Where exactly do you see the market failure? Even your “crushingly expensive” fares are still cheaper than pre-deregulation. Just because the majority of people do not agree with your personal preferences does not constitute a market failure. In fact, the market has been loud and clear on the issue, the market would prefer to be crammed in like cattle, given the bare minimum of service and shuttled safely from one point to another all for rock bottom prices. And the airlines have delivered themselves admirably. Those which have not delivered are failing, just like the market intended.
Just because the outcomes of the market do not correspond to you view of how the world should be does not constitute a market failure.
You may call bullshit, however heres a pretty good definition:
Basically “sprawl” can be characterized by vast expanses of single-use zoning (subdivisions, office parks), low population density
It’s the zoning and layout of the suburb that defines if it is “sprawling”.
Not sprawl - Hoboken, NJ is a suburb of NYC. It’s about 1 square mile of mostly multifamily low/mid-rise appartments, a main street (Washington) of stores and shops and public transportation (The PATH, Ferries, NJ Transit). You don’t need an automobile to live there.
Most of the rest of New Jersey (and Connecticut and New York and parts of PA) are what I would consider “sprawl”. Tracts of identical housing, strip malls, chain restaurants, etc, etc.
urb - It’s from latin for “city” (urbanus)
suburb - an outlying part of a city or town or smaller community within comutting distance of a city
exurb - a region or settlement that lies outside a city and usually beyond its suburbs and that often is inhabited chiefly by well-to-do families
Another phenomenon of sprawl is what is often refered to by the non-PC term “white flight”. It’s the tendency of people to migrate away from the city center as their wealth improves. Basically, people just keep moving into an ever expanding ring of new developments instead of improving the old neighborhoods. The inner city deteriorates as the tax base leaves for better, newer neighborhoods.
Leaving aside the basic problem (it’s only going to be politically possible in cases where there’s enough political cooperation between the jurisdictions to make it unnecessary), many of the major cities in the US are hemmed in by state lines (DC is the total-surround worst-case scenario, and NYC is close to it).
This is better. Obviously, there is a theory (probably many theories) behind the phrase “sprawl.” If someone wishes to advance a theory of the good in civic planning and use the negative phrase “sprawl” to characterize things that do not follow said, theory, that is fine.
But I would like the opportunity to judge myself the theories. Just having someone say, “That’s sprawl” doesn’t constitute an argument. Further, the word as commonly used by those who don’t have a theory conveys virtually no information in the first place.
OK, Hoboken is an example of good planning or at least a good random result of zoning, etc.
Whole states? The whole nation?!
So, basically our way of life is “sprawl.” At that point, the term “sprawl” is pretty much useless, since it no longer serves to point out a particular violation of a set of principles but rather is merely a pejorative aimed at the status quo.
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Yeah, but I meant in more concrete terms. I think the whole problem is that everyone is using these terms without concrete definitions behind them.
I have an inkling of why this is bad, but why, specifically?
Political cooperation between jurisdicitons is not always necessary. Some states have laws that allow cities to annex outlying areas as soon as they reach a certain density of population, without consent of those areas’ residents. Which is as it should be. The suburbanites enjoy the economic opportunities and civic amenities of the city (which is why they chose to live in the suburbs instead of the remote countryside); it’s only fair they should be taxed to pay for them. They should not be allowed to have their cake and eat it by relocating themselves just over the city line.
I just finished Kunstler’s book, ironically enough on a six hour flight that he would decry as madly impractical.
For the most part I found it interesting if speculative (the word “may” appears about six thousand times, as it would have to in any honest treatment of the dystopian scenarios that he paints). He is clearly an “anti-consumptionist” but unlike a lot of liberals who espouse such approaches he is impatient with pie-in-the-sky “solutions” such as solar and wind power that aren’t within any reasonable distance of providing the power we need, and he is very pro-nuclear.
