There are lots of public policy problems that, even with the best of political goodwill, cannot be easily solved. They're just inherently tough. Fixing airline overbooking is not one of them.
As proposed by Harvard economist Greg Mankiw on his blog, the solution is straightforward: Make the airlines pay when they overbook. When they do, "they should fully bear the consequences. They should be required (by government regulation) to keep raising the offered compensation until they get volunteers to give up their seats," writes Mankiw. "If $800 does not work, then try $1,600 or $8,000."
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