David Cameron recently announced a plan to help energy consumers: He would like to create a legal requirement for energy firms to offer customers the price plan that is cheapest for them.
Several commentators have argued that such a law is unlikely to lower average energy prices. It will merely encourage energy firms to reconfigure their prices so that, while offering every customer the plan that is cheapest given their usage, average profit margins are preserved. Some customers will face lower prices and some higher.
Probably. But quibbling about the law's likely effects on energy prices distracts from Mr. Cameron's more serious mistake. Such interventions are unwise even when they have their intended effect, for their intended effect is never their only effect. They also create new doubts and incentives. And these have far more profound effects than those the intervention was intended to cause.
Continue reading here .