A few days ago on a flight, I faced the risk of being squashed by an enormous man in the seat next to me. (And I mean enormous: an extreme obese.) I deployed the usual defenses to preserve my space, but fat was still overflowing over the armrest. This experience gave me an opportunity to think again about the standard economic theory of externalities and how property rights contribute to minimizing them. Recall that an externality (a negative externality in this case) is a cost that bypasses the market and is imposed on somebody without compensation.
The first question is, why didn’t my fat and involuntary travel companion pay for two seats in order not to impose his mass on me? Or he could simply have bought an upgraded seat that offers more room.
Would it be illegal discrimination for the airlines to impose such a requirement on the obese? I was surprised to find that it is not, either in the United States or in many other countries (see Elaine Glusac, “F.A.A. Declines to Regulate Airplane Seat Size,” New York Times, July 6, 2018). Smarttravel.com, a travel website, observes:
Airline obesity policies differ in degree and detail, but decree essentially that if you don’t fit in a seat with an extension seatbelt and the armrest down, you will be charged for two seats or removed from the plane.
(In Canada, the principle “One Person One Fare” is enforced by regulation. The image below is borrowed from NBC, which reported on this.)
But here is the catch: I could as well have purchased two seats or an upgraded one, and the problem would also have vanished. By contracting with the airline to buy a narrow seat in economy, my anonymous fat companion was pushing an externality on me. But in buying the same sort of seat, I was similarly creating an externality for any obese person who wanted to travel without arm and foot jostle nor visible annoyance from the next seat.
This is the crucial point: externalities are symmetrical. My fat co-traveler was inconvenienced by me just as I was inconvenienced by him. If either of us had dropped dead just before the flight took off, there would have been no inconvenience. Losses or gains in utility being subjective, there is no scientific way to compare my cost to his cost. An interesting essay titled “What It’s Like to Be that Fat Person Sitting Next to You on the Plane” by an anonymous writer known as “Your Fat Friend” shows that it is not easy to be fat when traveling by air on a single seat in the economy cabin. To be fair to my travel companion, he was obviously trying to minimize his intrusion in my space; but humans, contrary to old stars, cannot collapse into a black hole.
That externalities are symmetrical is an idea that we owe to Ronald Coase, who won the 1991 Nobel Prize in Economic Sciences. The anglers who insist on catching fish in the river are as much an externality to the paper mill as the latter is to the anglers whose fish are killed by chemicals. The problem can be solved by one of the two sides purchasing the right to “pollute” from the other. I explained this Coasian idea in my Regulation obituary, “The Power of Exchange.”
The jostle between the obese and the thin on airliners is symptomatic of the same sort of competition over resources. (I characterize as “thin” anybody who is not obese.) Space on an airliner is a limited resource and, one way or another, it has to be paid for by its occupants or by third parties. Most non-economist writers ignore this elementary point.
The efficient way to minimize a conflict over resources is for the involved persons to exchange among themselves and reach a bargain that each one thinks is better than the starting situation. If I am willing to pay my obese travel companion to voluntary leave me alone more than he is willing to pay me to leave him alone, everybody gains (compared to the starting point). In many cases, though, an ad hoc negotiation is difficult because “transaction costs” (the costs of finding the relevant parties, negotiating an agreement, and enforcing it) are too high. Between boarding and take-off, there is not much time to reach a bargain and disembark if necessary.
A more paralyzing problem occurs when property rights are not clearly defined. My seat does not belong to me nor to my fat co-traveler. It is not “my” space. It does however clearly belong to an airline company, which has the incentive to make as much money as possible from all the seats in the airplane. Because of this incentive, the airline company plays the role of an intermediary in a virtual bargaining. It indirectly allows both obese and thin passengers to bid for seats.
One way the airline company does this is to ask higher prices for wider and more comfortable seats, which either the fat or the thin may purchase depending on how much one is willing to pay to avoid sitting too close to the other. Comfort is available in business or first class or on a private aircraft.
A standard and tired objection is that the rich will be able to rent better seats. Ceteris paribus, that is true—just as the rich buy more BMWs and more rib eye steaks. But note that the non-rich are able to outbid the rich when they think it’s worth it. They regularly do so with large quantities of most goods in services. Finally, if everybody earned the same income, there would be no airline seat nor rib eye steaks to bid for; if they exist, they would go to the equalizing Nomenklatura.
