Before privatisation, required rates of return and test discount rates were being applied to utility and other nationalised industries. One effect of this new approach was to promote more marginal-cost based tariffs which could fall particularly heavily on low-income groups. This trend was reinforced by privatisation which, when accompanied by market liberalisation, increased uncertainty about the likely returns on capital investment projects. Both of these issues, the treatment of poverty and coping with uncertainty, were of long-standing concern to the Austrian school of economics. Where Austrian economists differed from liberalising governments was in their locating of responsibility.
This article compares the development of marginal cost pricing in the French and UKnationalised electricity industries between 1945 and 1970. Asking why French 'marginaliste' economists like Allais and Boiteux enjoyed more influence than their UK counterparts like Meade, political decisions concerning the organisation of the electricity industries, the differing injluence of industrial and consumer interests, and the early postwar choices of hydro and thermal investment in France, are advanced as explanations. In the UK, the Treasury pushed nationalised industries towards marginal cost pricing, requiring them to earn rates of return on existing investment and to subject the proposed investment to test discount rates dun'ng the 1960s. The paper closes by arguing that these different routes to marginal cost pricing in the French and UK nationalised electricity industries had significant effects on later government and publtc attitudes towards the privatisation and liberalisation of the national electricity industry and market.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.