In this episode of WichitaLiberty.TV, host Bob Weeks explains a complicated economic development mechanism used in Wichita that hides the true business welfare and cronyism taking place. Then Bob notices that the City of Wichita has banished disagreement, and then shows how the unintended consequences of regulation can be deadly. Episode 7, broadcast August 4, 2013.
As we approach another birthday of Milton Friedman, here’s his article where he clears up the authorship of a famous aphorism, and explains how to really get a free lunch. Based on remarks at the banquet celebrating the opening of the Cato Institute’s new building, Washington, May 1993.
I am delighted to be here on the occasion of the opening of the Cato headquarters. It is a beautiful building and a real tribute to the intellectual influence of Ed Crane and his associates.
I have sometimes been associated with the aphorism “There’s no such thing as a free lunch,” which I did not invent. I wish more attention were paid to one that I did invent, and that I think is particularly appropriate in this city, “Nobody spends somebody else’s money as carefully as he spends his own.” But all aphorisms are half-truths. One of our favorite family pursuits on long drives is to try to find the opposites of aphorisms. For example, “History never repeats itself,” but “There’s nothing new under the sun.” Or “Look before you leap,” but “He who hesitates is lost.” The opposite of “There’s no such thing as a free lunch” is clearly “The best things in life are free.”
And in the real economic world, there is a free lunch, an extraordinary free lunch, and that free lunch is free markets and private property. Why is it that on one side of an arbitrary line there was East Germany and on the other side there was West Germany with such a different level of prosperity? It was because West Germany had a system of largely free, private markets — a free lunch. The same free lunch explains the difference between Hong Kong and mainland China, and the prosperity of the United States and Great Britain. These free lunches have been the product of a set of invisible institutions that, as F. A. Hayek emphasized, are a product of human action but not of human intention.
At the moment, we in the United States have available to us, if we will take it, something that is about as close to a free lunch as you can have. After the fall of communism, everybody in the world agreed that socialism was a failure. Everybody in the world, more or less, agreed that capitalism was a success. The funny thing is that every capitalist country in the world apparently concluded that therefore what the West needed was more socialism. That’s obviously absurd, so let’s look at the opportunity we now have to get a nearly free lunch. President Clinton has said that what we need is widespread sacrifice and concentrated benefits. What we really need is exactly the opposite. What we need and what we can have — what is the nearest thing to a free lunch — is widespread benefits and concentrated sacrifice. It’s not a wholly free lunch, but it’s close.
Let me give a few examples. The Rural Electrification Administration was established to bring electricity to farms in the 1930s, when about 80 percent of the farms did not have electricity. When 100 percent of the farms had electricity, the REA shifted to telephone service. Now 100 percent of the farms have telephone service, but the REA goes merrily along. Suppose we abolish the REA, which is just making low-interest loans to concentrated interests, mostly electric and telephone companies. The people of the United States would be better off; they’d save a lot of money that could be used for tax reductions. Who would be hurt? A handful of people who have been getting government subsidies at the expense of the rest of the population. I call that pretty nearly a free lunch.
Another example illustrates Parkinson’s law in agriculture. In 1945 there were 10 million people, either family or hired workers, employed on farms, and the Department of Agriculture had 80,000 employees. In 1992 there were 3 million people employed on farms, and the Department of Agriculture had 122,000 employees.
Nearly every item in the federal budget offers a similar opportunity. The Clinton people will tell you that all of those things are in the budget because people want the goodies but are just too stingy to pay for them. That’s utter nonsense. The people don’t want those goodies. Suppose you put to the American people a simple proposition about sugar: We can set things up so that the sugar you buy is produced primarily from beets and cane grown on American farms or so the sugar in addition comes without limit from El Salvador or the Philippines or somewhere else. If we restrict you to home-grown sugar, it will be two or three times as expensive as if we include sugar from abroad. Which do you really think voters would choose? The people don’t want to pay higher prices. A small group of special interests, which reaps concentrated benefits, wants them to, and that is why sugar in the United States costs several times the world price. The people were never consulted. We are not governed by the people; that’s a myth carried over from Abraham Lincoln’s day. We don’t have government of the people, by the people, for the people. We have government of the people, by the bureaucrats, for the bureaucrats.
