My (non-economist) take on this:

  The federal government has an obligation to step in where the 
assumptions of a free market fall short in practice.  I think a free 
market model assumes that goods can be transported fairly easily. 
Additionally, air travel benefits information exchange (Fedex, 
business travel, etc.), which is needed for a simple free market 
model.  Therefore, I believe it is a legitimate function of the 
federal government to ensure that the airlines remain viable.  I'm 
not so sure about travel agents and others, though.


ps - I was wondering, regarding airline travel, did the demand fall 
or did the cost increase?  If someone usually travels on a short 
commuter flight from, say, Portland to Santa Clara (about 1.5 hours) 
for face to face business dealings, that person may think that the 
benefit of face to face v. teleconferencing or email is worth the 
inconvenience of air travel, though barely.  If an additional factor 
of fear or uneasiness is added to the cost of travel, the cost is 
greater than the benefit and, in an aggregate sense, the quantity of 
airline travel demanded decreases.   Is this correct economic 

>     The President has authorized some 15 billion dollars to bail out the
>airlines and now travel agents and a host of others are asking for help
>also.  Question: Is there any economic defense for this sort of action?
>After all, if the demand for air travel has fallen then isn't the
>optimal response to reallocate resources from the airline and related
>travel industries into other industries?
>Dr. Alexander Tabarrok
>Vice President and Director of Research
>The Independent Institute
>100 Swan Way
>Oakland, CA, 94621-1428
>Tel. 510-632-1366, FAX: 510-568-6040

John A. Viator, Ph.D.
Beckman Laser Institute and Medical Clinic
1002 Health Sciences Road East
University of California, Irvine
Irvine, CA  92612
Phone: 949-824-3754
Fax:   949-824-6969

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