Heathrow – this price fixing must end

Via Michal Sosinski on flickrVia BBC News – Heathrow Airport attacks regulator’s price-control plan:

The Civil Aviation Authority (CAA) on Thursday said that Heathrow’s yearly rise between 2014-18 should not be more than the retail price index (RPI).

Prices can only bring supply and demand into balance if they are allowed to find their own level. If some government authority fixes prices, it is bound to create problems: we should not be surprised Heathrow is overcrowded and other airports struggle if prices for access to Heathrow are suppressed.

Heathrow Airport is right that this “could have serious and far-reaching consequences for passengers and airlines at Heathrow.” Good economic decisions are impossible when prices are manipulated. Scarce capital is wasted on loss-making projects which make us all poorer. The proposed estuary airport and HS2 are examples. Socialism – that is, economic planning by authority – never works and never will.

Unfortunately, this is just one of many parts of our socio-economic system where government feels entitled to set prices. For all Ed Milliband’s socialism over energy prices has been denounced, enormous swathes of our lives are being ruined by state controls and yet escape criticism.

Tragically, too many people will refer to problems around airport capacity as “market failure”. The truth is that there is entrenched state failure. Markets are not being given a chance.

If we are to be prosperous, if we are to make good use of scarce resources, this kind of price fixing must end.

Further reading:

  • Living with Leviathan (David B Smith, IEA 2007) which explains that our economic system is “functionally hard to distinguish from that of fascism.”
  • How Markets Work (Israel M. Kirzner, IEA 1997) which briefly explains how prices guide human action.

Tags: , , , , , ,

Comments & Responses

Comments are closed.