Consider another myth. President Clinton says he’s the agent of change. That is false. He gets away with saying that because of the tendency to refer to the 12 Reagan-Bush years as if they were one period. They weren’t. We had Reaganomics, then Bushonomics, and now we have Clintonomics. Reaganomics had four simple principles: lower marginal tax rates, less regulation, restrained government spending, noninflationary monetary policy. Though Reagan did not achieve all of his goals, he made good progress. Bush’s policy was exactly the reverse of Reaganomics: higher tax rates, more regulation, more government spending. What is Clinton’s policy? Higher tax rates, more regulation, more government spending. Clintonomics is a continuation of Bushonomics, and we know what the results of reversing Reaganomics were.
On a more fundamental level, our present problems, both economic and noneconomic, arise mainly from the drastic change that has occurred during the past six decades in the relative importance of two different markets for determining who gets what, when, where, and how. Those markets are the economic market operating under the incentive of profit and the political market operating under the incentive of power. In my lifetime the relative importance of the economic market has declined in terms of the fraction of the country’s resources that it is able to use. And the importance of the political, or government, market has greatly expanded. We have been starving the market that has been working and feeding the market that has been failing. That’s essentially the story of the past 60 years.
We Americans are far wealthier today than we were 60 years ago. But we are less free. And we are less secure. When I graduated from high school in 1928, total government spending at all levels in the United States was a little over 10 percent of the national income. Two-thirds of that spending was state and local. Federal government spending was about 3 percent of the national income, or roughly what it had been since the Constitution was adopted a century and a half earlier, except for periods of major war. Half of federal spending was for the army and the navy. State and local government spending was something like 7 to 9 percent, and half of that was for schools and roads. Today, total government spending at all levels is 43 percent of the national income, and two-thirds of that is federal, one-third state and local. The federal portion is 30 percent of national income, or about 10 times what it was in 1928.
That figure understates the fraction of resources being absorbed by the political market. In addition to its own spending, the government mandates that all of us make a great many expenditures, something it never used to do. Mandated spending ranges from the requirement that you pay for antipollution devices on your automobiles, to the Clean Air Bill, to the Aid for Disability Act; you can go down the line. Essentially, the private economy has become an agent of the federal government. Everybody in this room was working for the federal government about a month ago filling out income tax returns. Why shouldn’t you have been paid for being tax collectors for the federal government? So I would estimate that at least 50 percent of the total productive resources of our nation are now being organized through the political market. In that very important sense, we are more than half socialist.
So much for input, what about output? Consider the private market first. There has been an absolutely tremendous increase in our living standards, due almost entirely to the private market. In 1928 radio was in its early stages, television was a futuristic dream, airplanes were all propeller driven, a trip to New York from where my family lived 20 miles away in New Jersey was a great event. Truly, a revolution has occurred in our material standard of living. And that revolution has occurred almost entirely through the private economic market. Government’s contribution was essential but not costly. Its contribution, which it’s not making nearly as well as it did at an earlier time, was to protect private property rights and to provide a mechanism for adjudicating disputes. But the overwhelming bulk of the revolution in our standard of living came through the private market.
Whereas the private market has produced a higher standard of living, the expanded government market has produced mainly problems. The contrast is sharp. Both Rose and I came from families with incomes that by today’s standards would be well below the so-called poverty line. We both went to government schools, and we both thought we got a good education. Today the children of families that have incomes corresponding to what we had then have a much harder time getting a decent education. As children, we were able to walk to school; in fact, we could walk in the streets without fear almost everywhere. In the depth of the Depression, when the number of truly disadvantaged people in great trouble was far larger than it is today, there was nothing like the current concern over personal safety, and there were few panhandlers littering the streets. What you had on the street were people trying to sell apples. There was a sense of self-reliance that, if it hasn’t disappeared, is much less prevalent.
In 1938 you could even find an apartment to rent in New York City. After we got married and moved to New York, we looked in the apartments-available column in the newspaper, chose half a dozen we wanted to look at, did so, and rented one. People used to give up their apartments in the spring, go away for the summer, and come back in the autumn to find new apartments. It was called the moving season. In New York today, the best way to find an apartment is probably to keep track of the obituary columns. What’s produced that difference? Why is New York housing a disaster today? Why does the South Bronx look like parts of Bosnia that have been bombed? Not because of the private market, obviously, but because of rent control.
Despite the current rhetoric, our real problems are not economic. I am inclined to say that our real problems are not economic despite the best efforts of government to make them so. I want to cite one figure. In 1946 government assumed responsibility for producing full employment with the Full Employment Act. In the years since then, unemployment has averaged 5.7 percent. In the years from 1900 to 1929 when government made no pretense of being responsible for employment, unemployment averaged 4.6 percent. So, our unemployment problem too is largely government created. Nonetheless, the economic problems are not the real ones.
