by Mitch Kokai
Senior Political Analyst, John Locke Foundation
If Alfred E. Kahn and Julian Simon were alive today, they would be spinning in their graves—along with thousands of other economists who spent their lives preaching the rational use of markets to satisfy people.
Kahn, the economist-turned-bureaucrat, filled airliners by deregulating ticket prices in the 1970s; Simon was the economist who taught the airlines how to cope with overbooked airplanes by paying people to give up their seats. But the two were prophets without honor in their own field of expertise.
Passengers are ungrateful for the low fares that Kahn made possible by ending government price-fixing and supply constraints. They prefer to complain about small seats, nonexistent food, baggage fees, and overbooking. Many airlines, meanwhile, ignore Simon’s advice about using auctions to pry passengers out of their overbooked seats.
Last week, United Airlines found that rejection of sound economics can carry a cost much greater than the cost of a seat. The company richly deserves the bad publicity.
Nobody did a good job that Sunday evening in Chicago: The airline ignored the market-clearing price of a seat on that plane at that time by limiting its compensation offers and substituting the use of force. Chicago policemen did the airline’s dirty work with excessive force, injuring a passenger. United crew schedulers did not find another way (Delta? American? Greyhound? Uber?) to deadhead four employees to Kentucky without bumping paying passengers. The recalcitrant passenger did not obey a lawful order to leave the plane, though the order never should have been given.
Unfortunately, the Federal Aviation Administration and the U.S. Department of Transportation have rules about such things: Paying for a ticket does not entitle a would-be passenger to fly; having a reserved seat does not confer a right to sit in it; the maximum compensation for bumping is fixed by regulation; passengers must obey all orders from the crew; all decisions are left up to the airlines.
Holding an auction—offering all of the passengers equal opportunity to make more than $1,000—is a more civilized solution than picking four people seemingly at random to give up their seats, and much better than having police drag a man off a plane.