Wednesday, December 30, 2009

Airlines, Banks, Competitive Markets, and Market-Babble Lobbyspeak

The pro-business "market-babble" put forth by some thinktanks is sometimes mind-boggling. This spoof of a new regulation to limit tarmac time of airlines to 3 hours is hilarious. Here's an excerpt:
“Forcing airplanes to return to the terminal after three hours will reduce the efficiency of the entire air travel system,” said David Dell’amore, professor of flight operations at Harvard University. “Modern flight management algorithms minimize aggregate wait times and ensure the perfect balance of customer comfort and economic value-added.”

The problem, experts say, is that the government rushed to create new regulations without considering how market forces could solve the problem. “Clearly, if consumers placed a value on a maximum runway wait time, they would have negotiated it with their airlines already,” said Petra Waterman of the American Enterprise Institute. “Since no airline offers such a contract term, we can assume that consumers place no value on it. Besides, if consumers were not happy with the service they receive from airlines, then a new airline would have already entered the market offering shorter wait times.”


Markets are great, but they are explicitly ill-suited for collective action problems (hence, the term "collective action problem").

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