The expected merger between Delta Air Lines and Northwest Airlines represents another blow to the deregulation policies of Jimmy Carter that ushered in many upstart airlines. Advocates of a “laissez faire” role for government believe that competition among many market participants will provide the highest quantity and quality of services at the best price.

The disciples of a free market devolve from the father of economics, Adam Smith, who in 1776 championed competition rather than regulation in his pioneering book, “Wealth of Nations.” Smith argued that an “invisible hand” would allow the consumer to choose freely what to buy. In turn each producer would choose freely what to sell and how to produce.

We should note that the American Revolution was being fought in the same year as the publication of the equally revolutionary “Wealth of Nations.” In 1776, the writers of the Declaration of Independence declared that people of our nation should choose their rulers, their acquisitions and their vocations unhindered by the state.

In a similar vein, Smith believed that the invisible hand would ensure the best distribution of goods at the best price. That is, the seemingly incompatible desire by buyers to purchase at the lowest price goods of the highest quality and the goal of producers to charge the highest price for the shoddiest goods would be reconciled through competition.

Today, the marketplace has killed the airline deregulation effort of Carter, who meant to encourage such competition. Milton Friedman, a Nobel laureate who advocated laissez faire doctrines, influenced the thinking of Carter. For several years Friedman’s bold recipe of free markets seemed correct. That is, after deregulation, many airline competitors sprang up and ticket prices plummeted.

However, the staggering losses, some $29 billion, in the airline industry in the wake of the Sept. 11, 2001, terrorist attacks and the recent unprecedented level of oil prices have decimated the airline industry.

Almost every major airline has declared bankruptcy in recent years. The salient exception is discount carrier Southwest Airlines, which has enjoyed first-rate economic results for many years and serves more passengers than any other airline.

Southwest has achieved its notable success because of two major cost-saving strategies.

First, it has hedged forward to protect itself against escalating oil prices. The company’s fuel hedge for forward years: 2007 was 95 percent hedged at $50 per barrel; 2008 is 65 percent hedged at $49 a barrel; 2009 is more than 50 percent hedged at $51 a barrel; up to 2012, which is 15 percent hedged at $63 per barrel.

Secondly, Southwest operates only Boeing 737s in its fleet. This saves significantly on operations because all of their pilots can navigate any plane in their fleet, the company can economize on needed parts and repair technicians can specialize on the Boeing 737s.

Proponents for the Delta and Northwest merger argue that only profitable airlines can ensure high industry employment with attractive benefits and continued high quality of service.

Critics point out that many previous airline mergers experienced operational quagmires in the attempt to combine different labor cultures and different aircraft, and determine optimal flight offerings. Not only did they not achieve their hoped-for synergies, but they even lost significant traffic to their competitors. The issue is hotly debatable whether Delta and Northwest can achieve their forecasts of $1 billion savings.

The airline experience has been replicated throughout corporate America. Corporate chieftains have convinced government policymakers that a few well-capitalized companies within each industry is the best paradigm. They argue only profitable large companies can:

* Develop new products.

* Retrain their employees.

* Absorb losses during recessions.

* Fend off global competitors.

In essence, we have largely forsaken Smith’s advocacy of free competition. That is, our government regulators have encouraged the emergence of super-sized companies in nearly every industry.

Consumer advocates have responded to oligopolies — a few operators in each industry — by advocating new layers of regulation in order to “protect” the consumer. Unfortunately, regulation has frequently fallen short partly because corporate America hires lobbyists and financially supports the election of sympathetic politicians in order to ensure favorable work rules. The massive shortfall in the collection of oil revenues by Interior Department officials from companies producing oil on government lands exemplifies the pitfalls of regulation.

In conclusion, we might ask whether the principles of Adam Smith are applicable in today’s world. Should we have faith in many competitors who operate without much regulation or should we trust that regulators can harness the selfish interests of a few competitors?

Originally published in the Sarasota Herald-Tribune