See Robert Kuttner's EVERYTHING FOR SALE for an interesting long-view inspection
of the rate of price declines in the airline industry. His data shows dramatic
decrease in the rate of price drop before the onset of deregulation in the 1980s
airline industry. He essentially argues that pre deregulation oligopoly pricing
generated higher profits which in turn generated sufficient R & D to revolutionize
tech far faster resulting in significantly faster price drops.... He shows a
significant price drop, especially for Joe Six-pack, initially, but then a
relative plateauing afterwards. The gist of his argument being that following the
rapid rate of price decline during the industry's regulated period, had that rate
of decline continued in a regulated environment, airfares would have been
substantially lower than at present. Again, this being dependent upon significant
advances in air transport having been introduced, instead of the deregulated
environment which only encouraged minor tinkering with the technology rather than
radical change of it. You economists can tell me if this counter-factual makes
any sense....
Best,
Jeff Sommers
Brad De Long wrote:
> >
> >> Louis Proyect wrote:
> >>
> >> >One of the most forceful advocates is Ted Kennedy, who
> >> >believed that Joe Six-Pack was getting cheated out of affordable air
> >> >travel. I guess neglect and stupidity about air travel runs in the Kennedy
> > > >family.
> >>
>
> But Joe Sixpack *was* getting cheated out of affordable air travel.
> Our current pricing configuration--low prices for vacationers who
> plan in advance and stay over Saturday night, high prices for
> business travelers who complete round trips within the week--and our
> current hub-and-spoke system (which provides greater capacity at the
> price of more hassle) are products of deregulation.
>
> Don't any of you fly anywhere on vacation?
>
> Brad DeLong
--
Jeffrey Sommers
World History Center
Boston/Riga
<www.whc.neu.edu>
"Adam Smith started with a view of the forest but his followers lost themselves in
the woods."
--John R. Commons, 1934--
