Re-regulate the Friendly Skies?

In Monica Prasad’s brilliant The Politics of Free Markets, she describes the changing ideological valence of “deregulation,” which began as a pro-consumer cause identified with the left to a pro-business cause identified with the right. Yes, it can be pro-market and both pro-consumer and pro-business. But as Prasad explains, the early champions of deregulation, led by Ted Kennedy, Stephen Breyer (yes, that Stephen Breyer), and Ralph Nader were primarily interested that entrenched the power of particular corporations. During the Reagan administration, the emphasis of deregulation shifted to what Prasad calls social regulations, to which all firms were subject — thus, in theory, not lending a competitive advantage to some firms over others. Now, I actually think this view is a little confused. Large, well-capitalized multinationals are better able to bear the brunt of social regulations, right? There are subtleties here, but regardless, it’s an interesting view about how deregulation meant one thing at one time and an entirely different thing at another time.

So I was struck by Richard Posner’s latest, in which he mulls over what to do about airline service, in particular the epidemic of delays that plagues airline service. After offering a pretty persuasive explanation, he proposes — shockingly! — bringing back the Civil Aeronautics Board, the obliteration of which was the first great triumph of deregulation during the Carter era. One senses he’s not entirely serious. Posner ends with a more plausible and less unappetizing fix.

A better alternative than any I have discussed thus far would be a heavy tax on airline transportation, with the tax rate varying according to the contribution of a particular route, time, or type of plane to congestion (for example, in general large planes would be taxed less heavily per passenger than small ones, because for a given number of passengers there are fewer big planes to clog the airways and runways than there would be small ones). To the extent effective, the tax would eliminate the deadweight cost of congestion.

And of course this would also have environmental benefits. I like it. Naturally I wonder if our regulators will be capable of making the fine-grained decisions necessary, but my sense is that the likely alternatives are even more intrusive.