More generally, competition between profit-seeking airlines facilitates the satisfaction and reconciliation of all individual preferences. If the obese or the thin feel they are not well served—that is, if they are not offered the seats they want for a price they are willing to pay—other airlines, whether existing ones or new ones, will be incentivized to cater to the neglected clienteles. That the current rules for obese seating differ slightly among airlines offers a glimpse of the possibilities of this mechanism (see again the smarttravel.com piece).
Other sources report that some airlines are now using wider economy seats as a marketing argument: see Elaine Glusac, “F.A.A. Declines to Regulate Airplane Seat Size,” New York Times, July 6, 2018, and Vikky Ortiz, “As Some Airline Seats Get Bigger, Experts Caution Against ‘Fat Shaming and Bias’,” Chicago Tribune, July 18, 2018. No doubt that we would see more competition if the government-created obstacles to entry in the American airline industry—such as those against foreign competitors—were abolished.
The reader who has followed me until now might be tempted to try a little exercise: Can you make a parallel analysis of smokers and non-smokers in restaurants and other commercial venues? Who is the obese and who is the thin among the two groups? And what is different between the smokers’ and the fats’ predicament on the market?
READER COMMENTS
JFA
Nov 6 2018 at 7:03am
I’ve always found this analysis of externalities to be both fascinating and absurd. In one sense, it shows us that we need to understand all sides to a conflict. In another, it shows that economics can’t really solve this problem on it’s own. You say to try this exercise with smokers vs. non-smokers. Instead, try it with the mafia vs. shop-keepers, thieves vs. property owners, slaves vs. slaveholders. You quickly see that viewing externalities solely in terms of who has the highest marginal value for the thing is deeply troubling. One would like to at least have some a priori judgement regarding the fundamental question of allocation, but we also don’t really have that either (many moral theories ignore the symmetry of externalities which can also lead to deeply troubling outcomes). Some Coasians would say that moral rules emerge to reduce transactions, but given that property rights are defined by power, this generally leads to a “might makes right” philosophy unless those with the power to make the property rights are constrained by something.
Jon Murphy
Nov 6 2018 at 7:47am
What’s the externality going on here? Prima facie, it appears you’re talking more coercion rather than externalities.
JFA
Nov 6 2018 at 10:21am
The idea of externality comes from poorly defined property rights. In the case of the fisherman and the factory, the issue comes from one party’s activity impinging on another’s in the use of the stream. The issue here is who has the right to perform the activity: does the fisherman have the right to fish in clean stream or does the factory have the right to pollute it. Likewise with the mafia and shopkeeper but instead of a stream, there is a flow of resources in and out of the shopkeeper’s store. Who has the right to it? I know the intuitive answer is to say the shopkeeper, but that’s only because we think of the shopkeeper as owner; we have already assumed the structure of property ownership. But if it is more costly for the shopkeeper to defend his store rather than pay the “extortion” to the mafia, then it seems that “efficient” outcome is that the mafia should have (de facto) ownership over the flow of revenue.
When you say coercion, you are implicitly assuming some structure of ownership. Until that structure of ownership is imposed, property rights are ill-defined/non-existence. Replace “mafia” with “obese man”, “shopkeeper” with “thin man”, and “shopkeeper’s revenue” with “thin man’s seat”, and you have an analogous situation.
nobody.really
Nov 6 2018 at 10:26am
Perhaps these examples refer to coercion. So? Coercion is harmless–but for the externalities created by people objecting being coerced, right?
This just illustrates that 1) yes, it takes two to externalize, and 2) we may find it useful to distinguish between an objective description of the situation and our subjective judgments about a situation.
Autonomy rights (property rights, the right to be free of coercion) reflect subjective value judgments, not objective facts. I don’t understand Lemieux to deny that he values autonomy rights. I understand Lemieux to invite us to reflect on this dynamics of externalities without the need to impose judgment. That doesn’t mean that we can’t ALSO impose judgment, but that we should distinguish judgments from facts.
As far as I can tell, the Coase Theorem does not recognize autonomy rights, and thus does not distinguish between negotiation and extortion. That doesn’t mean that WE can’t draw such distinctions–but we do so based on subjective standards.
So,
Mark Z
Nov 7 2018 at 5:35pm
I think you’re expecting Coase Theorem to solve moral dilemmas whereas it only purports to solve economic ones. There’s an argument to be made that one cannot make a convincing case against slavery on economics alone without referring to morality; just as one can’t necessarily make a convincing argument against throwing people off of roofs simply from the science of gravity.
Francisco Capella
Nov 6 2018 at 7:03am
Externalities, one by one, are clearly asymmetrical. The fat man is exceding his space and invading yours (which is external to his). You are not doing the same thing to him. The polluting factory is throwing out (externality) something toxic (negative) from its premises and into the river. The fishers are not doing the same thing to the factory owners.
