Allocating Airport Landing Slots
You can probably guess who I agree with. But then again, I work in an ivory tower.
the [Bush] administration is now proposing to auction off some takeoff and landing slots to the highest bidder.
The proposal has the support of New York Mayor Michael R. Bloomberg (I), but it has sparked an ideological battle over how far market controls should extend in the skies, attracting fierce opposition from figures such as Sen. Charles E. Schumer (D-N.Y.)....
"The resource is scarce and the best way to allocate it is a price mechanism," said Tyler D. Duvall, the Transportation Department's acting undersecretary for policy.
"It's part of a larger picture: We've got congestion on the roads, in our ports, in our airports," Duvall added, outlining the wider policy of the current administration. In each of these cases, he said, the market can best clear the way.
But others say auctions will do nothing to resolve the capacity problem, and could cause more confusion and incur more costs for customers than they relieve.
"This is an ideological, untested experiment from those in an ivory tower," said Schumer, who has introduced a bill to block the auctions.
Update: Hal Varian emails me a comment:
Hi, Greg.Thanks, Hal.
In your blog you cite a Washington Post article that says "But others say auctions will do nothing to resolve the capacity problem..." This isn't quite right. In certain circumstances, the optimal congestion prices send the right signals for marginal capacity expansion. Hence expanding capacity by using the present value of the optimal congestion fees will result in thesocially optimal level of capacity. This is sometimes know as the Strotz-Mohring theorem; see here, pages 6 and 11, for the simple argument.
Update 2: A NY Sun editorial on the issue.