I agree though with the OP that Kunstler does have a particular vision, which he allows to influence excessively what he claims is a dispassionate analysis of where we’re headed. He CLEARLY has an affinity for the agrarian lifestyle of, say, 1800s New England (not the agrarian South, which he rather gratuitously paints as a gothic abode of weird violent religious freaks – more personal prejudice creeping in). Apparently we’re all going to live like the Amish or Almanzo Wilder, raising food by organic methods in small communities (he goes on to tout all the supposed benefits (there are no drawbacks, apparently) to such communities, in clear contrast to our unhealthy McCulture). Whatever. People mocked Jefferson for an over-romanticized, bucolic vision of America – and that was before we’d seen any of today’s technology. I just don’t think we’re going to return to that kind of world (Kunstler would argue, though, that we don’t have a choice).
I know it’s a hijack, sort of, but I’ve got to chime in on the “disaster” of airline deregulation. I just flew round trip from Long Beach to JFK for $305, in a comfortable leather seat with my own TV. If that’s a “disaster”, then bring on the apocolypse!
Well, don’t tell Kunstler. On his website, he was recently apoplectic about the launching of the monster Airbus A380 – foolish, doomed, investment in a dying industry, etc. etc.
It’s precisely this type of thinking that is dangerous: working from a small sample and concluding things are A-OK because you just had a nice experience.
Haven’t you heard the latest stories about United’s Chapter 11 and its sloughing of its entire pension system? The entire industry is doing a crash and burn, pun intended.
Why is this an example of the market failing? United and Delta and all the other old guard were inefficiently run and should have really failed sometime around 2002 if 9/11 didn’t happen. Apart from not understanding the realities of the new air business, the main reason they were failing was precisely because of thier crippling prior pensions that were established before deregulation. If anything, it’s an argument for defined contribution style pensions.
And united != the whole airline industry. Jetblue, Southwest and other newer smaller airlines are still doing fine.
His point is not that it’s a “dying industry” at present but that it is doomed to die, or severely contract, when the fuel becomes dramatically more expensive. You can’t fly a jetliner on atomic or solar power, can you?
You’re talking personal transportation. But the critical factor is transporting in the supplies that the population of a city needs to live on.
On a seperate note, too many people are talking about the oil supply as if it was strictly an issue of supply and demand. It isn’t; ultimately it’s an issue of geology.
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Why is this an example of the market failing?You have most of the major companies in or near bankruptcy and most fliers in the US extremely unhappy about the product.
Why is it an example? If we could fly anywhere for $100 in sparkling planes with excellent service and with the airlines raking in the dough, then you would laugh in my face if I said the market was failing, right? Because it wouldn’t be failing.
But the planes are dirty, service is no-frills at best and the companies are going down the tubes. If that ain’t a failing market, I don’t know what would be.
First of all, it’s a matter of economic stability and indeed national security if all our major airlines are being liquidated. Of course, they are never really allowed to fail but go into Chapter 11 and become free of many market forces anyway.
Second, even had they failed the would have been replaced with something, and it’s an interesting question as to whether that something could have survived or not. I’m not convinced that purging ourselves of United (though I long to see it happen!) will really bring anything better, since the market is naturally dysfunctional and requires regulation.
Cite on how much of the problem was due to the pension burden?
Yeah, smaller being the key word here. Could the whole system be run with small airlines offering no-frills services and low prices? I doubt it.
One problem with the air travel market is that the function is so essential that we don’t have the luxury of running experiments to see which way is best. Once a system gets going, it could take decades for a failed experiment to play itself out, as each dying organization does its best to stay in play (the current situation).
If we were serious about national security and what’s best for the American people, we would nationalize the whole system, scientifically set the routes for the greatest good of all, and let the majors handle and profit from the international routes. That’s the de facto system in many countries.
The planes are dirty and service is no-frills because that’s what the customer wants. The companies that are failing are failing because they’re not what the customer wants. Just because people do not have the same priorities as you does not make it a market failure.
National security? How do you figure that?
Well, the united pension obligation it was allowed to offload recently was $8.4 billion. The total bailout for 9/11 for all airlines was $15 billion for all major airlines. This would suggest that United’s pension debt is a more significant factor in it’s failing than terrorists.
Why not? What can big airlines do that small ones can’t?
