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This is just another instance of the classic Soviet problem. A scarce resource is allocated by a government bureaucracy instead of a market, and the bureaucracy
by closeparen 7y ago
This is just another instance of the classic Soviet problem. A scarce resource is allocated by a government bureaucracy instead of a market, and the bureaucracy's design is imperfect, so nonsensical incentives fall out of it sometimes.
There's no irony. It's just kind of quirky for the West to manage flight/landing slots this way, instead of an auction (as the FCC does with spectrum).
- Nextgrid 7y agoTo be fair, the auction model doesn't seem to work well when it comes to spectrum. What you end up with is a few big players delivering awful service while having enough money to outbid anyone, essentially preventing any competitor from ever breaking into the market to provide better service.
- derefr 7y agoI would consider that an anti-trust problem, not an scarce-resource-allocation-system problem. The concept of an auction is predicated on having a liquid market—both that there are replacement goods available from other sellers, and that there are many buyers "at the top" with enough bidding power to compete fairly between themselves, such that they'll "pick their battles" by buying only what matters most to them.
- closeparen 7y agoThe government can only give away slices of a fixed resource for so long. Eventually it runs out. You literally can't start an airline from scratch. You have to first buy one that already has landing slots, then figure out how to dispose of the planes/staff/operations/debts that come with the package. Is that really better for competition than just having a market for slots?
- kroep93nd 7y agoOnly for them to immediately be gobbled up by 1 or 2 big players. How about a market for destinations? Oh wait that will be immediately controlled by one player. Hm it seems consolidation is the natural path we prefer towards solving a problem. Why not let the bureaucracy manage it then? Give up the pretense. This is all market capture of finance by low effort grifters who will throw a fit when they don’t get privilege for nothing but being an obnoxious talking head.
- danem 7y ago> Oh wait that will be immediately controlled by one player. According to[1], the average number of competitors per US domestic city-pair is 3.5 and has been increasing over the last few decades. [1] http://darinlee.net/pdfs/airline_competition.pdf http://darinlee.net/pdfs/airline_competition.pdf
- bumby 7y agoFreakonomics did a good episode related to this [1] One of the takeaways was that as organizations grow they become more married to spending resources to maintain their existing system which comes at the cost of innovation. So they “innovate” by buying other firms/ideas and it eventually leads to consolidation of an industry. [1] https://freakonomics.com/podcast/in-praise-of-maintenance/ https://freakonomics.com/podcast/in-praise-of-maintenance/
- kortilla 7y agoThey won’t be gobbled up if they aren’t offering a better service. Then that just clears the way for yet another competitor to come in and offer better service again until the large airline improves enough to make entering the market unprofitable. Big companies buying small companies is good. It’s a reward for improving the market. Big companies preventing smaller companies from even starting via government regulation (i.e. regulatory capture) is what’s bad. Giving it to the government is just skipping to the worst possible outcome. Nobody has any incentive to compete.
- SECProto 7y ago> You literally can't start an airline from scratch. Gonna need a citation on this one. I would guess the actual reason airlines are hard to start from scratch is the massive capital required, but would be interested in having this guess proven incorrect. Porter Airlines in Canada (which presumably has a very similar regulatory regime) was started from scratch about 20 years ago.
- vvanders 7y agoYou can also do like Kenmore Air and just land on the nearest body of water.
- wolco 7y agoVery small airline. They have 29 planes that can hold 74 people. American airlines (including regional partnerships has 1700).
- SECProto 7y agoFew notes there: * The parent comment didn't caveat "large airline". * Porter is the third-largest airline in Canada. Canada has 10% of the population of the US, so our airlines will be accordingly smaller. * American Airlines is the largest airline in North America [1], serves the entire country + international. Really not a reasonable comparison to a regional domestic airline. [1] https://en.wikipedia.org/wiki/List_of_largest_airlines_in_North_America https://en.wikipedia.org/wiki/List_of_largest_airlines_in_No...
- wolco 7y agoThat speaks to the lack of airlines in Canada if the third largest has 74 max people and 29 planes.
