We free marketers fail to point out often enough how beautifully the marketplace works and, thus, why it is so important to keep the market as free as possible from interference from burdensome regulations and interference. Here’s a great example of how airline customers and airlines themselves are responding to each other’s actions and choices.
The issue is fees for checked baggage. Airlines decided to create a revenue stream by charging fees. Some customers decided to go along with it and pay the fees. Other customers responded by grousing. In response, some airlines advertised free bags or first bag free in order to create a new reason to fly with them instead of the competition. Airlines that have continued to charge fees are now seeing a new customer reaction, in which more customers than ever are stuffing the overhead bins.
Airlines responded by asking for volunteers, during the boarding process, to voluntarily check their bags at the jetway — for free. Customers responded by intentionally bringing oversized bags to the gate, hoping the airline will ask for volunteers and giving them the chance to check their bags for free. The problem has gotten so bad that some airlines are redesigning planes to enlarge the overhead bins, and designs for new airplanes are following suit.
This is how the marketplace works when it’s left to businesses to find a need and fill it, and to customers to decide — via their buying decisions and behavior — if they like what the business has to offer. It may seem simple and obvious, but too many times our policymakers impose regulations that interfere in the market by imposing false incentives that alter the behavior of both business and consumer.
