Thursday, January 24, 2013

How Should Airport Landing Slots Be Allocated?

How should society allocate goods and services?  Should it be random - such as you get to buy a good or service if your number comes up in some sort of lottery system?  Should it be egalitarian - meaning if there are 100 goods and 100 people that each should get one?  Should it be time based - that those who are first should be the first to get a chance to purchase?  Should it be efficient - goods should be allocated to those who value them the most?

In economics, we choose the latter.  We start with the hypothesis that goods and services should be allocated based on the idea that goods and services should move to where they are valued the most.  While this system has its flaws - as all allocation systems do - it does result in the greatest overall well being.

So, how should airport landing slots be allocated?  The New York Times reported that Europe is changing towards a market based method to determine the way that airport landing lots are allocated among airlines.

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