Dr Eamonn Butler writes the following over at the Adam Smith Institute Blog:
The problem in aviation is that European airports are mostly owned by the state. And we're right to be concerned about how state money is used: we've had enough of governments messing up markets by subsidizing things in order to buy votes. So we need strict rules against subsidies.
This is dead on. In economics, if a manager provides a payoff to a customer to the detriment of the shareholders, this is a breach of fiduciary duty and a crime. A government businessman's duty is to provide a service to the benefit of the public. But if he lowers prices, is it a subsidy via the treasury? Is he doing it to run a sale to make a greater profit on higher volume? You can't tell the difference and the government businessman has all the incentive in the world to please key electoral blocs with subsidies and give difficult to prove discounts to connected special interests. This is a systemic failure of the government run economic model and I wish the people on the other side of the Atlantic all the luck in the world in their efforts to privatize their airports.
Posted by TMLutas at February 3, 2004 02:15 PM