Our major problems are social — deteriorating education, lawlessness and crime, homelessness, the collapse of family values, the crisis in medical care, teenage pregnancies. Every one of these problems has been either produced or exacerbated by the well-intentioned efforts of government. It’s easy to document two things: that we’ve been transferring resources from the private market to the government market and that the private market works and the government market doesn’t.
It’s far harder to understand why supposedly intelligent, well-intentioned people have produced these results. One reason, as we all know, that is certainly part of the answer is the power of special interests. But I believe that a more fundamental answer has to do with the difference between the self-interest of individuals when they are engaged in the private market and the self-interest of individuals when they are engaged in the political market. If you’re engaged in a venture in the private market and it begins to fail, the only way you can keep it going is to dig into your own pocket. So you have a strong incentive to shut it down. On the other hand, if you start exactly the same enterprise in the government sector, with exactly the same prospects for failure, and it begins to fail, you have a much better alternative. You can say that your project or program should really have been undertaken on a bigger scale; and you don’t have to dig into your own pocket, you have a much deeper pocket into which to dig, that of the taxpayer. In perfectly good conscience you can try to persuade, and typically succeed in persuading, not the taxpayer, but the congressmen, that yours is really a good project and that all it needs is a little more money. And so, to coin another aphorism, if a private venture fails, it’s closed down. If a government venture fails, it’s expanded.
We sometimes think the solution to our problems is to elect the right people to Congress. I believe that’s false, that if a random sample of the people in this room were to replace the 435 people in the House and the 100 people in the Senate, the results would be much the same. With few exceptions, the people in Congress are decent people who want to do good. They’re not deliberately engaging in activities that they know will do harm. They are simply immersed in an environment in which all the pressures are in one direction, to spend more money.
Recent studies demonstrate that most of the pressure for more spending comes from the government itself. It’s a self-generating monstrosity. In my opinion, the only way we can change it is by changing the incentives under which the people in government operate. If you want people to act differently, you have to make it in their own self-interest to do so. As Armen Alchan always says, there’s one thing you can count on everybody in the world to do, and that’s to put his self-interest above yours.
I have no magic formula for changing the self-interest of bureaucrats and members of Congress. Constitutional amendments to limit taxes and spending, to rule out monetary manipulation, and to inhibit market distortions would be fine, but we’re not going to get them. The only viable thing on the national horizon is the term-limits movement. A six-year term limit for representatives would not change their basic nature, but it would change drastically the kinds of people who would seek election to Congress and the incentives under which they would operate. I believe that those of us who are interested in trying to reverse the allocation of our resources, to shift more and more to the private market and less and less to the government market, must disabuse ourselves of the notion that all we need to do is elect the right people. At one point we thought electing the right president would do it. We did and it didn’t. We have to turn our attention to changing the incentives under which people operate. The movement for term limits is one way of doing that; it’s an excellent idea, and it’s making real progress. There have to be other movements as well.
Some changes are being made on the state level. Wherever you have initiative, that is, popular referendum, there is an opportunity to change. I don’t believe in pure democracy; nobody believes in pure democracy. Nobody believes that it’s appropriate to kill 49 percent of the population even if 51 percent of the people vote to do so. But we do believe in giving everybody the opportunity to use his own resources as effectively as he can to promote his own values as long as he doesn’t interfere with anybody else. And on the whole, experience has shown that the public at large, through the initiative process, is much more attuned to that objective than are the people they elect to the legislature. So I believe that the referendum process has to be exploited. In California we have been working very hard on an initiative to allow parental choice of schools. Effective parental choice will be on the ballot this fall. Maybe we won’t win it, but we’ve got to keep trying.
We’ve got to keeping trying to change the way Americans think about the role of government. Cato does that by, among other things, documenting in detail the harmful effects of government policies that I’ve swept over in broad generalities. The American public is being taken to the cleaners. As the people come to understand what is going on, the intellectual climate will change, and we may be able to initiate institutional changes that will establish appropriate incentives for the people who control the government purse strings and so large a part of our lives.
As we approach another birthday of Milton Friedman, here’s his column from Newsweek in 1982 that explains that despite good intentions, the result of government intervention often harms those it is intended to help.
There is a sure-fire way to predict the consequences of a government social program adopted to achieve worthy ends. Find out what the well-meaning, public-interested persons who advocated its adoption expected it to accomplish. Then reverse those expectations. You will have an accurate prediction of actual results.
