David Warsh has an excellent column on economists, auctions and the politicians who oppose them:
…the US Department of Transportation earlier this month canceled plans to auction landing slots for New York’s three busiest airports. The Bush administration had sought the measure, hoping to cut delays at the chronically congested airports (and, of course, raise some much-needed cash). The airline industry lined up against the proposal, so did Democratic congressmen. Incumbent airlines will continue to profit; frequent travelers will continue to suffer delays.
Similarly, the banking lobby, among the nation’s strongest interest groups, has so far successfully opposed Treasury Department attempts to put up for bid banks’ questionable (now “legacy”) assets. The reason is simple: when the asking price is, say, 90 cents on the dollar and the bid is closer to 40 cents, no manager will willingly take part in an auction that seems certain to lower book values.
[Similarly]…President Obama campaigned on a promise to auction the [carbon] permits. But a coalition of Midwestern and Southern Democrats teamed up to alter the bill, and when its language was released last week it turned out that fully 80 percent of the permits would be given away at first to electricity utilities and their big industrial customers…
Examples like this show the importance of Public Choice. I was flipping through the Samuelson text over the weekend and thought Samuelson and Nordhaus really didn’t give Public Choice the attention it deserves. In fact, I thought their text tended to paint government intervention in a much more favorable light.
I don’t have a copy the new Cowen-Tabarrok text but I sure hope you guys gave Public Choice the treatment that it deserves.
Emily the problem is two fold. First, the prices for landing don’t vary much by time or by aircraft size – thus it is quite possible for a plane with just a few passengers to land during peak hours thereby delaying a larger plane with many passengers. Auctioning slots would mean that the slots would go to the highest value users – generally the larger aircraft – this would reduce delays for many people.
Second, the airlines have grandfather rights to slots but they can’t sell them so one airline may have empty slots while another airline is in great need. Auctioning would also solve this problem– slots would be used more efficiently, once again reducing delays.
Ultimately, auctioning slots is about creating incentives to make the most efficient use of the slots that already exist, this would reduce delay even if no new slots are created.
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