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Comment by closeparen | Hacker News Reader

This is just another instance of the classic Soviet problem. A scarce resource is allocated by a government bureaucracy instead of a market, and the bureaucracy's design is imperfect, so nonsensical incentives fall out of it sometimes.

There's no irony. It's just kind of quirky for the West to manage flight/landing slots this way, instead of an auction (as the FCC does with spectrum).

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To be fair, the auction model doesn't seem to work well when it comes to spectrum. What you end up with is a few big players delivering awful service while having enough money to outbid anyone, essentially preventing any competitor from ever breaking into the market to provide better service.

I would consider that an anti-trust problem, not an scarce-resource-allocation-system problem. The concept of an auction is predicated on having a liquid market—both that there are replacement goods available from other sellers, and that there are many buyers "at the top" with enough bidding power to compete fairly between themselves, such that they'll "pick their battles" by buying only what matters most to them.

The government can only give away slices of a fixed resource for so long. Eventually it runs out.

You literally can't start an airline from scratch. You have to first buy one that already has landing slots, then figure out how to dispose of the planes/staff/operations/debts that come with the package. Is that really better for competition than just having a market for slots?

> You literally can't start an airline from scratch.

Gonna need a citation on this one. I would guess the actual reason airlines are hard to start from scratch is the massive capital required, but would be interested in having this guess proven incorrect.

Porter Airlines in Canada (which presumably has a very similar regulatory regime) was started from scratch about 20 years ago.

Porter tried to go around the problem by partnering with the government to revive a disused island airport, accessible only by ferry. Part of the deal was going to be a bridge.

The community organized vigorously against the prospect of new flights, and succeeded in kneecapping Porter by killing the bridge.

https://en.wikipedia.org/wiki/Porter_Airlines#History

Porter Airlines appears to have started in an entirely unique regulatory regime, actually:

  https://en.wikipedia.org/wiki/Porter_Airlines

In particular, airline monopoly control over allocation of terminal resources at an airport is not a useful prerequisite to generalize from.

> Porter Airlines appears to have started in an entirely unique regulatory regime, actually

I did a quick skim of that wiki article (skimmed a couple sections, ctrl+f'd for "regulat" and "monopoly"), but couldn't find anything about a unique regulatory regime. There has been regulatory issues with the Toronto Island Airport (where porter wants to extend the runway to allow jets to land, but no one* else wants this), but I don't see where they required a unique regulatory regime?

No one wanted it because it would have meant more flights. That's precisely my point. There is no such thing as new traffic capacity anymore. You can only take it from someone else.

> There is no such thing as new traffic capacity anymore. You can only take it from someone else.

JetBlue started in the late 90s, and according to the wiki [0], "was awarded 75 takeoff/landing slots".

Sunwing Airlines [1] started about 15 years ago, with departures from Toronto Pearson. They targeted the southern vacation niche. I don't know the details of the traffic capacity at Pearson, but they didn't get their landing slots by buying some other airline.

I'm not disagreeing with your comment about the limitations of dividing up a limited resource - many airports in North America are at capacity, and there's no room there for new competition to start up. But you followed it up with an absolute "You literally can't start an airline from scratch", which I took issue with because there are several examples that disprove it.

[0] https://en.wikipedia.org/wiki/JetBlue

[1] https://en.wikipedia.org/wiki/Sunwing_Airlines

You can also do like Kenmore Air and just land on the nearest body of water.

Very small airline. They have 29 planes that can hold 74 people. American airlines (including regional partnerships has 1700).

Few notes there:

* The parent comment didn't caveat "large airline".

* Porter is the third-largest airline in Canada. Canada has 10% of the population of the US, so our airlines will be accordingly smaller.

* American Airlines is the largest airline in North America [1], serves the entire country + international. Really not a reasonable comparison to a regional domestic airline.

[1] https://en.wikipedia.org/wiki/List_of_largest_airlines_in_No...

That speaks to the lack of airlines in Canada if the third largest has 74 max people and 29 planes.

> That speaks to the lack of airlines in Canada if the third largest has 74 max people and 29 planes.

No, it speaks to the population of Canada... Porter still comes in at 18th largest in North America [1]

(It might also be because each of the two large carriers, Air Canada and WestJet, has a number of subsidiaries/wholly owned sub brands which would each be larger than Porter - eg Air Canada Rouge, WestJet Encore)

[1] https://en.wikipedia.org/wiki/List_of_largest_airlines_in_No...

Only for them to immediately be gobbled up by 1 or 2 big players.

How about a market for destinations? Oh wait that will be immediately controlled by one player.

Hm it seems consolidation is the natural path we prefer towards solving a problem. Why not let the bureaucracy manage it then?

Give up the pretense. This is all market capture of finance by low effort grifters who will throw a fit when they don’t get privilege for nothing but being an obnoxious talking head.

> Oh wait that will be immediately controlled by one player.

According to[1], the average number of competitors per US domestic city-pair is 3.5 and has been increasing over the last few decades.

[1] http://darinlee.net/pdfs/airline_competition.pdf

They won’t be gobbled up if they aren’t offering a better service. Then that just clears the way for yet another competitor to come in and offer better service again until the large airline improves enough to make entering the market unprofitable.

Big companies buying small companies is good. It’s a reward for improving the market. Big companies preventing smaller companies from even starting via government regulation (i.e. regulatory capture) is what’s bad.

Giving it to the government is just skipping to the worst possible outcome. Nobody has any incentive to compete.

Freakonomics did a good episode related to this [1]

One of the takeaways was that as organizations grow they become more married to spending resources to maintain their existing system which comes at the cost of innovation. So they “innovate” by buying other firms/ideas and it eventually leads to consolidation of an industry.

