Economic feedback. Working with the insatiable profit motive [power markets]

In early 1998, before the California market opened, the author received a description of the new rules for controlling intrazonal congestion. He was delighted because he was sure they would contain gaining opportunities and was anxious to read them. His certainty was not based on any rumor that the rules were poorly designed; in fact, I knew they were designed by some of the best engineers in California. But engineers often overlook the human factor that drives markets-the profit motive, or as Adam Smith put it in 1776, "selfishness and rapacity, ... [and] the gratification of... vain and insatiable desires". Somewhere in these rules, he found a flaw leaving the door open to such behavior, so unexpected by engineers.