The myth of "Free Markets"

This post could be several hundred pages, but I'll try to keep it down to about four paragraphs.

Two days ago, the FAA under the Obama Administration mandated that should anyone be stuck on a plane more than two hours, they must be given food and water, and the lavatories on the plane must be operable and available. If they are stuck more than three hours, that the plane must return to the gate and off-load the passengers. Between Jan 2009 and June 2009, there were 631 incidents of planes sitting on the tarmack for more than three hours, so any of us who travel often deeply appreciate the change and probably even say, "FINALLY!" to the idea that this was a long-needed redress of an abusive and aggregeious practice by the airlines.

The reaction from the airlines was typical. One commented that this ran counter to the idea of getting the most flights completed, which was the 'goal' the commenter said they were required to meet.

And there's the rub, the fact is that airlines see you as a package, a breathing one sure, but a package to be deliverd, your comfort and convenience run a distant second (and third) to their completion of the contract to deliver you. They are happy to take the money because they need it to stay in business and the key element of that business is delivering you where you want to go - when is secondary, and your lost time and patience aren't really what they judge themselves by. They lose no money if you are angry, and unless you are an elite status passenger, they don't much pay attention to your complaints.

So here's the point - Obama acted in my opinion where Bush and the Republicans would not have. Bush would have made platitudes about letting the market correct the problem and that any 'regulation' here was overkill and unnecessary - as he so frequently did on a myriad of issues. This problem didn't start in 2009, and Bush certainly took no action during his 8 years to fix it, so I feel confident in saying he wouldn't have done anything - he had a pattern of worrying first about big corporate profits and worrying about anything else almost never. The problem is that Bush's canard is false - the market corrects only what the market can see - and the problem really are these:

1. Mostly, we consumers do not see or hear about major screw-ups or issues. Even if we do, we normally have short memories and go straight back to the company in question if it is offering the cheapest price/fare/whatever. In fact, like the cyanide laced Tylenol scare from the 80's, it is often the case that actions which AREN'T the fault of the company have more impact than those which are, because they get more press, and no one gets threatened with being sued for publishing the story. While we've all heard of the problems with flight delays, we've really only heard of a couple of incidents. I would bet only 1% of us knew that 631 flights sat on the tarmack longer than 3 hours during just the first 6 months of 2009.

2. Larger companies are better protected than smaller ones. All of us can access things like the BBB or Angie's List and inquire about a small company to some degree, plus we have word of mouth to discern a good product from a bad pretty often - however, as Exxon proved with the Valdez spill, often when dealing with big companies we have little to VERY little choice about doing business with the company in question. In the US 90% of the oil is delivered by 4 companies. Who among us knows which oil company services every station? The vertical monopolies make it virtually impossible to travel and not buy from Exxon. The same is true for airline travel. We COULD fly some other airline than that which most conveniently gets us to our local hub (or if we are lucky enough to live near a hub, then we COULD choose to not use the airline out of the hub), but the consequence is hours of additional flight time AND multiple stops thereby increasing our chances of a missed connection and other delays. In truth, we are close to captive to that airline because it is simply not economical to use another, either from cost or time, or both.

3. It is extraordinary for any regulatory agency to actually act to stop a company from doing something improper. They may cajole - they may even ask them to modify their actions, but they very very rarely actually make them stop, to wit, Credit Default Swaps and subprime lending. The FDIC WAS in fact telling banks these were risk laden, but they did NOT stop them. As a consequence, it is only thru events which are catastrophically damaging to the market that large companies actually fall victim to the market.

No, too often the dirty little secrets of failed audits, Sarsbannes Oxley violations, Enron type malfeasent abuse of the California energy market, are simply NOT in the public eye, and even when they are, it's not like we get to REALLY chose to shop elsewhere, certainly not easily.

Our government is increasingly in the thrall of big business - and I applaud Obama for taking a stand - but to think that the market would have fixed this rather obvious problem is naivete' at best. Regulation is, as in this case, often the reasonable reaction to abuse - and saying that all or most of it is unnecessary is mostly just playing into the hands of those who do not want to play nice.