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Allocating Airport Landing Slots

September 2, 2008

Greg Mankiw, suggests he favors the proposal described in the Washington Post to auction landing slots at the three main New York airports.

As my wife works for one of the larger airlines, I have heard about this at the dinner table for years and can pass on some context not mentioned by Mankiw or the Post:

  • The larger airlines don’t appear to be opposed to auctions, as much as they are to having something that is a de facto property right of theirs already being taken away and auctioned off by the government.
  • There are so many perverse effects of government regulation in just the airport aspects of air travel alone that this is pretty clearly the world of "second best" where adding a market mechanism onto many other market distortions isn’t necessarily likely to produce an increase in welfare.

That said, I suspect that most large carriers would support wholesale privatization of airports and air traffic control systems. Then you might really escape the world of second best, allocate capacity efficiently and actually get capacity increases in response to market demand.

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