Have you taken a look at the european airline industry lately? The small players like easyjet are doing a similar thing there and the response has been overwhelmingly popular.
You know, I took issue with this definition of ‘market failure’ before, and got a condescending, “Oh Sam, I expected so much better from you!” response. The fact is, a market isn’t ‘failing’ just because it fails to provide what some people want. I want to go to the moon. Is it a ‘market failure’ that I can’t?
The reason airplanes have fewer frills now is because deregulation opened them up to the masses. I can remember when it would cost thousands of dollars to travel by air almost anywhere, and people in ‘my class’ simply didn’t do it. People in the lower and middle classes still talked in awe about taking a jet somewhere. It was a big deal, and people saved for years to take their big airline flight somewhere.
The reason was because the routes were regulated, monopolies established, and therefore the airlines could charge a premium. And not only that, because there was a limit to the amount of planes that could fly in those routes, prices were raised because demand for those fewer seats was high. This in turn gave the airlines the profit to offer ‘champagne service’, and the higher prices raised the expectation of such.
After deregulation, the older airlines who were used to operating in those high-cost, high-margin environments had to learn to adapt. Some have, some haven’t. Some have gone out of business. THe ones that have survived or thrived are the ones who have developed innovative business models that fits what the market wants.
This is in no way, shape or form a ‘market failure’. Far more people fly today than they used to before deregulation. The lower classes can now afford to fly. I can get airline tickets across the country now for a couple of hundred bucks. It’s a great thing! Why aren’t you happy for the poor people? Don’t they count? Or should they be sacrificed to the god of glass plates, real silverware and shiny airplanes?
Ah, ‘market stability’. That great enabler of the mediocre. It’s GOOD that airlines go under. It’s GOOD that they have to fight tooth and nail for market share. These are the mechanisms that the market imposes on business to keep it on the straight and narrow and to weed itself of bad management and bad ideas.
There you go again. There is no market failure, and no requirement for regulation. You’re just making that up.
Why not? What particular economies of scale do the big airlines bring to the market?
Sounds like you could make the same argument for cars, taxis, medicine, computers, clothing, houses… There are a LOT of very important things that we leave to the ‘running experiments’ of the market. Thank God.
Yeah, because nationalized industries are generally a model of efficiency and good service. Hell, maybe we can get the airlines to offer the kind of high quality service you get from the DMV.
I wish I actually knew more about this example; then I could argue back effectively.
Yes, it is! There’s no way that market could exist right now, since the numbers just wouldn’t add up. It’s an excellent example.
And that’s precisely what I’m saying about airlines: the numbers just aren’t adding up. If I were an expert, I might be able to tell you why. Here is a pro-deregulation cite.
The reason airplanes have fewer frills now is because deregulation opened them up to the masses. I can remember when it would cost thousands of dollars to travel by air almost anywhere, and people in ‘my class’ simply didn’t do it. People in the lower and middle classes still talked in awe about taking a jet somewhere. It was a big deal, and people saved for years to take their big airline flight somewhere.
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I don’t think the cite (again, favorable to your POV here) backs up that impression:
The best estimates, however, are that deregulated fares have been 10 to 18 percent lower, on average, than they would have been under the previous regulatory formulas. The savings to travelers have been in the range of $5 billion to $10 billion per year.
An 18% reduction is nice, but not the kind of price break that is suddenly going to open up flight to the masses.
Actually, though, you may be right if average fairs are only a little lower but fares much more variable across the board. So the biz traveler gets shaken down to make up for $20 dollar flights from Chigaco to Vegas. The article backs up this impression.
As for the darker results of deregulation, the article says this:
**Second, travelers have endured an undeniable increase in congestion, delays, and discomfort. But these are not, in themselves, a sign of failure. After deregulation, low-cost, aggressively competing airlines, such as People Express, offered the public low fares, with correspondingly lower-cost service—narrower seating, longer lines, and fewer amenities. The incumbents responded with very deep discounts, accompanied by similarly poorer service. The enormous response of travelers to the availability of these new options is a vindication of deregulation, not a condemnation, even though the quality of the air travel experience has deteriorated as a result.