To illustrate on the broadest level, idealists from Marx to Lenin and the subsequent fellow travelers claimed that communism would enhance both freedom and prosperity and lead to the “withering away of the state.” We all know the results in the Soviet Union and the People’s Republic of China: misery, slavery and a more powerful and all-encompassing government than the world had ever seen.
Idealists, from Harold Laski to Jawaharlal Nehru, promised the suffering Indian masses that “democratic economic planning” would abolish famines, bring material prosperity, resolve age-old conflicts between the castes and eliminate inequality. The result has been continued deprivation for the masses, continued violence between the castes and widened inequality.
To come down to less sweeping cases rent control has been promoted for millenniums as a way to hold down rents and ensure more housing for the disadvantaged. Wherever it has been adopted, the actual result has been precisely the opposite for all but a few favored tenants. Rent control has encouraged the wasteful use of housing space and has discouraged the building of more housing units. As a result, rents actually paid — whether legally or under the table — by all tenants except those who do not move have skyrocketed. And even the tenants who do not move complain about not being able to.
Over two years ago, when the San Francisco supervisors were contemplating a form of rent control, I republished in a local paper a NEWSWEEK column of mine on rent control, prefacing it with the comment that only a “fool or a knave” could support rent control after examining the massive evidence on its effects. Needless to say, that did not prevent the majority of a board of supervisors, consisting of neither fools nor knaves, from enacting the ordinance I objected to. And the lessons of experience have not prevented the adoption of rent control in other cities — or the repetition of that same experience.
Urban renewal programs were urged to cure “urban blight” and improve the housing available to the poor. The result was a “Federal Bulldozer,” as Martin Anderson titled his searching examination of urban renewal. More dwelling units were torn down than were constructed. The new units constructed were mostly for middle- and upper-income classes. Urban blight was simply shifted and made worse by the still higher density created elsewhere by removing the poor from the “renewed” area.
In education, professionalization, integration, bilingualism, massive doses of federal assistance — all have been promoted to improve the quality of schooling and reduce racial tension and discrimination. The result was predictable: a drastic lowering of educational performance and an increase in actual segregation of races, at least in the North.
President Nixon introduced price controls on Aug. 15, 1971, to eliminate inflation, which at the time was running at about 4 to 5 percent per year. When controls ended in 1974, inflation soared into double digits.
The Interstate Commerce Commission was promoted in the 1880s and 1890s by the Ralph Naders of the day to discipline monopolistic railroads and benefit their customers. One group in today’s Nader conglomerate has published a devastating study of the ICC demonstrating that it strengthened the monopoly power of the railroads, and later of trucking. The users of transportation have had the dubious privilege of paying higher prices for poorer service.
Need I go on? I challenge my readers to name a government social program that has achieved the results promised by its well-meaning and public-interested proponents. I keep repeating “well-meaning and public-interested proponents” because they have generally been the dupes of others who had very clear self-interested motives and often did achieve the results that they intended — the railroads in the 1890s for example.
The amazing thing to me is the continued gullibility of intellectuals and the public. I wish someone would explain that to me. Is it simply because no one has given this widely documented generalization a catchy name – like … (suggestions welcome)?
In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
— Frederic Bastiat
While the program to reduce airfares in Wichita has probably met that goal, there have been consequences.
In particular, the availability of air travel in Wichita is lower than it has been, and the trend is in the wrong direction. In some aspects the Wichita trend mirrors that of the nation and other airports, and in others Wichita is falling farther behind.
The illustration nearby (click it for a larger version) is a static snapshot of data for the nation as a whole (blue line), Wichita (brown), and a few other airports in cities that Wichita’s Visioneering effort identifies as our peers. For each series, I show the percentage change over time, so that all series operate on the same scale. Data is through the end of 2012.
Of particular concern should be the trend in departures and seats. Both are declining in Wichita, as they are also for the nation. But the gap between Wichita and the nation is widening in recent years.
This trend is an example of unintended consequences of government intervention and regulation. The Affordable Airfares program imposes a rough form of price control on airfares in Wichita. If the program didn’t do that — and it appears it succeeds at this goal — then there would be no point in having the program.
The inevitable effect of price controls is that less is supplied, compared to what would have been supplied. This economic phenomenon is reliable and predictable. While travelers prefer low air fares to high, this is not the only consideration. For those who need to travel on short notice, the availability of flights is very important, and on this measure, Wichita is doing much worse than the nation.
