Fundamental flaws of social regulation: The case of airplane noise

This article provides an economic assessment of federal regulatory policy t oward airplane noise as encapsulated in the 1990 Airport Noise and Capacity Act (ANCA). This act mandated the elimination of certain aircraft, such as the Boeing 727 and DC-9, from all U.S. airports by the end of 1999 to meet quieter noise requirements. We find that the present discounted benefits o f the ANCA, reflected in higher property values for homeowners, fall $5 bil lion short:of the ANCA's cost to airlines, reflected in the reduced economi c life of their capital stock. More fundamentally, we find that the net ben efits that could have been generated by an economically optimal airplane no ise tax amount to only $0.2 billion (present value). It appears that noise regulations have generated substantial costs to society when, in fact, ther e was little justification on efficiency grounds for regulatory interventio n in the first place.