The true magic of the genies in stories such as “Arabian Nights” seems to be less their power to fulfill any request than their ability to do so at no cost. As human characters demonstrate throughout these folktales, achieving one’s desires — riches, love, fame — takes work, endurance, gumption, and some luck. A genie, however, can accomplish anything in mere seconds, literally on command. To a genie’s master, there are no scarcities, no opportunity costs, no trade-offs. The master need not expend any energy — not in bringing goods to market nor in courting a princess — beyond voicing a request to his supernatural servant.
It is stunning that, in anno Domini 2024, some economists and policy analysts insist on treating the government as if it functions like a genie. To this phylum of technocrats, regulators can solve every perceived problem by diktat, without danger of misaligned incentives, regulatory distortions, or other unintended consequences. But, of course, genies aren’t real, and hasty, invasive, ill-conceived regulation ineluctably inflicts disaster on American industry and consumers.
A perfect case study in this misguided perspective comes from a recent report on the airline industry from the outspoken anti-corporate activist nonprofit the American Economic Liberties Project (AELP). The authors seem to believe that their sweeping proposals — which include imposing price controls, centrally planned flight routes, and myriad compliance costs on airlines — would impend nothing bad for consumers.
The report’s most striking section details schemes to ensure airlines serve small and mid-sized markets. Under AELP’s proposals, federal authorities would yoke airlines with these markets, requiring them to schedule flights with prescribed frequency and at prescribed prices. Anybody who understands basic economics — or has a passing familiarity with the respective histories of, say, New Deal America, Soviet Russia, or modern industrial China — understands that such hamfisted command-and-control and price-fixing techniques generally fail to achieve their stated ends, at least not without inducing disastrous economic externalities. While promised to provide abundance, these policies invariably produce scarcity. Instead of affordability, they yield inflation.
The report’s silences are almost as striking. The authors lament the airline industry’s purported dearth of competition (while omitting data that contravene this grand theory), yet they fail to acknowledge the best means of promoting it — a liberalization of cabotage laws, which would allow foreign airlines to operate domestically. According to one analysis, introducing a single European airline could create $1.6 billion annually for consumers, while another suggeststhat cabotage reform could deflate prices by more than a fifth.
In the report, the authors condemn President Jimmy Carter’s 1978 airline deregulation as the origin of today’s supposed air-travel nightmare. Yet, in the two decades following that reform, ticket prices (adjusted for inflation) dropped roughly 40 percent. And since the 1990s, the price of airfare has continued to fall. The inflation-adjusted price of flying domestic in 2021, including extraneous fees, undercut 1979 prices by 55 percent. Although Covid-19’s retreat drove ticket-price increases, by 2022 “inflation-adjusted fares averaged 6.8 percent below 2019” per trade group Airlines for America. While some may wish airfare to cost less, no affordability crisis now exists.
American consumers’ habits reflect air travel’s increasing affordability and availability. 50 years ago, three fifths of Americans had flown. Today, more than nine in ten have. Commercial airlines transported 44 percent of Americans in 2022 alone, compared to just 25 percent in 1975. Carter’s deregulation democratized air travel. Somehow, in the name of the consumer, today’s technocrats seek policies that would revive its former status as a luxury good.
Of course, the report elides such inconvenient facts. Worse, its myriad policy prescriptions would radically inflate today’s historically low prices. For instance, to manage unexpected events, the authors urge regulators to force airlines to institute operational redundancies. “Until the 1990s, it was common for major U.S. airlines to maintain spare crews and even spare aircraft,” they write. One might respond first by referencing the aforestated price declines since that decade. Maintaining redundant staff and planes costs money, and businesses relay these costs to consumers in the form of higher prices.
The authors also propose reshoring all plane maintenance now done outside the U.S., which likely would raise repair costs and — all together now! — further raise the consumer price of airfare. American regulators cannot adequately monitor foreign repairmen, the authors write — quelle horreur! — yet they provide no case in which the globalized status quo harmed anybody. In fact, when workers failed to replace four necessary bolts in a Boeing 747, causing a door to rip off the jet at about 15,000 feet elevation last January, authorities confirmed that the negligence occurred at a facility in Renton, Washington — not in El Salvador, Mexico, Brazil, China, or Singapore, the places AELP frets about maintenance taking place.
Shackling airlines in excessive regulatory fetters would merely calcify the industry’s current shortcomings in the long term. If let be, market forces that promote flexibility, competition, and innovation will continue to widen and deepen Americans’ access to air travel. It is true that, despite tremendous progress, economic forces have as of yet failed to manifest AELP’s personal ideal of airline paradise. But this fact cannot negate the costs of regulatory attempts to immanentize the aviationary eschaton.
Genies aren’t real, and neither is costless regulation.
