Disagreeing With Krugman

Yes, I have found an area in which I disagree with Paul Krugman. Once you pick yourself up off the floor, you can read this excerpt from his latest book; End This Depression Now!

"(President) Carter presided over the deregulation of the airlines, which transformed the way Americans traveled, the deregulation of trucking, which transformed the distribution of goods, and the deregulation of oil and natural gas. These measures, by the way, met with near-universal approval on the part of economists, then and now: there really wasn't and isn't a good reason for the government to be setting air fares or trucking rates, and increased competition in these industries led to widespread efficiency gains."

When I first read that, I thought, "How can he get that so wrong?" Once you start picking the statement apart, it's gets tougher and tougher to say he's "wrong". It's a lot easier to say I disagree with him. I'll just say he's the "first kind of wrong".

I believe there really is "a good reason for the government to be setting air fares". The first reason was safety. In case you've never heard me say it -- the day before deregulation, the FAA's regulations were the minimum requirements for respectable airlines. The day after deregulation, they became the maximum. It happened slowly, but it happened. And there was a price to be paid for deregulation. At least that is my belief. Accidents such as Eastern 855, Palm 90 (Air Florida) and Continental 1713 were due in part to the pressures of deregulation. But it isn't like those pressures didn't exist before deregulation.

American Airlines 191 Engine Separation

"The procedure recommended by McDonnell Douglas called for the engine to be removed from the pylon prior to detaching the pylon itself, but American Airlines, along with Continental Airlines and United Airlines, had begun to use a procedure that saved approximately 200 man-hours per aircraft and "more importantly from a safety standpoint, it would reduce the number of disconnects (of systems such as hydraulic and fuel lines, electrical cables, and wiring) from 72 to 27.""

Yes, that accident happened after deregulation but the procedure was developed before deregulation. I'm not a trained scholar but I do try to be thorough and fair when I research these things. Aviation safety has continued to improve since deregulation but it has always continued to improve, ever since man took flight. I don't believe deregulation contributed to that improvement. I believe the improvement came about despite deregulation.

My real disagreement with Krugman on this issue is the fact that I believe a stable industry with good-paying jobs and secure pensions is a very good reason indeed for the government to set airfares -- if that is what is needed. I don't really care if there have been any "efficiency gains" -- not at the cost that was paid. Whether or not you agree that deregulation cost a few hundred people their lives, it certainly cost thousands upon thousands their jobs, their lifestyles and their pensions. It has left us with a bankrupt industry that is universally hated by its customers.

It's a mystery to me why we tolerate this situation. Cheap airfares? You do realize that every major airline has gone bankrupt, right? I believe that situation could be the poster child for today's favorite buzzword -- "unsustainable". The jobs certainly aren't any better. How about the investors? Do any of you want to buy airline stock? Competition? You realize we've merged ourselves into three major carriers (five if you're generous) don't you ? If there is any economic good in any of this you'll have to point it out to me.

Now that I have that out of my system, I'm thoroughly enjoying Krugman's book. And just in case you didn't click on the link before, you might be interested in the pundit pummeling going on between Krugman and Niall Ferguson. Somehow, James Fallows has been dragged into it also. Boy, two days without the internet and I miss all the fireworks. I'll have to go catch up.

Don Brown
August 22, 2012