Bob Poole of the Reason Foundation has written an outstanding article on airline deregulation. He gives a nice history of the issue, filled with lots of facts about the effects of deregulation and about where we need to go next: pricing landings better and following countries like Canada in getting rid of our antiquated socialist (pardon the redundancy) system of air traffic control.
Bob, by the way, wrote a piece in Reason in 1969, “Fly the Frenzied Skies,” that was only the second thing I ever read on airline deregulation. The first was then-graduate student Sam Peltzman‘s excellent piece in the New Individualist Review.
Some excerpts follow.
On the seeming impossibility of deregulation:
My very first Reason article, in 1969, argued that airlines should be allowed to fly wherever they wanted and charge whatever prices they thought sensible. My dad, then a facilities engineer at Eastern Airlines, read the article, laughed, and told me that would never happen.
Nine years later, the impossible did happen. Congress moved to phase out price and entry controls and set a date–January 1, 1985–for the CAB to disband, which it did, on schedule.
An excerpt on how the politics helped deregulation:
United Airlines played a uniquely important role. After repeatedly being denied access to new routes by the CAB, it broke with the other major carriers and refused to support the status quo. The company pushed for reform starting in 1974, which prevented the airline trade association from choosing sides, since its policy was to take positions on policy issues only if all member airlines agreed.
Do read the whole thing.
One thing Bob left out is that he didn’t mention the idea of allowing foreign airlines to compete on domestic routes. That would give a boost to competition.
The Concise Encyclopedia of Economics, first edition, has a piece on deregulation by the late Alfred Kahn, the chairman of the Civil Aeronautics Board who did so much in the late 1970s to deregulate. The second edition has a piece by Fred L. Smith, Jr. and Braden Cox in which the authors take it to the next step.
READER COMMENTS
Michael Sandifer
May 26 2018 at 12:15pm
I’m all for deregulating airlines. I’d love to see the private sector automate air traffic control over time.
Let’s also stop protecting Boeing, while we’re at it.
Alan Goldhammer
May 26 2018 at 1:03pm
Interesting comment by Michael Sandifer about Boeing. I grew up in a town that made passenger airliners (Sam Diego once home to Convair) and can remember when in addition to Boeing, there was Locheed, Douglas, McDonnell, along with Convair that all competed first with prop driven and the jet engine aircraft. Mergers and bad business decisions left only Boeing as the last one standing. It was an interesting result as some of the others had better technology.
Thaomas
May 26 2018 at 5:42pm
Let’s not forget getting airports to pricing landing spaces/times including/especially for “civil aviation.”
Slightly different subject but how about turning over airport security to airports, not the TSA?
Thomas Boyle
May 29 2018 at 8:14am
Imagine if Robert had advocated airline “deregulation” in the sense of giving control of the CAB to a group controlled by airlines and controllers, with protection from competition, and little or no government oversight?
Of course, he didn’t! He promoted competition, not a private monopoly regulator. And that makes sense: regulators need public oversight, not profit-maximizing incentives. Consumers need competitive suppliers, not a government-mandated monopoly.
And so, given his great promotion of competition in airlines, I have been very disappointed to see that, for many years, he has promoted the creation of a private monopoly regulator for our nation’s airspace, with minimal government oversight, managed by an entity controlled by incumbent profit maximizers (airlines, controllers), with protection against competition, and with the ability to put a “thumb on the scale” against new competitors and new capacity and new disruptive technologies.
Efforts to get Robert to see that the only thing worse than a government monopoly is a government-mandated, must-use private monopoly, have failed. He appears to have lost sight of the fact that it is not the absence of government that makes things better, but the presence of competition; and that a government-protected privately-controlled monopoly is the worst of all possible worlds.
I’d love to see competitive provision of services that are currently FAA monopolies. Heck, let the FAA compete on an equal footing! But I’d hate to see a private monopoly – especially one the government would protect from competition.
I hope Robert returns to his competition-promoting deregulatory approach, which brought so many benefits to air travel, as he said it would.
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