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.
I don’t think the problem here, as you seem to insinuate, is with our regulators per se. Fee setting authority starts with congress and that is where perverse incentives, such as our current weight based landing fees (which advantage smaller carriers and encourage congestion), originate. There are really three distinct spheres of use or property that an air carrier uses and should thus be charged for: The gates themselves, the runways (i.e. landing and departures), and airspace. It seems the first two can be auctioned off with higher prices likely to emerge for peak hours. The latter can be a flat fee based either on time or distance traveled.
— richard · Apr 22, 08:31 PM · #
Very true — I’ve followed the debate over landing slots, which seems like a good locus for intervention and reform.
— Reihan · Apr 22, 08:51 PM · #
Devil’s advocate argument here:
While I am generally in favor of “congestion pricing” for airports, highways, and other transportation infrastructure, how do you think Congress will react to this? When you incentivize larger aircraft at congested airports, you force the airlines to seriously consider dropping routes that can only be supported by smaller aircraft. All those congressmen from districts with smaller cities that are barely holding onto their twice-daily 30-seat puddle jumper or 50-seat gas-guzzling regional jet service to O’Hare, LaGuardia, etc. aren’t going to keel over to airline economics and realities.
Besides, with jet fuel prices at the levels they are today, the airlines are probably in the process of pulling these small-aircraft routes anyways.
Also, airspace is also affected by peak-hour congestion – during hub peaks, you have the same queuing issues as you do at gates and runways – it’s all connected together. Runway-related landing fees are charged by weight in order to take into account a heavier aircraft’s impact on pavement.
— MPS · Apr 23, 05:08 PM · #
“When you incentivize larger aircraft at congested airports, you force the airlines to seriously consider dropping routes that can only be supported by smaller aircraft.”
This is true, but does not in fact appear to be the major cause of congestion. I think what you are seeing, especially at a place like La Guardia, air carries are running more trips than they used to between major markets but without increasing the number of passengers (i.e. by flying say 10 trips to from La Guardia to Boston in 50 seat RJs instead of three in a larger aircraft). I think part of the economic rationale behind this is do to scope issues with the airline labor force. Pilots and crew are compensated according to the size of aircraft. RJ pilots and crew are paid less than pilots and crew for larger jets. I think the more compelling reason though is customer service. That said, keeping with your example of air carriers dropping routes to an O’Hare or La Guardia from smaller markets, that may very well be the case. That said, instead of flying to O’Hare or La Guardia, the carrier could service that market by flying to a secondary airport like Midway or Islip.
“Also, airspace is also affected by peak-hour congestion – during hub peaks, you have the same queuing issues as you do at gates and runways – it’s all connected together.”
That’s totally true. I guess the idea is that if you implement congestion pricing, whether it be a shift away from weight based landing fees, then the rest would fall in line. Carriers where possible would upgage, thus reducing the number of aircraft queing up on the runways.
— richard · Apr 24, 08:39 PM · #