Higher Airfares Ahead?; W. L. Anderson

THEFREEMAN IDEASON LIBERTY HIGHER AIRFARES AHEAD? by William L. Anderson L ast summer, I flew to the Northeast to participate in a seminar on teaching economics. In the process of buying my ticket, however, I learned an important economic lesson in this post-Airlines Anti trust Litigation age: antitrust decisions usu ally do not benefit consumers in general. For many years, I have almost exclu sively flown Delta Airlines, which means I have been able to build up frequent flyer miles. But when I called my travel agent to purchase a ticket for my flight to Philadel phia, she informed me that a competing airline could take me to my destination for $50 less than Delta. I asked about the possibility that another fare war might be gin, allowing me to fly my preferred airline for a comparable price, but she said she had no such information. Given this meager bit of knowledge, I decided to go with Delta's competitor.

In less than a week, a fare war did begin and Delta's charge for the Atlanta to Phila delphia route was $152, nine dollars less than what I had just paid. In other words, had I waited a few more days, I could have had my low fare and Delta. What is gallingto me is that a year ago, my travel agent could have tipped me off about a coming fare war. Since last year, however, William L. Anderson teaches economics at Chat tanooga Christian School and Covenant College. Delta and several other airlines settled a class action lawsuit which accused them of price fixing and other antitrust violations. One of the provisions of the suit was that the airlines could not notify customers of im pending price cuts; that is considered col lusion. Thus, a provision of a legal settlement which supposedly was meant to help con sumers like myself receive a better deal has actually forced me to pay more for less service, part of the law of unintended con sequences. It is no accident that this situa tion has occurred, the way that the plaintiffs (and antitrust lawyers from the federal gov ernment) define competition, price fixing and collusion almost guarantee that any "solutions" they impose will be anticom petitive.

In the academic world of antitrust "ex perts," prices are objective (and purely a function of cost-plus), and, in most situa tions, are subject to few restraints. The "experts" believe that information which is shared by more than one firm will automat ically lead to collusion, and if two or more firms charge the same price for a good or service, that is prima facie evidence of price fixing. Therefore, according to their defini tion, competition will better serve consum ers when everyone has less information to help them make choices. The real world offers a different and more accurate definition of competition. Prices, far from being something that can be objec tively calculated by a central authority, are subjective and reflect the values of buyers and sellers at the point of purchase. Match ing a competitor's low price is not an act of collusion. Rather, it is a tool that allows a producer to remain an equal participant in the marketplace. Competitive situations re quire that participants be as well informed as possible, not left groping in the dark. .

I predict that the antitrust settlement WIll lead to higher, not lower airfares. Perhaps, this is why the airlines so eagerly embraced it; it will give them a chance to reap some badly needed profits while operating und~r an agreement which has produced a pubbc perception running counter to the truth. D 177 THEFREEMAN IDEASON LIBERTY SOCIAL SECURITY, THE WELFARE STATE, AND THE MARKET by Sylvester Petro W hile old-line Communists in the Rus sian parliament strive to abort the market economy's birth in Russia, the forces of darkness in the Nomenklatura of the Western welfare states work unremit tingly to prevent their existing market econ omies from realizing man's ultimate good: a peaceful world in which global free trade spreads instantaneously everywhere, from their points of origin, the improvements in human wellbeing brought about by the creators among us-the savers and the en trepreneurs, thinkers, and inventors, driven by the profit motive to serve mankind's endless effort to better itself.