US Free Market in Action

July 10th, 2008 | Posted by Smithers at 11:05 am in Politics |

Along the same lines of my Tuesday ISP post, another stellar example of US business providing horseshit service is the airline industry.

Overbooking, flight delays, impossible to understand pricing structures, nickel and dime service charges, unhappy employees, uncomfortable seating, dirty cabins, lost baggage, old equipment, and just about every single US carrier is losing money hand over fist.

Sure, it’s cheap, so long as you can find the flight you want and it does not get cancelled and you feel like you want to take a shower after getting off the plane.

Airlines in other developed countries don’t have these kinds of problems. Flights are reliable, planes are clean, employees are happy.

Just like ISP service in the USA, consumers continue to use the airlines because they have no other choice. But what is so unique about the US airline industry that makes air travel such a horrible experience? We have multiple carriers who are competing for business so we should not have these kinds of problems right?

Does the free market really work that well at all? Time to re-regulate the airline industry.

  1. 29 Responses to “US Free Market in Action”

  2. By T3 at 11:29 am on Jul 10, 2008 | ReplyReply directly to this specific comment

    you read my mind. which is scary for you.

    i was thinking this same thing in regard to the ISP post on my way home last night.

    Not much to add except that it’s interesting in airports that serve as hubs for an airline — you generally get better service on airlines that are not using that airport as a hub.

    people say “if people don’t like your product they’ll stop buying it”. totally bunk when you don’t have many choices.

    who honestly believes they have a choice when it comes to the airlines? the ratio of business to personal travel for me is like 90/10. when I travel for work my “choice” is that I have no “choice”. and even when i travel for pleasure i still don’t think i have many options. so what would motivate NWA to provide a quality product?

  3. By Bike Bubba at 11:58 am on Jul 10, 2008 | ReplyReply directly to this specific comment

    Since when is the industry deregulated? Is it the free market that subsidizes airports and airlines, and is it the free market that banned smoking on planes? Is it the free market that rigidly fixes airport usage and allocates route times? Is it the free market that comes up with insane security rules?

    With all due respect, that’s what the government has done. By no stretch of the imagination is the industry “deregulated,” and a great part of the problems you see is the fact that due to government intervention, Northworst has no real competition out of MSP. As a result, a carrier that should have either gone under or greatly reformed decades ago is pulling the same old tricks.

  4. By Charlie Anderson at 12:03 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Did you get that email from NWA signed by all the airline CEOs asking everyone to stop speculating on oil?

  5. By skibby at 12:07 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    With all the subsidies, bailouts and bureaucracy’s that make up the the US airline industry, this is not a good example of a free market.

    http://www.reason.com/news/show/36068.html

  6. By jroosh at 12:11 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Have you ever flown Sun Country? How about Southwest?

  7. By jroosh at 12:17 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Time to re-regulate the airline industry.

    Should we make the airline industry like Amtrak?

    You think airliners are dirty inside?

    I rode Amtrak to Chicago a few years ago with a bunch of colleagues and when we got off we all wanted to ge deloused and burn our clothes.

  8. By Bike Bubba at 12:20 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Charlie; assume you’re joking, right? All of the airlines have entire departments whose job is to speculate on the price of jet fuel and lock in prices, so they can attempt to be profitable. Shutting down petroleum speculation could be death to a lot of airlines.

    And Roosh has a great point; some airlines are very good, others frankly stink. For that matter, flying out of a city with multiple airlines (say Chicago, Tokyo, or Frankfurt) is quite different than flying out of a city with just one.

  9. By pcomeau at 12:32 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Wow… wish I had the time today to reasearch and poke hole in the Reason Mag article… cause it was quite bad.

    Very little data to back up it’s assertions…

    As for deregulation… I think a common definition needs to be agreed on… Ohterwsie I sense a moving of goal posts here.

    In general the airling industry, in the U.S. is deregulated. Thanks to something called the Airline Deregulation Act passed in 1978 (hmm under Carter, can’t be.)

    That elimnated the govs role in setting fares, routes, and schedules. By 1985 deregulation was complete.

    Now yes the airlines are regulated, as we wouldn’t wan’t companies flying thier jets just anywhere, but it’s not like the 70s.

    As for airports being funded by municipalities, much like sports arenas, somethings are just too big to get by on private financing alone. Espcially when they will be heavily used by the public.

  10. By pcomeau at 12:37 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    “And Roosh has a great point; some airlines are very good, others frankly stink. For that matter, flying out of a city with multiple airlines (say Chicago, Tokyo, or Frankfurt) is quite different than flying out of a city with just one.”

    Yes very nice. I’ll move to Chicago or Tokyo, or Frankfurt then. So I can enjoy the benefit of a free market.

    Oh wait… I have a family, stable job, house, and my in-laws are in town. Kinda late for that.

    Bzzz try again.

    There is some evidence, though I’ll have to dig it up, that the deregulation of the late 70s led to the current hub system.

    sigh.

