The recline of the American empire

Perhaps you’ve seen the video: a woman on an airplane in the second to last row reclines her seat, into the lap of a man whose seat does not recline, and who in frustration repeatedly punches the seat of the woman in front of him. The clip initially sparked debate about which of the passengers was in the wrong (both, obviously, for behaving like children). But the discussion then turned to things like this:

Followed by scores of other twitterers declaring that, actually, under communism flying also sucked. It’s twitter, I know, it’s fundamentally a terrible place that generates terrible discussions. But still, is this the discourse we’re having? Are these the options we think we have: full communism or, sorry, miserable airplane rides are good because of the wisdom of the market. It’s maddening. 

Matt’s response is along the lines of the explanation you’d expect to get from an economist discussing the subject with a class of undergrads. It’s how a lot of us have learned to think about trade-offs like the ones we experience when we pay for a budget airline seat. I got into journalism writing torrents of blog posts applying economics-brain analysis to all sorts of subjects. I suppose I’m glad I did, in the sense that I’m thankful to have the job that I have now. But I wish I’d been able to think a little more flexibly, to appreciate the fact that the world is more complex than economics brain often allows us to recognize.

Does flying have to be like this? On the one hand, the point about scarcity seems inarguable: airplanes only get so big, and you’ve got to allocate the space in the tube somehow. Why not offer different levels of comfort at different price points and let people decide for themselves what’s worth paying? But just what sort of scarcity are we talking about here? Airlines can choose between different sized planes with different seat configurations. They can decide how frequently they fly between any two particular destinations. Maybe those things are largely influenced by the market—but on the other hand, maybe there’s quite a lot of implicit and explicit collusion between carriers which gives airlines a lot of freedom to set quantities, and correspondingly the prices (and conditions) which go with those quantities.

Scarcity is also a matter of available airport slots, and indeed airports. The amount and allocation of these things are policy choices; before concluding that what we’ve got here is a welfare-maximizing pattern of seat prices, we might want to consider whether those other variables are determined in ways that are good, overall, for the consumer experience. Then of course there are substitutes for flying: trains, buses, cars and also not traveling at all—relying instead on all the wonderful communications technology we now have at our disposal. I generally find flying to be a miserable experience and take the train when it’s a reasonable alternative. In America, sadly, it often isn’t. But that’s a policy choice too. Flying is obviously going to be the first best option for cross-country flights, no matter how uncomfortable it is in the back. But there are vast numbers of routes in America that could be covered by European-style high-speed rail, which allows people of all sorts of means—famously even broke, backpacking college kids—the ability to travel in comfort all across the continent. 

I know that discussion of ambitious high-speed rail plans in America is treated as fundamentally unserious, that everyone knows we can’t or shouldn’t try to make it happen. But consider this: between 2016 and 2019, the federal budget deficit grew by about $400bn, thanks largely to Donald Trump’s tax reform. So for the exact same annual deficit that we’re running right now we could have had, instead of tax cuts which overwhelmingly favor the rich and which have largely failed to generate the rise in private investment they were intended to bring about, $400bn to spend on construction of a high-speed rail network. That’s per year. For context, the total estimated cost of the proposed California HSR network, which has famously seen its price tag balloon, is $80bn. So even if there were no economies of scale to be had from doing lots of rail construction all at once, and even if the folks planning a nationwide network made every cost-increasing error that California has, we could, with the same deficit but without the stupid tax cuts, afford to pay for 5 California-size HSR systems each year. 

You can just imagine the criticism such a plan would face as it got going. The complaints about government waste would be deafening. But at the end of it all, when someone could walk into a grand rail station in central Indianapolis and be in the middle of Chicago in under an hour, or in Manhattan in three, using this extraordinary infrastructure that would be there, being of use to people, for a century: wouldn’t that seem worth it? Wouldn’t that be a satisfying way to travel? Better than cramming oneself into a plane after waiting in line to take off your shoes and have TSA agents look at you naked? We could have it, but we choose not to. We opt instead for the tax cuts, which are out there right now working their magic. Can you feel that magic? Honestly, I can’t. I think I’d rather have the high-speed rail. There are a lot of reasons why we get the tax cuts and not the HSR. It’s not the only factor, and probably not the most important, but the ubiquity of economics brain has something to do with it.

There are other things to question in the wisdom-of-the-market story about cramped airline seats. Like the matter of preferences. If America’s income distribution were highly compressed, then I’d readily agree that people who pay more for more leg room really care much more about leg room. But America’s income distribution is very much not compressed. So you have passengers who don’t need more leg room, in any meaningful sense, but for whom the difference between a business-class fare and the cost of a coach seat is too small to care about—and people who are tall and poor and whose only decision is between flying in discomfort and not flying at all.

Now you might say: exactly! If the airlines provide more comfort to passengers in the rear then fares will have to rise and the tall and poor won’t have the option to fly at all! But this neglects a few things. First, if indeed the airlines enjoy some market power then they are not forced into this pricing pattern by the fierce competition of the market. Second, the seats could be reconfigured such that there are fewer premium seats, and more and roomier coach seats. That might hurt an airline’s profits if the profit per seat were vastly different across classes, and perhaps it is. But if that were the case you’d have to ask why the airlines don’t give over more of the plane to the high-profit premium seats. Potentially, the reason is because the profitability of the premium seats is directly linked to the discomfort of the budget seats. 

But there’s another thing to consider, which is that airline seats shouldn’t be cheap. Air travel is a massive contributor to global carbon emissions, and one of the most difficult places to reduce the carbon intensity of economic activity. The cheap ticket you buy for a flight from Philadelphia to Chicago does not include the cost that you, the passenger, impose on others by adding to the world’s carbon emissions. Cheap seats aren’t a lovely market outcome. They’re among the more glaring examples of market failure around. 

