The more I think about it, the more I'm inclined to say that even "natural" barriers to entry will distort the market from its state of "perfection", even though they are unavoidable in any real world situation.  If so, then the "perfect" market not only does not exist, but never can exist, at least for any business producing non-virtual goods.

Thoughts?

RPS stands for Renewable Portfolio Standard.

In my understanding, the big fish eat the little fish -- they have to, to survive you have to grow in a competitive market. As they get bigger, they use their power and resources to corner the market (hire lobbyists, engage in massive advertising,...).

The other side of that is big dirty stuff that once permitted is a big barrier to someone else coming in.  Living in Chicago, I see all those steel mills in northern Indiana that are producing a pure commodity that in many respects is close to an ideal market.  But it's expensive to ship it around, and no one wants their town to look like Gary, IN.  Ergo, those plants have really nice barriers to entry from their competition, who can't build the facility (even if they had the $) until some town decides that they really want them.

And you're absolutely right that perfection never really exists (although all economic models assume it does, since to admit it doesn't exist is to admit that you can't model reality - subject for another post someday).  But that's not to say that  regulation can't recognize that and react accordingly - for example, by providing bridges to get over the barriers to entry.  More often, regulation takes the opposite tack, raising barriers to entry, as when it extends the life of patents & trademarks or guarantees equity returns of the existing market participants.

There cannot be a perfect market, presently, since a perfect market, presently, would be infinitely hot. We get relatively close to perfect markets when we detonate hydrogen-fusion explosives.

The heat-death of the universe is a perfect market.

Don't prices in a market reflect supply and demand, rather than costs?  

As I was taught, the third bullet should be more along the lines of "information transparency, as reflected by prices."  That is to say that there should be few, if any, barriers to obtaining the prices, and the information about the market that is conveyed by those prices.

Compare this to the coal industry, where the majority of the costs are related to health impacts, none of which show up in the price of power.  So when those costs rise, we see no differential reason to shift resources elsewhere.

This is not incompatible with saying that the relate through supply and demand (since if we paid the health costs for coal in our coal-derived kWh, we'd demand a lot less coal power), but not quite the same thing because it factors in all the costs that are treated external to the system.  (And lest someone cry that these externalities are non-monetizeable, I would point out that we make all sorts of decisions about incorporating those externalities into new plants that compete with coal - like all the audits of potential bat fatalities that would accompany a new wind farm - all while assuming that the alternative has no costs that are not already reflected in the price.)

And if we paid the health costs for windpower in our windpower-derived kWh, we'd demand a lot less windpower.

1. Adam Smith wasn't a market fundamentalist either.
(That all comes from Frodrich Hayek, a crank how thought robber barron capitalism was self regulating, but wasn't popular during the great depression.  Later his pupil was Milton Friedman)
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2. US Republicans aren't exactly "fiscally responsible".  Or atleast haven't been since Regean took office.
http://greyfalcon.net/debt.png
http://greyfalcon.net/debt
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3. The real question you have to ask is what is the difference between a "competitive" market, and a "free" market.

4. One perspective of why the market should exist, is to maximize it's benefit to society. Some however believe it should be to maximize the rewards to individuals.

As long as there are smart people, they will figure out a better system and eats away at the Cathedral.  Their efforts go up the more they are barred.

Government usually steps in when all is said and done.  Thus they "break up" AT&T long after MCI establishes that anyone with a bank account can set up a long distance phone company.   Microsoft is "fined" long after Linux establishes itself as a cheaper, more powerful competitor.

In energy, the Oil Exchanges are the last gasps of the Old Guard to hold out against hydrogen, and fuel cells.   They bid the price up not because of any rational reason, but because they want to make their last dollars before the whole thing collapses.