John Maynard Keynes identified in the 1920s cost and demand conditions under which competition doesn't emerge. This seems largely forgotten. Keynes goes further, to explain how economists move from simplifying assumptions to abandonment of the actual facts, and to conclude that reality is what their model says. The problems caused by introducing competition in the electricity sector in Europe (and documented by Steve Thomas of PSIRU in several publications for EPSU) but also Australia and the US are similar and underline the validity of the observation of Keynes. it is...
"The beauty and the simplicity of such a theory [competition producing economic efficiency] are so great that it is easy to forget that it follows not from the actual facts, but from an incomplete hypothesis introduced for the sake of simplicity. Apart from other objections to be mentioned later, the conclusion that individuals acting independently for their own advantage will produce the greatest aggregate of wealth, depends on a variety of unreal assumptions to the effect that the processes of production and consumption are in no way organic, that there exists a sufficient foreknowledge of conditions and requirements, and that there are adequate opportunities of obtaining this foreknowledge. For economists generally reserve for a later stage of their arguments the complications which arise -- (1) when the efficient units of production are large relatively to the units of consumption, (2) when overhead costs or joint costs are present, (3) when internal economies tend to the aggregation of production, (4) when the time required for adjustments is long, (5) when ignorance prevails over knowledge, and (6) when monopolies and combinations interfere with equality in bargaining -- they reserve, that is to say, for a later stage their analysis of the actual facts. Moreover, many of those who recognise that the simplified hypothesis does not accurately correspond to fact conclude nevertheless that it does represent what is 'natural' and therefore ideal. They regard the simplified hypothesis as health, and the further complications as disease." (Keynes, 1972)
Keynes, J. M. "The End of Laissez-faire" in The Collected Writings of John Maynard Keynes, Vol. 9, Essays in Persuasion, London, The Macmillan Press, 1972
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