  11. By bruce at 1:06 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Charlie is not joking. I got that e-mail from NWA today as well. Click HERE, and then check out the SOS Supporters via the link in the left…

  12. By Bike Bubba at 1:16 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    pcomeau–another way of getting more competition here would be to end subsidies for Northworst, which would free up terminal space for profitable airlines to come in.

    Again, the problem here is government. (note as well; if we stopped subsidizing airports, maybe BNSF might get back into the passenger rail business and show Amtrak how to do it right)

    Bruce, thanks, and yikes. You would think that some of the chief speculators in the market woudl sense their rank hypocrisy in releasing such a note, but evidently not.

  13. By eric at 1:35 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Are airlines in other developed countries more or less regulated than US airlines? Having flown on KLM and Alitalia(sp?) I can say that the service and experience is remarkably superior to US airlines in general. This isnt a rhetorical question, I honestly dont know the extent of regulation imposed on Euro carriers.

    The prevailing business model of US airlines is wiping out or buying other carriers to build a monopoly in certain hubs. This is how profit is derived–not by creating a better product or providing first rate service. Once the monopoly is established they can pretty much charge whatever they want.

  14. By monty p at 2:06 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Indead, time to re-regulate the airline industry. We need to bring back the hot stewardesses.

    This is definitly an area that America is falling behind in compared to all other developing nations.

  15. By bruce at 2:18 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Bruce, thanks, and yikes. You would think that some of the chief speculators in the market woudl sense their rank hypocrisy in releasing such a note, but evidently not.

    Yikes, indeed. You’re welcome, Bike Bubba.
    …and perhaps now you can begin to understand why I don’t trust industry/corporations or the free market to do the right thing or solve all of our problems. Enron didn’t help my trust in the private sector much either - talk about market manipulation. That said, I know government is far from perfect and some things are best left to the free market and private sector.

  16. By Bike Bubba at 3:35 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    I don’t trust corporations, either, but I know that they tend to be more responsive to the prospect of losing money than government types tend to be at constituent feedback.

    And Enron? Sorry, government made that one–their whole business plan more or less hinged on Clinton getting the Senate to approve Kyoto, and their meddling in the CA electricity markets was only possible because utilities were forbidden to own their own power plants and sign long term power contracts. Hence, they couldn’t hedge against market/climate shifts.

    You want to keep corporations in check? Great. Let’s remove barriers to entry where practical.

  17. By bruce at 3:54 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    Sorry, I don’t buy the “government made me do it” excuse for Enron. That was just a bunch of white collar criminals in action.

  18. By Bike Bubba at 4:44 pm on Jul 10, 2008 | ReplyReply directly to this specific comment

    I don’t, either. Government didn’t “make them” do it at all–but they did make it a whole lot easier by restricting the tools that utilities and customers could use to get their electric power (and other things Enron handled).

  19. By T3 at 10:50 am on Jul 11, 2008 | ReplyReply directly to this specific comment

    whatever. govt regulation had nothing to do with why or how they cooked their books to show continued growth to their investors. as usual it seems you’ve drawn the wrong conclusions based on the facts.

  20. By Bike Bubba at 10:58 am on Jul 11, 2008 | ReplyReply directly to this specific comment

    Motivations are not important to human behavior? I assume, then, that you leave your doors open at night and when you’re away, because of course it’s completely the burglar’s fault that he came into your house and stole your stuff?

    Of course you don’t. In many ways, you yourself recognize the importance of opportunity to crime. If only we’d recognize better the opportunities we create for white collar crime.

  21. By Little d at 10:58 am on Jul 11, 2008 | ReplyReply directly to this specific comment

    Bubba for awhile I was starting to try and take away something positive from your posts and think about it. NO longer.

  22. By checkbook at 11:51 am on Jul 11, 2008 | ReplyReply directly to this specific comment

    Motivations are not important to human behavior? I assume, then, that you leave your doors open at night and when you’re away, because of course it’s completely the burglar’s fault that he came into your house and stole your stuff?

    Dood! you must’ve had like a quintuple-major in undergrad!! Now we learn about your mastery of behavioral psychology as well!! I am in awe…

    Seriously though, it’s funny that your statement actually works against your argument and for better (note, not necessarily more) government regulation.

    Regardless, I’d like to comment that we don’t live in a Hobsian world, as many of your comments suggest. Be serious — do you steal shit from a store when there aren’t any cameras or security guards around to provide inscentive against it? Opportunity does not imply actualization; we all have a choice in how we conduct ourselves in almost every aspect of our lives.

    Saying that the US government is responsible for the Enron scandal is like saying that a cop is responsible for an armed robbery that takes place during his/her shift.

  23. By (dis) at 1:04 pm on Jul 11, 2008 | ReplyReply directly to this specific comment

    leave your doors open at night and when you’re away, because of course it’s completely the burglar’s fault that he came into your house and stole your stuff?

    viva canada! where it’s always the burgars fault!

