Monthly Archives: February 2010

Meddling in free market

It’s not a big deal in terms of the federal budget, but a recent grant to Huntsville International Airport is one of the purest examples I have seen of politicians trying to meddle with the free market.

The airport received a $1 million grant from the U.S. Department of Transportation. Its purpose: to attract a low-fare air carrier to Huntsville.

The desire for such a grant is understandable. For three consecutive quarters, HSV has had the highest average air fares nationwide. That’s bad for the airport, and it’s bad for prospective passengers in North Alabama.

Clearly, though, there is no artificial impediment to low fares. Independence Air, Allegiant Air and Air Tran have all tried to create a niche in the Huntsville market in recent years. All have failed.

The free market does an excellent job at allocating resources. That is not the same thing as guaranteeing low prices. It matches supply and demand, and all evidence indicates demand for a low-fare carrier is not strong enough to drive prices down.

There are many instances in which artificial impediments require adjustments to the free market, or in which misalignment of public and private goals justify governmental involvement. Obtaining low fares in a market with inadequate demand, however, does not justify the governmental expenditure of tax dollars.


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