many ways that rich and influential industries can influence government to help their business, and in doing so, increase inequality.

One of the challenges discussed in the podcast is that politicians are much more likely to be blamed for visible problems they create then hypotheticals which never come to pass. In other words, if the energy sector moves from nuclear to more renewables (solar, wind etc), Murphy will have to deal with the politics of thousands of jobs being lost in the district of the State Senate president. He will have to weigh that against a hypothetical in which this doesn’t pass and renewables are more competitive. On the other hand, if this passes, residents across the state will face rate increases.

It’s a tricky issue that gets to the heart of the government role in the state economy: does subsidizing existing business ultimately lead to a “captured economy” and increased inequality?

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