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Failure by design: The California energy crisis and the limits of market planning
Event Information
With Georg Rilinger, Assistant Professor of Technological Innovation, Entrepreneurship, and Strategic Management, MIT Sloan School of Management
The Western U.S. energy crisis was one of the great financial disasters of the past century. The crisis began in April 2000, when price spikes started to rattle California’s electricity markets. Decades later, some blame economic fundamentals and ignorant politicians, while others accuse the energy sellers who raided the markets. In Failure by Design, sociologist Georg Rilinger offers a different explanation — one that focuses on the practical challenges of market design.
The unique physical attributes of electricity made it exceedingly difficult to introduce markets into the coordination of the electricity system, so market designers were brought in to construct the infrastructures that coordinate how market participants interact. An exercise in social engineering, these infrastructures were intended to guide market actors toward behavior that would produce optimal market results and facilitate grid management. Yet, though these experts spent their days worrying about incentive misalignment and market manipulation, they unintentionally created a system riddled with opportunities for destructive behavior.
Join us at BESI for this talk as Rilinger illuminates the California energy crisis and develops a broader theoretical framework for thinking about markets as the products of organizational planning and the limits of social engineering.
About the speaker
Georg Rilinger is an assistant professor of economic and organization sociology at MIT Sloan School of Management, where he holds the Fred Kayne Career Development Professorship. His research examines organizational, cultural, and political reasons why technocratic expertise — from Nobel Prize-winning market designers to financial regulators — so often fails to prevent market failures, drawing on archival research, interviews, and ethnographic methods. He is the author of Failure by Design: The California Energy Crisis and the Limits of Market Planning (University of Chicago Press, 2024), which won the Viviana Zelizer Prize for Best Book in Economic Sociology. His work has appeared in the American Journal of Sociology, Socio-Economic Review, Theory and Society, and others.