For more about the subsidy programs in use at the Wichita airport, see these articles:
Wichita flight count continues decline. “A program designed to bring low air fares to Wichita appears to meet that goal, but the unintended and inevitable consequences of the program are not being recognized. In particular, the number of flights available at the Wichita airport continues to decline.”
Affordable Airfares audit embarrassing to Wichita. “An audit of Affordable Airfares produced by the Kansas Legislative Division of Post Audit is an embarrassment to City of Wichita elected officials and staff, the Kansas Regional Area Economic Partnership, and the Wichita State University Center for Economic Development and Business Research.”
Mixed message on Southwest subsidies. “Now that Southwest Airlines has announced that it will offer service in Wichita, the question is this: Will Southwest tap the subsidy?”
To help you explore this data, I’ve created an interactive visualization. Click here to open the visualization in a new window. You may add or remove any number of airports. Or, if you’d like to watch a video, click on Wichita Airport statistics: The video.
Data is from Research and Innovative Technology Administration (RITA), which is part of the U.S. Department of Transportation. Visualization created by myself using Tableau Public.
In this episode of WichitaLiberty.TV, economist Dr. Russell Sobel joins host Bob Weeks. Topics include local economic development incentives, the environment of favor-seeking, how regulation stifles entrepreneurship, the seen and the unseen, the broken window fallacy, and Dr. Sobel’s research on how intergovernmental grants lead to higher taxes. Episode 6, broadcast July 28, 2013.
Links to material mentioned in this episode:
Dr. Sobel’s page.
Unleashing Capitalism.
Do intergovernmental grants create ratchets in state and local taxes?
Bastiat: What is seen and not seen, and the broken window.
Two weeks after the City of Wichita learned that two prominent downtown hotels are not in compliance with city policy regarding signage, the hotels are still in violation.
The hotels are located in Community Improvement Districts and are able to collect an extra sales tax that is routed back to the two hotels. Merchants located within a CID are supposed to display a sign. These two hotels — Drury Plaza Hotel Broadview and Fairfield Inn at Waterwalk — aren’t displaying the signage.
For background and photographs, see CID signs missing at some Wichita merchants.
In this episode of WichitaLiberty.TV, host Bob Weeks recommends the Crony Chronicals website and explains the harm of cronyism. Westar, our electric utility, is asking for a rate increase, and cronyism is part of the application. Finally, Wichita Mayor Carl Brewer feels he can’t shop for his personal car in Wichita, but dishes out no-bid contracts and millions in subsidies to his cronies. Episode 5, broadcast July 21, 2013.
A regulation intended to save children resulted in many more deaths. The reason is the lulling effect.
Do well-intentioned regulations ever produce the opposite effect? In 1972 the Food and Drug Administration introduced regulations requiring child-resistant bottlecaps for aspirin and some other medications. The goal was to reduce aspirin poisonings among children. Surely this is a laudable goal. If government has the capability to reduce these tragedies, why wouldn’t we implement laws or regulations?
When W. Kip Viscusi looked at data, he found something striking and very sad: After the implementation of the regulations, there was no significant impact on the rate of aspirin poisonings. The intended goal of the regulation was not met.
But here’s the real problem, writes Viscusi: “… there has been an alarming, upward shift in the trend of analgesic ingestion rates since 1972. The source of this pattern appears to be attributable to a general reduction in parental caution with respect to such medicines, which has had an adverse spillover effect on unregulated products. The economic mechanisms involved can be best understood by considering the nature of individuals’ response to regulatory protection.”
Because of the response of people to the regulations, Viscusi estimates an additional 3,500 children died each year. This is a regulation intended to protect children.
The research is presented in The Lulling Effect: The Impact of Child-Resistant Packaging on Aspirin and Analgesic Ingestions. I’ve excerpted from the conclusion:
Analgesic poisoning rates for children under age 5 escalated from 1.1 per 1,000 in 1971 to 1.5 per 1,000 in 1980. Even after taking into account increases in analgesic sales, 47 percent of this increase is attributable to an unexplained upward shift in the analgesic poisoning rate beginning in 1972. The coupling of the absence of any shift in the trend of aspirin poisoning rates with an upsurge in analgesic poisoning rates is consistent with the hypothesis that there is a significant indivisibility in safety precautions. Moreover, absence of a significant effect of safety caps on aspirin poisonings and the 47 percent unexplained shift in analgesic poisonings suggests that the impact of the regulation on balance was counterproductive, leading to 3,500 additional poisonings of children under age 5 annually from analgesics.
