Markets Work: United Airlines and the Self-Regulation of the Market

Editor’s Note: This article is part of a week-long series illustrating how the free market works, from around the globe to our day-to-day lives. 


A couple of weeks ago, United Airlines had the biggest PR blunder in company history when a passenger refused to leave an overbooked plane.  Airport police removed the passenger by force, which left him bloodied and beaten. Another passenger caught the ordeal on video, and the video later went viral on the Internet. Thousands of people became outraged at the treatment of a customer just wanting to return home. While United did attempt to explain away the situation, they only dug themselves a deeper hole.

Much of the outrage that ensued because of the incident was non-partisan. People of all ideologies agreed that what occurred on that United flight from Chicago to Louisville was wrong. Some, however, saw this incident as a fundamental flaw in the market and a failure of capitalism.

After all, if capitalism works so well, why didn’t it stop this man from being forcefully removed from the plane? Why wasn’t the solution to have just kept raising the bid until someone eventually took the money?

While United could have continued to raise bids until someone took it; ultimately, the market hurt and regulated United much better than the government ever could.

Shortly after the incident happened, public outcry kickstarted the laws of the marketplace. United’s stock plummeted, losing roughly $255 million in market value.

This incident was not the first time United has been viewed in a negative light either. United’s image problem stretches back many years. Polls find that flying travelers would rather have longer waiting times than fly with United and arrive quicker.

Public backlash and an already dismal record on their hands forced United to self-regulate or suffer greater losses. United is now changing their policy to ensure off duty crew have secured seats at least an hour in advance to prevent over-booking.

Even though it was a terrible situation for all involved, this was without question a victory for the free market.

It is a mistake to believe that, under a pure market economy, there will never be any wrong doings and no one would ever be hurt. In fact, this is part of the core philosophy as to why advocates of free markets want limited government. We know all too well the nature of man and want to keep that nature as removed from power as possible. Under a market system, however, actions like that which happened on this United flight will never go unchecked.

The market responded so negatively to United that it required no government intervention to force change before it happened. Likewise, the market rewards those airlines who treat their customers with dignity and respect. This carrot-and-stick approach is what makes competition so vital in regards to marketplace self-regulation.

While United has poor customer service and, as we now see, may even drag you off their plane, airlines like Delta find it good for business to treat their customers with respect. In reaction to the United incident, Delta made it known where they stand, and will now offer up to nearly $10,000 to travelers on overbooked flights.

People often forget the human element in their advocacy for government intervention. If you do not like something that has happened to someone, the chances are that neither do a million other people. Actions and inactions have very powerful effects on the market and how companies conduct themselves.

The economy is not some giant machine that is in constant need of repair or maintenance. The marketplace is organic because it is made of all of us and is, therefore, whatever we want it to be. There is no room for cronyism or the mistreatment of customers or workers in a genuinely free market because those who perform these actions will suffer the consequences. The market perpetually corrects and regulates itself, weeding out the bad and lifting up the good.

This incident with United Airlines is only the latest example of how quick and efficient the free market will take action and self-correct.  While government regulations are often impulsive and emotionally driven, market regulations keep the focus where it should always be: on the individual.

As unfortunate as the situation with United was, the reaction and self-regulation by the free market displayed just how well markets work.

About Caleb Franz

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Caleb Franz - your neighborhood libertarian, Caleb is the Podcast Director for OUTSET Magazine and a media entrepreneur, finding new and unique ways to convey the message of liberty . Caleb frequents the radio waves and is an avid fan of Marvel comic books and movies. He is the host of OUTSET Magazine's very own podcast, "MilLiberty with Caleb Franz" - airing every Thursday. When he isn't fangirling over the Paul family or overdosing on coffee, you can find this Eagle Scout defending liberty and promoting free markets at @CalebFranz. For show updates, be sure to follow @MilLiberty.