Adam Triggs | Consumers get a raw deal on airlines, electric cars and medical devices

It's obvious why. It's the same reason we don't let kids choose their own bedtime or let people choose how much their parking fine should cost: their incentives are out-of-whack with the public good.

It's strange, then, that decision-making over so many major economic processes in Australia are trusted to entities that have conflicting self-interests.

The airline industry is the latest example.

One of the factors that determines the state of competition (and how much we pay) in the airline industry is who gets a slot at the airport. After all, a new airline can't compete with the big guys if it can't even access customers.

These slots are worth big bucks. The slots owned by British Airways at Heathrow are valued in the billions of dollars.

In Australia, the decision around which airlines get a slot and which don't at our biggest airport (Sydney) is decided by a private company. This is fine. The problem is who owns the company.

Turns out, the company that decides which airlines get the slots is owned by Australia's two biggest airlines: the very companies that benefit the most from excluding new airlines.

And it gets worse. The process through which slots are allocated is pretty arbitrary. If an airline has used its slot 80 per cent of the time in the previous year, it gets allocated that same slot next year automatically - as per the 80:20 rule under international standards.

This is the opposite of what economists would recommend. Economists would recommend at least three things.

First, if airlines aren't using their slots to full capacity, they should be punished for doing so, particularly to defeat 'slot hoarding' where airlines hoard slots to stop potential rivals from competing with them.

Second, slots should be auctioned off to the highest bidder and airlines should be allowed to sell their slots on secondary markets. It's the approach we use for everything from carbon credits to radiofrequency spectrum bands. The fact that an airline was awarded a slot last year shouldn't be relevant. If anything, new airlines should be the ones getting favourable treatment.

And third, airlines shouldn't be allowed to own the company that regulates them. It's simple: owners influence managers, and if the manager is regulating the owner, we've got a problem.

This isn't a one-off example of the fox guarding the hen house, either. The supply of motor vehicles is another example.

Back when Australia used to make cars, we put in place regulations that stopped people from importing car models that were made in Australia to protect the car manufacturers that operated here.

It was blatant protectionism which, like all protectionism, only made sense to those who directly benefited from it. Consumers, as always, were hung out to dry.

But at least we were protecting someone. Amazingly, those regulations still exist today even though we don't have a car industry to protect.

The outcome is perverse: these regulations put foreign car manufacturers in charge of deciding how much competition they should face in Australia by controlling what's allowed to be sold here.

Little wonder why few people can afford an electric vehicle. Allowing more secondhand EVs to be imported into Australia would push down their price. Instead, we're pulling up the handbrake on climate change action in Australia.

The fox is guarding the hen house in the supply of medical devices, too.

The price of medical devices that are used in Australia are negotiated by the foreign manufacturers of those devices with the government rather than being set by market forces.

The result is not surprising. The cost for a selection of 46 frequently-used devices is 2.4 times as much in Australia compared to the average of eight comparable overseas markets.

Compared to the lowest prices from these markets, prices of medical devices in Australia are 4.7 times higher. Germany pays the least for these 46 devices: less than a quarter of what Australia does.

We see the same thing in other parts of the medical profession.

The rules around who is allowed to come into Australia to supply medical services is decided by the medical colleges themselves: the people who benefit most from stopping more people from coming into Australia to compete with them in providing those services.

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As any introductory economics textbook would predict, the rules they come up with are extremely restrictive.

An independent review has recommended urgent reform: simplifying the rules, stripping the colleges of their powers and centralising them in the Australian Medical Council.

The government should step-up. After all, Australia's shortage of doctors is at crisis levels.

The list goes on. Credit check firms getting paid by the very firms they were meant to be monitoring, and multiple professions in Australia entrusted with regulating themselves.

The solution to all these problems is simple. If we want more competition in airlines, if we want cheaper electric vehicles, if we want cheaper medical devices, if we want to address the shortage of doctors and nurses and have a more stable financial system then we need to stop putting the fox in charge of guarding the hen house.

As the saying goes: people respond to incentives. The rest is commentary.