AIRLINES commonly overbook flights in order to compensate or estimated numbers of "no shows", thereby ensuring that total seating capacity is used. Now and again this mechanism fails when the number of "no shows" is less than expected. Some travellers must then necessarily lose their seats.
Until the 1960s, American airlines dealt with this problem in a harsh manner. Seats, equivalent to the number overbooked, were refused to passengers chosen from two categories - the elderly and military personnel. It was expected that such people would be more docile and therefore more easily dealt with. Naturally, this policy caused many headaches.
Since the 1960s, such matters are handled in a much more satisfactory way. An auction is held, and an attractive inducement, e.g. an extra free flight ticket to a destination of their choice, is offered to any passenger who is willing to give up his/her seat. If this does not attract the necessary number of volunteers, a more attractive inducement is offered, and so on until enough people have come forward to solve the overbooking problem.
The whole process can be completed in a few minutes, with agreement and with consent. Some authorities (e.g. Herbert Inhaber, president of Risk Concepts Inc., Buffalo, New York) have proposed that a similar auction mechanism would provide a very satisfactory solution to several prickly modern problems involving the siting of facilities that are generally reckoned to be highly undesirable, e.g. burial sites for toxic waste.
Consider the problems associated with picking a site for a toxic waste repository. Such wastes are generated mainly by chemical industries and the nuclear industry. There is general agreement that the best way to dispose of such waste is to bury it under appropriate and secure conditions. A typical sequence of events associated with picking and opening such sites goes something as follows.
The government spends lots of money investigating various options for a disposal site and eventually picks the optimum site. An annoucement is made detailing why the site is suitable and outlining the design features that will be incorporated into the site to ensure that it poses no hazard to inhabitants in the neighbourhood. Immediately, the community in which the proposed site is located raises an enormous outcry of protest. The community hires its own experts to prove that the site is unsuitable and takes all necessary steps, including legal action, to ensure that the plans do not go ahead. The community feels that it is being unfairly victimised and is outraged at this.
The authorities have so far responded to this general situation by specifying ever more stringent safety conditions for disposal sites so that, they claim, the risk to the public will be negligible. This has made no difference to public reaction. Everybody agrees in principle that it would be safest to bury toxic waste under appropriate conditions but "not in my backyard" - the NIMBY syndrome. In Ireland, this syndrome has so far prevented the establishment of a national toxic waste dump and a central - facility for storing radioactive waste.
The proposed solution to this problem is to reverse the current mechanism and, instead of trying to foist a disposal site onto an unwilling community, to invite communities to bid for such disposal sites in an auction process. The most suitable type of auction would seem to be the reverse Dutch auction. In such an auction, the auctioneer shows the undesirable item to be auctioned to the assembled bidders and specifies a certain amount of money which will be given to the first bidder to take the undesirable object. If no one bids, the amount of money is increased and bids are again invited. The process continues until a bid is received and the exchange then takes place.
The auction process for pick.ing a waste disposal site would go something as follows.
The government would announce that it was inviting bids from communities interested in having a waste disposal site for a particular waste. The government would announce strict criteria that would have to be met by any disposal site, e.g. location, geological conditions, etc. All of the strictest current safety considerations would apply. Interested communities which did not have the resources to carry out surveys in their own particular areas would be entitled to governments funds to hire experts to carry out such surveys. The government would announce the amount of money that would be paid to the successful bidding community. If no bid was received for that amount of money (say £5,000,000), the amount would be increased gradually until a bid was received. When a bid is received, the government would investigate the site, and, if it met all the criteria previously specified would award the contract to that community. The agreed amount of money would be paid over to the community when contracts were signed and, of course, the government would pay the full cost of the construction of the disposal facility and all ongoing costs involved in operation and maintenance.
SUCH a mechanism would have many advantages. The disposal site would now be located with the consent of the local community (there would be a rule that bids would only be accepted from communities where a substantial majority of the population were in favour). Such a mechanism would also encourage more open and honest debate than presently occurs. The climate would be entirely different. Since there are great potential advantages as well as potential disadvantages to securing the site, people would be much more interested in weighing the pros band cons in a dispassionate manner. Our current mechanism for picking disposal sites arouses almost entirely negative emotions in the community involved and this is a fertile ground for breeding half truths and misinformation.
On the other hand, it could be argued that the auction mechanism is simply a clever way of "buying off" people. But the problem is that toxic wastes exist, they have been produced with our consent, and they must be dealt with. We cannot wish them out of existence.
I have been using the example of waste disposal to illustrate the NIMBY syndrome, but, of course, this syndrome applies to many other situations also. Some other examples would include the siting of high security prisons, the siting of treatment centres for AIDS victims, of halfway houses for the mentally ill and, in this country, the siting of halting sites and other settlements for the travelling community.
Would it be a good idea to use the auction mechanism to solve some of these problems? I don't know. At first glance, it seems somewhat insensitive, even cruel, to propose holding an auction, for example, to pick a halting site for travellers. However, would it not be preferable to confronting travellers with protest marches and worse, as is not an uncommon result of our present mechanism for choosing these sites?