By Daniel K. Benjamin
Given the racket that people raise
over airport noise, one would think
that the social benefits of regulating
airport noise must be great.
Pollution comes in many forms. One of the most ubiquitous is noise--from truck and automobile traffic, neighbors' stereos, barking dogs, and for some people, takeoffs and landings of commercial aircraft. So far, the federal government hasn't sought to regulate the decibel output of Metallica or Fido, but it does restrict the noise that airplanes may generate.
Given the racket that people raise over airport noise, one would think that the social benefits of regulating airport noise must be great. In fact, they are not. According to recent research by Steven A. Morrison, Clifford Winston, and Tara Watson (1999), regulating airplane noise has cost $10 billion--twice as much as the most generous estimate of the benefits.
Internal combustion generates noise, and the combustion needed to get a loaded 727 off the ground is considerable. In the early 1970s, prompted by homeowner complaints of noise near airports, Congress gave the Federal Aviation Administration (FAA) authority to set noise standards for new airplane designs. In 1977 the FAA designated three stages of aircraft, judged by their noise levels. For example, the Boeing 707 is a Stage I aircraft--the noisiest; the Boeing 727 and DC-9 are somewhat quieter Stage II planes; and the Boeing 767 is a relatively muted Stage III aircraft.
The agency also established deadlines for meeting the second-stage noise requirements. This process was abruptly accelerated by the 1990 Airport Noise and Capacity Act (ANCA), which mandated the complete elimination of even Stage II aircraft from all U.S. airports by the end of 1999.
Airplane noise tends to reduce the value of land located in the flight paths around airports. By cutting noise, ANCA has generated benefits--higher land values--for homeowners in areas affected by aircraft. But the law also has generated costs for airlines and their customers. In effect, ANCA shortened the useful life of planes flying into U.S. airports: Airlines either had to replace Stage II aircraft with quieter ones far sooner than they would have, or they had to retrofit the planes with expensive "hush kits" that could meet the Stage III noise standards. Airlines have chosen a mix of strategies, depending on the routes they fly and the vintages of the Stage II airplanes they owned.
When ANCA was passed, fully 55 percent of the U.S. fleet was comprised of Stage II aircraft. As I write, all of these planes either have been scrapped, sold to foreign airlines at substantially discounted prices, or retrofitted with hush kits. The cost of meeting the ANCA Stage III noise requirements for these planes has been $10 billion--the equivalent of about $700 million per year forever, or about $1 for each passenger enplanement every year.
There is an extensive literature on the effects of noise on property values. The authors draw on this literature to estimate that the ANCA rules have raised property values near airports by at most about 5 percent, or about $5 billion. So, the net effect of ANCA--costs minus benefits--has been to destroy $5 billion worth of resources.
The authors go on to ask and answer another intriguing question: Even though Congress got it wrong with ANCA, how much could we have benefited if Congress had done things right? An economically sensible policy would have hit airplane noise with taxes as great as the damage done to nearby homeowners; or it would have established noise permits that took into account both the benefits and costs of noise reduction. Such a policy would have been far less costly than ANCA, turning a multi-billion dollar social loss into about $15 million per year in net benefits.
Even so, $15 million per year is only about two cents per passenger enplanement. Why are the potential benefits from government noise regulation so low? The answer is quite simple: Because people are free to live where they wish, they sort themselves according to their preferences. Thus, people for whom noise would be the most costly simply don't live around airports and other noise generators. In contrast, noise lovers congregate not only at rock concerts; they also live in major flight paths, relatively unconcerned with the roar of passing jets. And because the sounds are of less concern to them, the benefits of government policies to reduce those sounds are small relative to the costs.
The good news, then, is that had the market been left alone, it would have produced an outcome vastly superior to that produced by social regulation. Free to choose, individual market participants would have almost completely eliminated the potential net losses from airport noise pollution. The bad news is that Congress didn't get the message, and its choices have wasted $5 billion worth of our scarce resources--by compelling air travelers to provide homeowners near airports with a level of quiet that is worth only a fraction of its cost.
Another way to think of this is that every time you get on a plane, you are throwing away a buck so that nearby homeowners can enjoy 50 cents worth of the quiet life. And what happens to the other half of the dollar? It gets lost in the noise.
Morrison, Steven A., Clifford Winston, and Tara Watson. 1999. Fundamental Flaws of Social Regulation: The Case of Airplane Noise. Journal of Law and Economics 42(October): 723-43.
Daniel K. Benjamin is a PERC senior associate and professor of economics at Clemson University. His regular column, "Tangents-Where Research and Policy Meet," investigates policy implications of recent academic research. He can be reached at: email@example.com