The Aviator!

I just saw The Aviator. It is every bit as good as you have heard–maybe a little better. The film is being lauded for its historical accuracy. (Though, as is often the case with Hollywood, they left out some of the more interesting aspects of reality. For instance, Hughes’ obsession with germs probably stemmed from his bout with syphilis which was entirely ignored in the movie.)
What I particularly liked about the film was how it portrayed the distressingly all-too accurate relationship that often exists between industry and government. Throughout the film, Hughes competes with Pan American’s Juan Tripp over airline market share. This, of course, would be great for the consumer if the contestants played fair. Instead, Tripp, and to a lesser extent Hughes, compete for unfair assistance from government.
To gain market-share in a free market, firms have to please the consumer–get him to voluntarily choose their product over their rivals’ product. But gaining market share is much easier when you have government on your side. Using government’s legal powers of coercion, firms can force their competitors’ prices up (for instance, with a tariff), or lower their own costs (say, with a subsidy from the taxpayers). In many cases, firms have been able to use government to simply outlaw their competitors by obtaining a legal monopoly. This is more than unfair, it is hugely costly. Intelligent, hard-working people like lawyers, accountants and lobbyists spend their time and money vying for an unfair advantage rather than thinking of new ways to please the consumer.
People often blame the firms and their executives for this unseemly behavior. What The Aviator does so well is to show that this is a government problem not a firm problem. At one point in the film, Howard Hughes is under intense interrogation from Maine’s Senator Owen Brewster. Brewster, known in real life as “the Senator from Pan Am,” had an interest in destroying Hughes’ TWA. Under oral examination, Hughes admits to dolling out gifts to government officials in hopes of gaining their assistance. But as Hughes points out, this is simply the way the government-entwined airline industry works. If you don’t take advantage of government’s unfair help, your competitors will.
The problem is not that business asks for hand-outs. After all, we can’t very well outlaw the desire for wealth. The real problem is that government obliges! This we can outlaw! So, see the movie and learn some economics.

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2 Replies to “The Aviator!”

  1. By capitalism I do not specifically mean an economic system of capital ownership and investment opportunities. Those things can also exist in a command economy. What I mean is the liberal market economy, with free competition based on the right to use one’s property and the freedom to negotiate, to conclude agreements, and to start up business opportunities. What I am defending then, is individual liberty in the economy. Capitalists are dangerous when, instead of seeking profit through competition, they join forces with the government. If the state is a dictatorship, corporations can easily be parties to human rights violation, as a number of Western oil companies have been in African states. By the same token, capitalists who stalk the corridors of political power in search of benefits and privileges are not true capitalists. On the contrary, they are a threat to the fee market and as such must be criticized and counteracted. Often, businessmen want to play politics, and politicians want to play at being businessmen. That is not a market economy; it is a mixed economy in which entrepreneurs and politicians have confused their roles. Free capitalism exists when politicians pursue liberal policies and entrepreneurs do business.
    –Johan Norberg, “In Defense of Global Capitalism”

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