Third, much of the congestion is the result of the failure of governments to do their job. When the demand for any service exceeds the available supply, it means two things. First, the service is probably being produced in inadequate quantity. Second, it is underpriced.**
That last paragraph is interesting. It says that the product is underpriced. So maybe that 18% should go back to the airlines anyway. The reasons why they would not do so are highly complex. Competition in that industry is one big, ugly application of game theory.
Oh, the article also says that monopolies have become a problem.
There still is a limit, and the article says that prices should be raised. Back to square 1.
By stating that there has been a market failure, I am in essence saying that adaptation is not possible or not desirable. At this point in time we have no examples of airlines using big jets and turning a profit. All the airlines that are held up as successes (and I’m not saying they’re not) are using small planes and completely different route strategy. That strategy could not possibly serve the entire market adequately.
So you, the market fundamentalist say. It’s a matter of personal preference whether stability or quality is preferred in any given product over any given period of time. Sometimes it’s good that companies go under; sometimes it isn’t.
We need a few fewer big airlines, and the right way would be to take a look at which is offering the best service, maintenance, etc., and keep that one and toss out some of the losers–but have the gov. pay for the severance, etc. of the employees. Or just nationalize the thing as I’ve suggested.
Oh give me a break. Sometimes you have excellent management with pretty good ideas that nevertheless gets broadsided by changing situations.
It’s not so tough to imagine, is it? When I fly from Chicago to Tokyo it is on a big jet filled to capacity.
Sam, I often respect your arguments, but here you’re not even trying to think through this; you’re just jerking the knee. These goods are all different. Anyone can clothe himself with a few bucks at the Goodwill store; clothing is fundamentally a cheaper item. But no one can just walk in off the street with a few bucks and get open-heart surgery. So medicine is an excellent example, actually, of something that the goverment will eventually have to pay a higher percentage of (we’re about 45% socialist in that regard already).
Umm, and the post office is really bad, too. Shall I tell you of my recent experience at FedEx, where they simply didn’t have a product to get my package to Japan cheaply and quickly, whereas the post office has about 5 cheap/good options? Nah, let’s skip that story.
The market is not a guarantee that every good or service people want shall be available. It just isn’t. In fact, the whole field of economics is about how to manage scarcity. I can’t buy a ticket to the moon because flying to the moon is hellishly expensive, and because there aren’t enough other people who want to do so. You cannot wave a magic wand and make it so, even with the involvement of government.
This is not a market failure. It is a representation of reality.
That’s exactly it. The market has adapted to deregulation by engaging in price discrimination. This is efficient. People who can fly on short notice can take advantage of seat sales. People who can plan their vacations around non-peak hours and dates can save money. Business travellers and people who want first-class service pay more for the privilege of being able to call up the airline and have them chauffer them around on demand. It’s a great thing.
Of course. The same is true at Wal-Mart. It’s a hassle, it’s crowded, the aisles are narrow, there are long lines. So why do people shop there more than at any other store? Because the market has priced the value of convenience below the value of cheaper goods. For the lower classes, that is. Rich people don’t like it, but they are free to shop elsewhere. And if you want red-carpet service at the airport, pay for a first-class ticket. Last I checked, first-class was still pretty sweet.
I’m sorry - why is it the government’s job to relieve this congestion? Perhaps there is a case to be made here, since the FAA still controls the airways and funds the controllers, so there may be shortages there that are due to government failure. Not market failure.
Or it may be that the airline industry is still adapting to the new realities. Why are flights under-priced, if they are? Perhaps because airlines are still operating inefficiently large aircraft, and need to keep their utilization higher at the expense of over-selling. Or perhaps they hyper-competitive and trying to beat each other to the market. Lots of industries wind up in this position from time to time. Ask GM.
The airline industry has been adapting like crazy. I have no idea how you can make that statement.