[1] https://freakonomics.com/podcast/in-praise-of-maintenance/

What I don't like is the DoD keeping the best 5G spectrum to themselves (3GHz-4Ghz) while the rest of the world is using it, putting our future lead in communiciations industry at risk.

Lead? Telecom in the US is an oligopoly, with most of the major spending backed by government grants. Many areas are still supported by rotting copper and old 2g/3g towers because there's no incentive for providers to upgrade them. Unless you meant something else by "communications industry".

That rotting copper is going to be immensely valuable after the collapse.

Yeah, go check out what type of ISP service you can get in Australia for comparison of a similarly sized country. Get ready for ADSL and quotas.

It has nothing to do with size and everything to do with politics. Plenty of small countries have crap internet too.

Australia's internet sucks because the conservative government nerfed the NBN plan.

There is no large country that has amazing Internet everywhere. Size does matter in this regard.

"everywhere" is moving the goalposts. The US (and Australia) doesn't even have amazing internet in the cities.

It does, both of the last two metros I lived in offered gig symmetrical fiber to my apartment for $70/mo.

What's keeping our "lead in communications industry" at risk (and has been for decades) is the broken pricing model for mobile data. With that model, whether you have 4G, 5G or 9G wouldn't change anything because the limiting factor is never the speed but the usage quotas.

To be fair, it seems to work just fine. I can choose from at least 5 carriers in my city for cell phones alone, multiple of which offer unlimited data now. That’s only cell phone spectrum.

For other spectrum, it’s easy enough to acquire spectrum that microwave ISPs are able to get into local markets with very limited capital. I graduated with 2 folks who started an ISP together and the spectrum was cheaper than the hardware to transmit on it at the time.

Yeah, the problem with cellular in the US is that it is moderately expensive.

The institution of rules that aren't suitable when unforeseen conditions arise isn't a purely government thing. It happens in private organizations all the time.

I used to work for a consulting company and heard similar stories for IT budgets. Companies nearing the end of financial year with budget to spare would scramble to get more consultants in to spend the remainder, otherwise the following year their budget would be scaled back to whatever they actually spent.

Don't forget that a company internally is run like a Soviet Style planned economy. 5 year plans, no way for people on the ground to adjust plans, inflexible leadership. I could also mention things like total disconnect between communication from leadership and reality or motivational posters. It's all there.

It's not surprising they create similar behaviors.

And yet, all of these companies that run like command economies have collectively out-competed all the companies that run like market economies. We know this, because the latter... Don't really exist. No company of any note operates like one.

Does that imply that command economies are actually more efficient than market ones?

It might be an issue of scale. Centralized control allows for faster decision making and exploitation of opportunity that outweighs inefficient resource allocation when you're a small organization, but once you get to a certain scale it's simply not feasible to make all the decisions at the top due to how opaque the view from the top becomes. Once you get to the largest of multinational companies, they try to mimic the competition in a market economy by using metrics to allocating more resources to profitable divisions.

That might also explain why centralized command was so common throughout history. The political entities of the past were much smaller than today and could be centrally organized, but they competed against their neighbors for resources in a regional market. It's only in the past 2 centuries that political entities have become large enough to encompass entire markets within themselves and have had to step back and let the market do the large scale economic allocation that they've become too large to do effectively.

The problem of command economies aren't related to being command economies, they tend to be related to communications.

A market is a form of communication, with various forces that are supposed to balance themselves. Many of them actually outside of market (the supposed anti-monopoly aspect heavily depends on externalities preventing concentration, like slow travel/shipping, non trade barriers, etc.)

"Does that imply that command economies are actually more efficient than market ones?"

I think it's probably similar to politics. A well-run dictatorship can do better than a democracy but usually dictatorships deteriorate after a while.

I think it has to do with leadership.

Corporate leaders get sacked by the board rather quickly if they completely screw up. Most of them also don't blatantly steal from their firm.

Regime change in governments happens much slowly.

I've thought about this for different reasons lately and concluded that companies that operate internally as a market would be vulnerable to second system syndrome, ie just becoming a poor imitation of the actual market. You could argue that some (rare) companies that act like markets are those with a safe income stream that insulate them from financial pressures enough to create a market of a second sort. The only sort I can think of is any sort of market of ideas where employees are reasonably free to invest their time as they see fit. Something like Google's 20% time (at least in the old days when that was apparently still a thing) or Valve, where they say the reason desks are on wheels is so you can move to join the team you think is doing the most important work. Whether that's how it works out is another matter...

At least in Britain, there's an open market for the landing slots.

Slots at Heathrow can be sold for tens of millions of pounds.

https://simpleflying.com/flybe-heathrow-slots/

y and this optimizes for the highest bidder, i.e. most profitable and not the airline best serving the user.

Companies are only profitable because they serve their users better than their competitors.

You cannot seriously believe this. Is a parking company only successful due to how well it serves its users? No, it extracts rent.

If the parking compny pays rent to the parking space owner (based on the auction’s highest price), then yes (the owner gets all the rental profits).

I have seen multiple times cases where an establishment has parking spaces outside that are not paying to that establishment. The customer is basically tricked into parking on spots that seem to be free for customers, but is in fact not: those are further away. The only reason it seems is that this gives more fines, and more profit to the parking company. Neither customer nor the establishment benefit from this at all.

Is the parking company the only option? If not, then yes, it's serving it's customers better than competitors.

The proof is the fact that if they charged $100 per hour, they'd have no customers.

Maybe replying with "companies" was too broad, but within the context of airlines its correct

People paying to park there are getting something they value.

Only true in markets and industries where there is a low barrier to entry.

Or because there are no competitors. Allocating parking slots based only on bidding has the potential for one company to become a monopoly by purchasing all the slots, allowing them to charge ridiculous prices while providing bad service.

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