Don't forget demand

Heathrow: I spent Monday at Heathrow, but not as a journalist. I should have been frustrated by the delays, cancellations and difficulty finding out what was going on. In fact, I started musing: what is the best way of solving problems caused by bottlenecks, whether they are caused by snow, volcanic ash or just the pressure of humanity?

My answer is: demand management. Most popular solutions for transport chaos involve investment to boost supply - by adding runways, snow ploughs, railways, motorways or whatever. These have a role. But, as Adam Smith taught us, supply is only half of the equation.

At Heathrow, demand management might involve BAA (the airport operator) taking bids from airlines for a reduced supply of take-off slots during a crisis. The highest bidders would get to fly. There could also be an inverse auction. Airlines might set the price at which they were willing to surrender their slots. Those demanding the least compensation would be cancelled first.

A similar process could be used by airlines with their passengers. Those really wanting to fly could pay a premium. Those prepared to cancel or delay their departures would get compensation. Airlines do this already, but not nearly systematically enough. For it to work effectively, they'd have to make sure they have all passengers' emails and mobile numbers.

Places like Heathrow would also need to make sure that there is more wireless capacity (so people can use their smart phones) and electricity sockets (so they can recharge them).

Some people may object that such demand management isn't fair - and that it will inevitably be the poorer people who suffer. But poorer people may actually benefit by receiving large inducements not to travel. One also needs to realise that demand management isn't such a radical idea. We have peak/off-peak pricing for railways; congestion charging for cars; first-class travel; and taxis. And to make such an idea politically palatable, why not recycle the money raised from those who are willing to pay extra to beat the queues into public transport?