Twenty-five years ago, we did not have free markets in electricity. Back then, prices were set by government agencies. Consumers could only buy power from one local monopoly utility company.

The general principle that exists in a free market, that marginal revenue equals marginal cost, did not apply. Back then, I was part of an effort to introduce free markets and competition into the electricity sector. I testified before Congress that the monopoly part of the electric industry was quite small, and that free markets and consumer choice would have societal benefits. That idea took off around the world. It turned out that “marginal cost equals marginal revenue” could work in electric markets.