In 1968, Garrett Hardin, a professor of Human Ecology at University of California at Santa Barbara, wrote an influential article for the journal Science that described a dilemma in which multiple individuals acting independently in their own self-interest can ultimately destroy a shared resource even where it is clear that it is not in anyone’s long term interest for this to happen. Prof. Hardin titled this dilemma and his article the “Tragedy of the Commons.” The current situation at this country’s busiest airports, a shared resource, is a graphic example of the Tragedy of the Commons.
In Prof. Hardin’s article, the central theme is that herders share a common parcel of land, i.e., the commons, on which they are all entitled to let their cattle graze. It is in each herder’s interest to put as many cattle as possible onto the commons, even if it is damaged as a result. The herder receives all of the benefits from the additional cattle, but damage to the commons is shared by the entire group. If all the herders make this individually rational decision, however, the commons is destroyed.
A parallel can be drawn to the sttructure of the United States air transportation system with respect to congestion management. It is in the each airline’s interest to schedule as many flights as possible during the busiest time of day, even if those flights are substantially delayed as a result thereby overloading the airspace system and the airport, taxing customers’ patience, and damaging the airline’s reputation. Each of the airlines receives benefits from the additional flights, but the damage to the airport, the airspace system and the airlines is shared by the entire group.
In this scenario, cooperation among the airlines does not lead to tangible benefits. Aside from the legal restrictions of anti-trust laws, this is the result of a “prisoner’s dilemma.” The prisoner’s dilemma is:
- when two prisoners are told that if they cooperate and testify against the other prisoner, they will go free.
- If one of them cooperates and testifies, and the other does not, then the non-testifying prisoner receives a harsh sentence.
- If both cooperate and testify, they both will receive a average sentence. If they both refuse to testify, they both will receive a very light sentence.
The outcome is that it is in the interest of each of the prisoners to cooperate and testify against the other, since the worse that could happen is that he would receive an average sentence, whereas the best outcome would be he would be set free.
Such is the case with the airlines and overscheduling during peak hours. Although the airlines would benefit if all airlines did not overschedule during peak hours, the risk that another airline would schedule too many flights to obtain a larger market share is too great. Moreover, since the damage created by overscheduling is shared, the rational behavior for the airline would be to schedule as many flights as possible before the damage gets too great. The possibility is for the airlines to support enhancing capacity at the airports (i.e., enlarging the “commons”), but this increases the cost to the parties other than airlines. Witness the surfeit of litigation surrounding the expansion of O’Hare and the East Coast Airspace Redesign.
In most cases, the Tragedy of Commons leads to an increase in government intervention. Since it is in the airlines’ rational best interest to schedule additional flights, someone needs to regulate their behavior for the best interests of the community. Thus, slot restrictions (i.e., limiting the number of “cattle” allowed on the commons and when they are allowed) would seem to make sense to resolve the problem. However, this solution is not one that is preferable to the airlines, since the government is deciding the highest and best use of the airports and mandating the result irrespective of the outcomes the airlines desire and economic benefits or losses. (for the purposes of this post, I put aside the legal and philosophical issue of who “owns” the slots). There are, however, two possible solutions to the problem that can be derived from economic theory and from solutions to the Tragedy of the Commons.
First, a possible solution is the application of the Coase Theorem, which is well-known to lawyers through its application in United States v. Carroll Towing Co, 159 F.2d 169 (2nd Cir. 1947), where Judge Learned Hand decided that tort liability could be assigned using economic analysis. At its most basic, the Coase Theorem states that the individual who can make the highest and best use of a resource will pay the most for it. It was used in the 1950s when the government was deciding how to regulate radio frequencies so that radio stations did not overlap. The conclusion was to auction the radio frequencies, since the individual or company who thought that they could make the most profit from the particular frequency would incur the highest transaction cost.
Similarly, slot auctions where the slots for arrivals and departures are auctioned off for the peak hours at the busiest airports would seem to be a solution that would resolve the Tragedy of the Commons. Airlines would have to take a careful look at their needs and desires to assess properly the value that they would place on any particular slot. This method of resource allocation is not favored by the airlines because they would end up paying for a resource that they currently get for free. However, the price for the slot would be determined by the market, i.e., if the airline places a high degree of value on a particular slot, then it will end up paying for it. On the contrary, the airline that can make its business plan work using slots that either cost less or are not during the peak hours, will pay less. The Coase Theorem as applied to airports, may result in larger aircraft being flown during the peak hours, if that is what the market can bear.
Second, Prof. Hardin proposed in his article, which addressed overpopulation, that the solution to the problem is “mutual coercion, mutually agreed upon” and result in the “relinquishing of the freedom to breed.” The “freedom to breed” in the airport context is the ability of the airlines to schedule flights ad infinitum during peak hours at the busiest airports. Thus, the relinquishment of the freedom to breed would be a cap on the number of arrivals and departures during the peak hours. This would be determined on the basis of the airport’s capacity, throughput and safety as well as the air traffic controller’s workload. Then it would be up to the airlines to divvy up the arrivals and departures amongst themselves. In this way, the airlines would avoid slot auctions and slot restrictions, but would have to cooperate among themselves to coerce each other to behave in a manner that supports their mutual good, rather than just the good of a single airline. This also resolves the prisoner’s dilemma issue, since studies have shown that in “iterative prisoner’s dilemma” cases, i.e., where the “game” is conducted in a series, cooperative behavior is rewarded where there is penalty assessed for non-cooperative behavior. Thus, so long as the government provides the stick if the airlines do not cooperate, then the result would be the most beneficial. In addition, this solution has the advantage of more limited governmental involvement, since it is only setting the cap based on its values (safety and capacity), but getting in the business of actually scheduling flights and deciding who can fly when.
This article is not intended to offer an in-depth exhaustive survey into the problems surrounding congestion management, but merely to place the problem into a context for discussion recognizing the basic principles of human behavior and economics.