If flights were more expensive people would do less flying, and there would be some economic cost to that: in terms of time not spent with loved ones, and business meetings not taken. But the availability of cheap flights creates its own social reality which might not, in the end, be particularly healthy. Because flights are cheap, people are expected to travel for meetings and conferences that might not be particularly necessary. In the absence of cheap air travel, public pressure for better transportation alternatives might well be significantly stronger: helping to clear the way, politically, for a greener but still convenient transport network.

Economic thinking is supposed to be clarifying. It’s supposed to help us think beyond the seemingly easy solution with the unanticipated costs. Instead, it seems to encourage many of us to turn our brains off, to accept some outcome as tolerable or desirable without pausing to ask: wait, can we really not do better? And the fact that the only alternative that many of us see to the choices made by amoral corporations is Soviet-style communism is pathetic. We can reflect on what we would like society to be like, decide that we want better things, and make those better things happen.

That’s an overreaction to a series of tweets, I know. But we really ought to get used to thinking harder about what we want our lives to be like. 

***

Changing the subject (slightly). I had considered writing something about Bernie, given his strong showing in the first two primary contests. Perhaps I’ll come back to it. Having been rude to Matt about the tweets, let me now recommend this well-argued case for Bernie that he wrote back in January. 

Instead, I wanted to note the surprising surge that Mike Bloomberg seems to be enjoying across polls and betting markets. For a lot of established elites, this is like water in the desert. Bloomberg is a moderate technocrat who can be counted upon to spend lavishly in an effort to defeat Trump, and who can also be counted upon not to confiscate the wealth of billionaires. I get that. But even if you love his policies, and don’t worry about skeletons in his closet, and don’t care about the questionable stuff in his record, you should be cautious in your Bloomberg enthusiasm. 

Recall that the argument motivating the campaigns of Bernie Sanders and Elizabeth Warren is that the system is broken, that it is rigged to favor the interests of the well off, to undercut democracy, and to deny working people the voice they deserve in the workplace and the voting booth. Now, maybe you disagree with them and favor a moderate because you don’t believe these things are a problem and don’t think that radical change is necessary. The problem with Bloomberg is that he absolutely makes their case for them. Here’s a guy who’s a true billionaire, who could buy and sell Trump many times over, who is dropping hundreds of millions of dollars on this election like it’s nothing. And it’s working! It’s working in the sense that he’s managed to gin up real political support for himself. It’s working in the sense that—because the field is so crowded—he could very easily buy himself enough delegates to make a case for himself in a brokered convention, or to play kingmaker, or perhaps even to win the nomination outright.

It is also working in the sense that it is skewing the incentives facing everybody in politics. Bloomberg money is everywhere. It’s everywhere now and it will be everywhere after the race, whatever happens. If you are a pundit, or a local politician, or a consultant, or a journalist, you end up thinking to yourself: am I going to do something that might alienate myself from that money? Journalism is a tough business, and nobody knows when their publication might find itself trimming staff or looking for a buyer; who wants to annoy a deep-pocketed potential employer? A number of campaigns are about to end. Who wants to get on the wrong side of the guy who might soon be adding new staff, or who will be bankrolling other friendly candidates’ races? I don’t doubt that Bloomberg is out there doing what he thinks is right, but his money is creating a stiff test of the integrity of vast numbers of people in politics and journalism. Not everyone is passing.

If Bloomberg is successful, then the Bernie critique and the Warren critique will have been proven correct. I don’t know how die hards in their camps will respond; Bloomberg is less of a threat to democracy than Trump, and the right thing to do in the short run is to show up in November and vote to remove Trump from office. The outcome cannot help but be a radicalizing one, however. I find it a little difficult to believe that Bloomberg cannot see this. Perhaps he thinks it is worth it to eject Trump. But history is full of men who, believing they alone could save a troubled society, found themselves contributing to that society’s undoing.

There’s a line of thought among some social scientists which posits that high levels of inequality undercut democracy and lead, inevitably, to social crisis. Sensible centrists have tended to scoff at that notion, at least as it applies to America. But here we are, with a corrupt billionaire in the White House demonstrating the weakness of our institutions and the utter absence of any principle other than loyalty to power on the part of his co-partisans (with only the rarest of exceptions, like Mitt Romney). And on the other side of the partisan divide there is another billionaire, spending vast amounts of money to deny the nomination to the folks who argue that the concentration of income in society is a problem for democracy, and very quickly winning over a large and growing share of the Democratic establishment. If Bloomberg wins the nomination, he loses the argument with the party’s left wing. In doing so, he might well convince many of them that the system is beyond redemption.

In any case, I would hope that many wealth-tax skeptics are out there revisiting their position on the subject.

***

This week’s column suggests that wage growth for workers at the bottom of the income distribution—which has been surprisingly strong over the past two years, thanks largely to state and local level increases in the minimum wage—might be responsible for the durability of the economic expansion. Last week’s, which I don’t believe I linked to in the last newsletter, considers the role that social norms play in perpetuating gender inequality. It’s prompted quite the reader response, including many gems like this:

Markets are part of a suit of social forces that shape economic behavior (Free exchange, The Economist February 8th 2020). Only using biology can we understand the forces driving divergent economic utility functions for different genders and sexes. The most conspicuous difference between a man and a women is the size of the breasts, which signal differences in economic potential and efficacy in providing high quality food for infants. This and many other biological features produce a deluge of differences in basic psycho-social characteristics, such as the perception of time intervals (see arXiv1203.3954), that are studied by behavioral economist. Social economist trying to understand the market forces shaped by social fundamentals, without using insights gained from evolutionary biology, may be politically correct but are scientifically wrong.

¯\_(ツ)_/¯