It is possible but unlikely that such a strong impact could emerge from fully rational consumer decisions. Moreover, this effect is not only large but reasonably widespread, as I have identified a similar pattern for prescription drugs, and for cleaning and polishing agents. A more likely explanation for these dramatic effects is that consumers have been lulled into a less-safety-conscious mode of behavior by the existence of safety caps. The presumed effectiveness of the technological solution may have induced increased parental irresponsibility.
A variety of regulatory efforts have sought to reduce individual risks through mandated technological changes. These measures will be effective if individual actions remain unchanged. In practice, these regulations will produce a lulling effect on consumer behavior because the perceived need for precautions will decline, potentially producing adverse spillover effects on the safety of other products. The strength of these impacts should highlight the importance of taking individual behavior into account when designing regulations intended to promote safety.
So we see regulations lulling people into assuming safety, assuming that all is well, but danger is actually increased.
Do you remember Bernie Madoff? He operated in the highly-regulated securities investment industry, yet he was able to steal billions from his clients over a long period of time. Did his clients assume that regulations would keep their money safe? I’m sure that many did.
Recently John Stossel has an episode of his television show devoted to the subject of regulations. He said: “America drowns in law. There are 175,000 pages of federal regulations that you must obey, or some lawyer can wreck your life. For every pound of good the regulations do, they do a ton of harm. 175,000 pages alone strangles life.”
Stossesl also recently wrote: “EBay’s business model is also threatened by fraud. How can a buyer trust that, say, a seller will actually deliver a $25 pack of baseball cards and that the cards will be what he claims they are? In theory, you could sue; but in practice, our legal system is too slow and costly for that. So eBay came up with self-regulation: The buyers rate the sellers.”
When we look to government to solve problems, we can end up with systems that actually make the problem worse. When trading baseball cards, that’s not good. When investing for retirement, regulatory failure is very harmful. But when trying to protect children from poisoning, and then actually causing more deaths — that’s a man-made disaster of the highest order.
In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
— Frederic Bastiat
A program designed to bring low air fares to Wichita appears to meet that goal, but the unintended and inevitable consequences of the program are not being recognized. In particular, the number of flights available at the Wichita airport continues to decline.
Of particular note is that over the past two or three years, the trend of flights nationally is level, while the trend of flights available in Wichita is declining. The gap between Wichita and the nation is increasing.
According to Regional Economic Area Partnership, the goal of the Kansas Affordable Airfares Program (KAAP) is “to provide more air flight options, more competition for air travel, and affordable airfares for Kansas.”
Is the Affordable Airfares program meeting its goals? If we look at “air flight options,” and if we consider the number of monthly departing flights as a measurement, Wichita isn’t doing well compared to the nation. The chart at the end of this article illustrates.
In its Kansas Affordable Airfares Program Fiscal Year 2011 Report, REAP addresses the goal of “more air flight options” and reports:
“Air service through Wichita Mid-Continent Airport addresses the statutory objective of more flight options, as follows: A total of 11 airlines provide service from Wichita to seven nonstop destinations with connecting service and four nonstop destinations with no connecting service. Overall, there are on average 38 daily (with 40 on weekdays) nonstop or one-stop flights by commercial air carriers, providing access to 4,989 U.S. and international destinations.”
This statement simply addresses the current situation. But the goal is more flight options. Which is better evidence of meeting the statutory goal: A simple recitation of what’s available today, or looking at the trend, especially comparing Wichita to the nation? REAP’s statement provides very little information as to whether the program is meeting its stated goals, or whether the program is desirable. We should ask that REAP recognize the data and its implications.
This trend is an example of unintended consequences of government intervention and regulation. The Affordable Airfares program imposes a rough form of price control on airfares in Wichita. If the program didn’t do that — and it appears it succeeds at this goal — then there would be no point in having the program.
The inevitable effect of price controls is that less is supplied, compared to what would have been supplied. This economic phenomenon is reliable and predictable.
While travelers prefer low air fares to high, this is not the only consideration. For those who need to travel on short notice, the availability of flights is very important, and on this measure, Wichita is doing much worse than the nation.
Data is through March 2013, from Bureau of Transportation Statistics. Since this data is highly seasonal, I present a 12-month moving average, so that each point plotted is the average of the previous 12 months data. Also, I index January 2000 to 100.
Monthly flights, Wichita Airport and nationally.