Uh, why not? Perhaps big aircraft are exactly the problem. If you have big airplanes, it’s a disaster if you can’t fill the seats. Two smaller airplanes give you flexibility - if you can’t sell enough tickets for both, you can cancel one flight and save a whack of money. Big aircraft also cause congestion at terminals - the Airbus 380 has a real issue in that they have to be able to embark and disembark 700 or 800 people at a time. Not many airports can handle that kind of passenger load for a single flight. And an airplane that big had better be flying with almost all its seats filled, all the time. That means it’s only useful between hubs where it can be guaranteed large quantities of passengers all the time.
Again, aircraft choice is not a sign of market failure, any more than the fact that many people prefer taking taxis than riding a large bus.
You know, I’ve prevented myself so far from calling you a ‘government fundamentalist’. Can we leave the extreme exaggerations out of it? There are real cases of market failure out there, and government has a role to play. It even has a role to play in the airline industry, since it already regulates safety and provides airspace services. What government shouldn’t do is get in the businessof micro-managing operations, setting fares, and all the other heavy-handed things they did back in the bad old days.
Really? And how many big airlines are there today compared to the pre-regulation days? And just how do you claim to know what should be done with the industry? You started this message by admitting you don’t know much about it, and now you’re ready to declare what needs to be done to fix the industry? The problem with government-regulated industries is that your typical politician has exactly the kind of hubris you’re showing. They think they know more about an industry than the experts who have spent their lives actually running airlines, and presume to know what’s best. Needless to say, their dictates from on high usually end up in disaster.
Maybe they need to be more flexible to changing situations. Perhaps by moving to more, smaller airplanes.
Yeah. And when I fly from Edmonton to Chicago, it’s often on a DC-9 with 40 people aboard. Different planes for different roles.
But no one can build themselves a distribution network that brings them all the various goods and services they need. Our entire infrastructure has been constructed out of the ‘chaos’ of the market. Seems to be working quite well. So when you claim that some special industry is an exception and is too precious to be left to the market, you need some serious data to back that up. Given the innumerable successes the market has shown over the past 200 years, vs the gigantic disasters governments have had a hand in, the null hypothesis should be that the market is the proper mechanism for managing and allocating scarcity. People with a better ‘plan’ that requires the coercion of government should carry the burden of proof, and a bunch of handwaving about dirty airplanes and lines at the airport doesn’t rise to that level.
In your opinion.
If you want to compare the efficiency of Fed-Ex to the USPS, I’m all over that. It’s not even close. The fact that I can pay ten or fifteen bucks and be guaranteed to get an envelope across the continent by 10:30 the next morning is amazing. When I call Fed-Ex, they tell me when the driver will arrive, and he’s always on time. He’s friendly, and professional. And my package always gets where it needs to go.
The last package that was sent to me through the mail was lost for three weeks.
True. Though I understand it’s risky as heck investing in airlines, and riskier investing in the legacy carriers, I own stock in Continental, because they seem to be making some of the hard and radical changes that may be necessary. They’re buying commuter jets like mad, not buying any new jumbos, taking seats out of First Class, and pricing business fares at a level that promises to fill the seats. They’re also adding lots of (they hope) high-volume, higher-profit international routes. Though they won’t come out and say it, essentially they’re converting themselves into a two-tiered airline – a de facto low-cost-carrier using lots of jam-packed small planes in the U.S., with a premium-level international business division.
As an investor, I hope this works. As a passenger, of course, it kind of sucks, because I face 3 hour flights on an uncomfortably-small regional jet, and the days of flying coast to coast with a free upgrade on a jumbo jet for $200 may be gone. But apparently that’s what the times demand.
I do not reject Kunstler’s criticisms of the airline industry as obsolescent and, in the long-term, possibly doomed – I just don’t know what will happen, and if we really are in for a period of ever-increasing fuel prices and oil instability, I may re-think my decision to invest in any airline.
Commercial air travel is admittedly uniquely vulnerable to fuel costs; there’s simply no alternative to liquid hydrocarbon fuels. Even presuming that you can obtain jet fuel from coal or shale oil, at what price per gallon would fuel be too expensive to sustain commercial air travel?*
meaning commercial (non-nationalized) airlines offering regularly scheduled flights available to the public. I presume that at any price there would still be chartered or privately contracted air travel available at a stiff premium.
