Friday, May 15, 2009

Congestion pricing in airports

Freakonomics draws attention to the decision by the Transportation Department of New York to cancel its plans for auctioning off slots at the three city airports, so as to reduce congestion and attendant delays. Strong backlash from airlines and industry groups, coupled with lawsuits and a court-ordered stay, are being held responsible for the decision.

However, I feel that this postponement is only temporary, especially since it appears that further investments in modernization can achieve very limited capacity addition to handle more flights. Under such circumstances, as Econ 101 teaches us, price rationing is the only way to allocate scarce resources. Congestion pricing is already successful in road use in cities like London, and would (as in the case of New York's three airports) efficiently allocate airline usage both across multiple airports and different times of the day.

The net economic benefits (for passengers, airlines, and the environment) associated with reduction in delays for arrivals and departures, shorter aircraft taxiing times for both take-off and landing, and ease of getting to the airport, would more than off-set the costs imposed by an appropriately tailored congestion pricing scheme.

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