  24. By Bike Bubba at 1:14 pm on Jul 11, 2008 | ReplyReply directly to this specific comment

    Checkbook, perhaps you’d better explain how understanding motivations argues for more government regulation. The examples I’ve presented show how government regulation of airlines and electric markets created perverse incentives, specifically by preventing free markets from offering standard products.

    And yes, not everyone responds to perverse incentives, thank God. However, anyone who’s ever ridden the school bus ought to know what happens when people think no one is looking. To pretend you can ignore this when crafting policy is to beg and plead for the 2×4 of reality to hit you across the back of the head.

  25. By Plan B at 1:20 pm on Jul 11, 2008 | ReplyReply directly to this specific comment

    Enron broke the existing law, and led to more regulation, didn’t it?!

    I have no idea what the hell the problem with the airlines is, but my guess is that it’s not the government (aside from BS security). I’d say mergers and oligopoly may be a problem.

    I get the sense that Bike Bubba conflates trust in firms with trust in the market. Firms don’t like competition, and spend considerable resources getting rid of it. Sometimes it takes a buttload of regulation just to keep a market competitive.

    That said, these bailouts and subsidies are total crap. Like Sting said, fcuk NWA.

  26. By Bike Bubba at 1:33 pm on Jul 11, 2008 | ReplyReply directly to this specific comment

    Plan B, actually regulation makes markets less competitive. The trick is that you need to hire someone to help you comply, whether you’re big or small; and which company is better able to absorb the salary/costs of the “compliance officer”; the big company or the small one?

    You add regulations, companies merge to better comply with them without losing money. They function as a powerful barrier to entry.

    You don’t trust big firms? Neither do I. The way to keep them in check, however, is markets, not government. NWA would be a much healthier company today, IMO, if they’d not been allowed to suck at the public teat so long and so much.

  27. By Plan B at 2:10 pm on Jul 11, 2008 | ReplyReply directly to this specific comment

    Plan B, actually regulation makes markets less competitive.

    Just minutes ago you advocated for removing the HMO exemption in antitrust law. Increasing regulation to increase competition.

    That is a perfect counterexample to your statement above. The fact that you put forward these two contradictory statements within minutes of each other is prima facie evidence of your confusion on the matter.

  28. By checkbook at 2:18 pm on Jul 11, 2008 | ReplyReply directly to this specific comment

    And yes, not everyone responds to perverse incentives, thank God.

    Or we could just thank each other… you know, free will and all. This sentence makes it sound like those not committing serious crimes and offenses are in the minority. I would argue that it’s actually the other way around.

    However, anyone who’s ever ridden the school bus ought to know what happens when people think no one is looking. To pretend you can ignore this when crafting policy is to beg and plead for the 2×4 of reality to hit you across the back of the head.

    WOW, that must be a sressful and tense life you lead with such a high level of paranoia. Is this why people like you live in the burbs? So far away from all the evil-doers in the city? Then again I don’t know, if I saw a dude sitting that high on a horse I might slap him with a 2×4, too. Maybe knock some sense into him.

    As for this bit: The trick is that you need to hire someone to help you comply, whether you’re big or small; and which company is better able to absorb the salary/costs of the “compliance officer”; the big company or the small one? Nice try pulling the “small business” card here — we’re not talking about mom and dad’s bait store down the way.

  29. By Bike Bubba at 5:41 pm on Jul 11, 2008 | ReplyReply directly to this specific comment

    Plan B: try again. It actually turns out that no monopolies have ever been broken up via Sherman litigation. The most famous example, Standard Oil, had actually lost a third of its market share by the time Taft “took action.” The company WAS broken up, but it wasn’t a monopoly.

    It has (at least in part) created at least one monopoly, though; back in 1980, IBM and their very competent software team were emerging from antitrust litigation, so they sold a little program called “DOS” to a chap named Gates.

    If you doubt that regulation creates bigger problems for smaller businesses than big ones, take a look at an OSHA manual or two, and consider whether a bigger company might be able to process that information better than a small one.

    Whether small means “mom and pop” or a “mere” thousand employees to the tens of thousands employed by some conglomerates.

  30. By Adam B at 11:11 pm on Jul 14, 2008 | ReplyReply directly to this specific comment

    It actually turns out that no monopolies have ever been broken up via Sherman litigation.

    That’s going to make your HMO proposal pretty ineffective then, no? It’s your contradiction, Bubba, not mine.

    But the Sherman Act is just one of many competition-enhancing laws we have. Laws against collusion and price-fixing are good examples. Modern capitalism requires a legal framework, a referee, and a watchdog.

    Who do you suppose enforces the conservatives’ beloved property rights, anyway? The government. Who enforces the codes of accounting and transparency which make modern corporations possible (and which Enron willfully violated)? The government. Modern capitalism could not exist without the government.

    IIRC, many competition-enhancing laws don’t apply to small businesses anyway. And certainly future implementations of such laws wouldn’t need to either.

    What the hell does OSHA have to do with anything I’ve said, btw?

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