Ken Lay, Local Boy

28 May 2006 at 4:05 pm Peter G. Klein Leave a comment

| Peter Klein |

Today’s edition of my local paper, the Columbia (Missouri) Daily Tribune, adds a little local color to the Enron story with this item on Ken Lay, a Missouri minister’s son who attended the University of Missouri in the 1960s and earned BA and MA degrees in economics. Lay was a protégé of economics professor Pinkney Walker, who brought Lay to Washington when Walker was appointed by Richard Nixon to head the Federal Power Commission (now FERC). That, for better or worse, is where Lay learned about the energy industry.

A 1991 profile of Lay in the Houston Chronicle goes further in crediting — certain people would say “blaming” — Lay’s economics training for his later accomplishments. “His sophomore year at the University of Missouri, in professor Pinkney Walker’s introductory economics class, the small-town boy who had never been outside the Missouri state line became hooked on the world of money, from Wall Street horse-trading to monetary policy and international trade. ‘It all became so clear, so logical,’ Lay says. ‘I could see how markets worked, how firms worked. All of it just sort of fit together.’ ”

Of course, Lay understood markets well, but was no friend of free ones. Enron’s raison d’être, and main source of competitive advantage, was not the exploitation of unregulated energy markets, but instead what might be called regulatory opportunism — the ability to navigate the Labyrinthine system of government regulations controlling every aspect of the production, distribution, and consumption of electricity. Were Gabriel Kolko writing his famous book today, he might well choose Enron as his main case.

(Addendum: The University of Missouri says it has no immediate plans to fill the Kenneth L. Lay Chair in Economics, an endowed position funded with a $1.1 million gift from Mr. Lay in 1991. Nor, ahem, to give the money back.)