Energy Price Cap: Good politics but bad economics?

This is a big story in the run up to the 2017 General Election. The Conservatives (traditionally a less interventionist, free market party) are proposing to impose a price cap to address ‘rip-off’ energy prices.

Consider these issues:

  • Why is this being proposed?
  • How would it work?
  • Will the policy achieve its aims or is it just another example of short-sighted politics getting in the way of markets?
  • Are there any other ways of achieving a more efficient outcome in the market?
  • Can behavioural theory help us understand the issues and what can be done?

ripoffenergy

Tory’s plan energy price cap

How will price caps work?

Isn’t this Labour’s idea?

Audio clip: Could a price cap stifle competition?

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