Wednesday, December 05, 2007


The Belief in Competition

My Conservative friends continually press upon me their objection to such good things as Universal Health Care (UHC) because the plan for UHC is to create a single entity that will either provide payments from a universal insurance pool or provide the needed medical services as a government agency, in the manner of a fire or police department. My friends point out that the UHC entity would not have any competitors because it would be a monopoly. They believe without any doubt that competition is always good in that it compels providers to furnish good quality services at low prices.

I think differently. I recently traveled to Grand Rapids, Michigan by air. My itinerary was San Francisco to Grand Rapids, then, a week later, Grand Rapids to Los Angeles. I had not traveled so far by air since my wife and I took a cruise from Auckland, New Zealand, to Sydney, Australia. We traveled from Los Angeles to Auckland by air. In fact, we rode the same airline as the one I rode from San Francisco to Grand Rapids to Los Angeles. I find that travel by air, particularly in economy class, is uncomfortable. The seats do not provide much leg room. As a passenger you have to sit in one position for up to three and a half hours. Getting out of the seat to use the rest room requires physical agility that I no longer have. It is especially difficult to leave the seat if the passenger ahead of you has his seat tilted back as far as it will go.

It seems to me that air travel used to be more comfortable and enjoyable. On long flights you were served a hot meal. Some of those meals were pretty tasty and helped make the flight enjoyable. Those were the days before deregulation when the airline companies had no difficulty in making a profit. Deregulation and increased competition brought cheaper fares and took away the meals. Now it appears to me that an airline company is interested mostly in crowding as many paying travelers as possible into each plane. That means the seats are closer together than before. That means that there is a confusing set of special prices for tickets. If you order tickets far enough in advance of your flight, you can get a bargain, with some strings attached. Typically the bargain flight is not refundable. The best you can hope for if you have to cancel at the last minute is that you will have a credit that can be applied to some future flight.

If you consider only the cost of air travel, you can convince yourself that competition has brought bargain prices in certain conditions. To that extent, competition works in your favor. However, competiton also forces airlines to skimp on comfort (leg room, meals) and safety (less rigorous inspection of each plane before sending it off with its load of passengers).

Past experience has shown that competiton is not a universal "magic bullet" to force purveyors of goods and services to provide good quality at low cost. We at one time had competing fire fighting companies. As a home owner, you could subscribe to any of several companies. It turned out that not everyone subscribed to any service. A house would be left to burn, either because the owner hadn't subscribed to any fire fighting service or because the particular service wasn't able to get to the house in time to save it. The notion that competition among competing fire fighting companies would provide low-cost and effective fire protection was discarded when the public decided to create a government-run fire department, paid for by the taxpayers.

I believe that competition does provide economical and good quality service in such things as hair cuts and dry cleaning clothes. If a barber does a bad job on your hair, you simply let it grow out and go to a different barber. If a dry cleaner does a poor job on your jacket, you use a different dry cleaner next time. Observe that you don't need to get a hair cut and you don't need to have your jacket cleaned. In my case, I did need to travel from California to Grand Rapids and back in a short time. One of my daughters was traveling with me and she, unlike me, is not retired and can't afford the luxury of taking all the time in the world to go some place.

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