- SECProto 7y ago> That speaks to the lack of airlines in Canada if the third largest has 74 max people and 29 planes. No, it speaks to the population of Canada... Porter still comes in at 18th largest in North America [1] (It might also be because each of the two large carriers, Air Canada and WestJet, has a number of subsidiaries/wholly owned sub brands which would each be larger than Porter - eg Air Canada Rouge, WestJet Encore) [1] https://en.wikipedia.org/wiki/List_of_largest_airlines_in_North_America#By_fleet_size https://en.wikipedia.org/wiki/List_of_largest_airlines_in_No...
- mycall 7y agoWhat I don't like is the DoD keeping the best 5G spectrum to themselves (3GHz-4Ghz) while the rest of the world is using it, putting our future lead in communiciations industry at risk.
- eyegor 7y agoLead? Telecom in the US is an oligopoly, with most of the major spending backed by government grants. Many areas are still supported by rotting copper and old 2g/3g towers because there's no incentive for providers to upgrade them. Unless you meant something else by "communications industry".
- amylene 7y agoThat rotting copper is going to be immensely valuable after the collapse.
- kortilla 7y agoYeah, go check out what type of ISP service you can get in Australia for comparison of a similarly sized country. Get ready for ADSL and quotas.
- kalleboo 7y agoIt has nothing to do with size and everything to do with politics. Plenty of small countries have crap internet too. Australia's internet sucks because the conservative government nerfed the NBN plan.
- kortilla 7y agoTo be fair, it seems to work just fine. I can choose from at least 5 carriers in my city for cell phones alone, multiple of which offer unlimited data now. That’s only cell phone spectrum. For other spectrum, it’s easy enough to acquire spectrum that microwave ISPs are able to get into local markets with very limited capital. I graduated with 2 folks who started an ISP together and the spectrum was cheaper than the hardware to transmit on it at the time.
- maxerickson 7y agoYeah, the problem with cellular in the US is that it is moderately expensive.
- Symbiote 7y agoAt least in Britain, there's an open market for the landing slots. Slots at Heathrow can be sold for tens of millions of pounds. https://simpleflying.com/flybe-heathrow-slots/ https://simpleflying.com/flybe-heathrow-slots/
- asah 7y agoy and this optimizes for the highest bidder, i.e. most profitable and not the airline best serving the user.
- derrick_jensen 7y agoCompanies are only profitable because they serve their users better than their competitors.
- toxik 7y agoYou cannot seriously believe this. Is a parking company only successful due to how well it serves its users? No, it extracts rent.
- derrick_jensen 7y agoMaybe replying with "companies" was too broad, but within the context of airlines its correct
- tomp 7y agoIf the parking compny pays rent to the parking space owner (based on the auction’s highest price), then yes (the owner gets all the rental profits).
- toxik 7y agoI have seen multiple times cases where an establishment has parking spaces outside that are not paying to that establishment. The customer is basically tricked into parking on spots that seem to be free for customers, but is in fact not: those are further away. The only reason it seems is that this gives more fines, and more profit to the parking company. Neither customer nor the establishment benefit from this at all.
- joshschreuder 7y agoI used to work for a consulting company and heard similar stories for IT budgets. Companies nearing the end of financial year with budget to spare would scramble to get more consultants in to spend the remainder, otherwise the following year their budget would be scaled back to whatever they actually spent.
- Ididntdothis 7y agoDon't forget that a company internally is run like a Soviet Style planned economy. 5 year plans, no way for people on the ground to adjust plans, inflexible leadership. I could also mention things like total disconnect between communication from leadership and reality or motivational posters. It's all there. It's not surprising they create similar behaviors.
- vkou 7y agoAnd yet, all of these companies that run like command economies have collectively out-competed all the companies that run like market economies. We know this, because the latter... Don't really exist. No company of any note operates like one. Does that imply that command economies are actually more efficient than market ones?
- p_l 7y agoThe problem of command economies aren't related to being command economies, they tend to be related to communications. A market is a form of communication, with various forces that are supposed to balance themselves. Many of them actually outside of market (the supposed anti-monopoly aspect heavily depends on externalities preventing concentration, like slow travel/shipping, non trade barriers, etc.)
- Ididntdothis 7y ago"Does that imply that command economies are actually more efficient than market ones?" I think it's probably similar to politics. A well-run dictatorship can do better than a democracy but usually dictatorships deteriorate after a while.
- perl4ever 7y agoThe institution of rules that aren't suitable when unforeseen conditions arise isn't a purely government thing. It happens in private organizations all the time.