Prices and Planning

Abstract

The purpose of this chapter is to examine, in the context of three major nationalised industries, the problems which arise in incorporating prices into the long-run planning process. I begin by setting out a simple theoretical model of the process, based on the standard economic analysis of pricing and investment decisions, and examine the role that prices play in this model. The model provides a framework within which to consider the actual planning processes of the three industries — electricity, coal and gas — in the next three sections. The final section then summarises the main conclusions on the ways in which prices have been treated in the planning processes of these industries.

I am grateful to a number of economists in the nationalised industries who have helped me in preparation of this paper, and in particular to Terry Boley, Ted Denham, Rufus Godson, Colin Gronow, and Michael Parker. None of them of course, necessarily shares the views expressed here.