A Stitch in Haste

Two quick tales of how monopolies really rise and fall:

ITEM: "If you have two airlines, decide now which one you love more" --

[A] law known as the Wright Amendment prohibits airlines at Dallas Love Field from flying beyond a seven-state perimeter. That means that Dallas-based Southwest, the main airline at the Dallas airport, can't sell flights from Dallas to Chicago or other cities in states that aren't adjacent to Texas, like Philadelphia or St. Louis.

The Southwest study ... shows that the restriction costs other cities $1.8 billion annually in lost flights and higher passenger costs.
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Last month two Texas congressmen introduced legislation to repeal the 26-year-old Wright Amendment, saying that the law lets government "play favorites" among airlines and airports.
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American Airlines, the other major Dallas-based airline, said in a recent statement that Southwest should seek flights to other states by opening gates at Dallas's other airport, Dallas-Fort Worth International Airport. "Repealing the Wright Amendment only serves to line the pockets of Southwest," the news release says. ... "It would weaken the DFW hub, and if you weaken the hub you hurt the community."

MY TAKE: Yes you read that last sentence correctly -- Dallas would be hurt by having two strong, diversified airports instead of one. By that logic, New York should shut down LaGuardia and Newark.

Two other quick observations. First, if the State of Texas had tried to pass this law, rather than Congress, it would likely have been unconstitutional on Dormant Commerce Clause grounds and perhaps federal pre-emption grounds.

As a federal law, champions of federalism can ask what business it is of the federal government to regulate, not air travel safety, but air travel competition, especially in a single local market. I thought we scrapped the Civil Aeronautics Board.

(FUN FACT: The Airline Deregulation Act passed in 1978, the Wright Amendment in 1979. Connect the dots. Oh and that's "Wright" as in, not Orville and Wilbur, but in then House Speaker Jim Wright of -- you guessed it -- Fort Worth, Texas. It is so very hard to remain calm sometimes.)

Second, as Hit & Run notes, for American Airlines to lament that repealing the law would "line Southwest's pockets" when what they really mean is that their own pockets would no longer be lined by an artificial, government-imposed monopoly, is the height of arrogance.

POST SCRIPT: I presume readers understand the "which one you love more" reference. If not, see here.

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ITEM: Revenge is a beer best served cold --

Brewery bosses on Tyneside are locked in a legal battle with Eurocrats for the right to still use the name Newcastle Brown Ale -- despite shifting production to Gateshead.

Scottish & Newcastle had originally celebrated gaining specialist European status for the famous beer -- which stops it being brewed anywhere else.

But the firm has since been trying to have the status revoked, after announcing plans to move production to the Federation Brewery in Gateshead.

MY TAKE: In other words, Scottish & Newcastle, which was literally brewed in Newcastle, got a law passed that prevented any beer not brewed in Newcastle from using the word "Newcastle" in its name. And now they want to move out of Newcastle. Oops. The economics gods have a sense of humor. Hat tip to Reason Magazine by way of Daily Pundit.

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Folks, always keep the following in mind regarding Industrial Organization (i.e., the economics of monopoly):

--Monopolies are almost always created by government fiat rather than by cutthroat competition. And the politicians and bureaucrats doling out those barriers to entry are rarely motivated by the "public interest." It is all about the Politics of Pull.

--In those rare cases where monopoly or near-monopoly does arise naturally (e.g., Microsoft), it arose because the company was successful. And what does it mean to be successful? It means providing the greatest satisfaction to the greatest number of customers. This is somehow bad?

--It is never the goal of a monopolist to charge the highest possible price. Rather, the monopolist seeks the highest possible profit. And, most often, maximum profit is achieved by lowering prices, thereby increasing volumes and spreading fixed costs across as large a base as possible.

--In the absence of government insulation from competition, today's monopoly will only be tomorrow's monopoly if it continues to do what it did to become a monopoly in the first place: continue to satisfy customer needs. If the monopolist ceases to be the best, then it will also cease to be a monopolist. Would you give even half a damn if the market for vacuum-tube, black-and-white, non-cable-ready televisions was a monopoly?