Is economics good for aviation policy? Some problems in bridging the gap between theory and policy

Abstract

This paper argues that airport economics is based on the concept of economics as the positive value free science of efficient allocation of scarce resources with given wants, ignoring the approach of economics as a moral science. It assesses critically the results on major policy issues. Although there is strong empirical evidence of natural monopoly of airports, no consensus has emerged. The effects of privatisation have been assessed in terms of cost efficiency, but not in terms of economic welfare and distribution. While airport economics has made theoretical progress, the policy recommendations on single versus dual till are less relevant than those from the older models. Airport expansion is assessed in many cases by economic impact studies instead of cost benefit analysis. Economists applying impact analysis, have contributed to an irrational policy discussion. The role for morals in the management of airports has been neglected, although there is evidence that incentives might backfire. The paper argues that airport economics based on economics as a moral science could improve airport economics, and make its policy recommendations more relevant.