Some externalities could be symmetrical when they happen in equivalent pairs, for instance breathing by people at the same rate or intensity, meaning consuming the same amount of oxygen and producing the same amount of carbon dioxide.
Jon Murphy
Nov 6 2018 at 7:51am
Then it is symmetrical. “Symmetrical” does not refer to blame or fault or who is “right.” It just means that the externality arises because of the interaction between the two parties.
If the fat guy spilled into the next seat and no one was there, there is no externality. Or let’s say there was a child in the next seat who thought he won the lottery because Santa Clause was sitting next to him, there is no negative externality (there may be a positive one).
Francisco Capella
Nov 6 2018 at 9:45am
Wrong. I am not blaming anyone (though I clearly could in these cases because they are very easy). I am trying to explain what symmetry means: when you exchange the two interacting parties, the situation is the same (a symmetry means a system is invariant under some change, like a rotation, a mirror reflection, a change between agent and patient). You seem to believe that all interactions are symmetrical: they are not. A symmetry is a property of a relationship, but not all relationships are symmetrical.
Peter hits Paul. Asymmetrical, because it is not the same as Paul hits Peter.
Peter hits Paul and Paul hits Peter. Symmetrical, because it is the same as Paul hits Peter and Peter hits Paul.
I hit your face is not the same as your face hits my fist.
If I hit the air there is no relationship, therefore symmetry or asymmetry make no sense.
Also Coase’s theorem is not such a powerful and brilliant idea as many people seem to think it is.
robc
Nov 6 2018 at 11:32am
Isaac Newton would disagree.
Francisco Capella
Nov 6 2018 at 11:57am
Interesting. I studied astrophysics. There is a symmetry in the newtonian law of gravitation, of course m1m2. But even if the forces are the same, the accelerations are not. If you swap the two bodies you have a similar situation, but not the same (which symmetry requires), you have to perform a mirror reflection with a plane passing through the center of gravity of the two bodies. So, symmetry in the law, not in the result.
Natural language reflects the asymmetry of human interactions: there is usually an agent and a patient.
Reciprocal
Nov 6 2018 at 6:41pm
Francisco,
Pierre (and the commenters following) used the wrong word. Externalities aren’t symmetrical, they’re reciprocal. Reciprocal meaning “given, felt, or done in return.” I.e., both parties impose externalities on each other.
andy
Nov 7 2018 at 5:07pm
“Peter hits Paul. Asymmetrical, because it is not the same as Paul hits Peter.”
Symmetrical; Peter hits Paul (Paul feels pain) vs. Peter cannot enjoy the pleasure of hitting Paul (Peter feels psychological pain).
Andre
Nov 6 2018 at 8:39am
“But in buying the same sort of seat, I was similarly creating an externality for any obese person who wanted to travel without arm and foot jostle nor visible annoyance from the next seat.”
When you buy a ticket, you have the expectation that the space between the armrests will be occupied by you and not by someone else who did not pay for it.
I’m gobsmacked by the quote above. By that logic, you’re creating an externality for me, if I’m hungry and you’re not letting me enter your house and eat your food.
Andre
Nov 6 2018 at 11:07am
Also, this strikes me not so much as an issue of externalities (which I don’t think apply in this case), but rather that the airline has sold the same “air space” to two different people, while implying it is selling each person their own space.
(I’ll bet the fine print says absolutely nothing about the possibility that a fat person might get up close and personal with you, and that by purchasing the ticket you’re okay with that.)
David Henderson
Nov 6 2018 at 9:24am
Pierre,
Very interesting and nuanced analysis.
As a factual matter, though, I’m not sure you’re right that you could have purchased 2 seats on a U.S. airline. A tall friend of mine (he’s 6 foot, 4 inches tall) who used to travel a lot on business wanted to avoid paying for first class but wanted lots of room. He asked to purchase 2 coach seats side by side and the airline refused. Maybe it was just that airline, though.
Pierre Lemieux
Nov 6 2018 at 12:00pm
David: According to the smarttravel.com website I cited, all (major) American airlines require, allow, or encourage very fat people to buy a second seat. Perhaps this does not apply to the merely tall because they are assumed to be able to avoid imposing any externality to their neighbors? This would raise the interesting questions of why an airline would want to impose a specific cost–inconvenience instead of money–on the tall and why competition would not cater to this clientèle. Is it for the same reason that you can’t find on the market a tie with pink unicorns on a brown background adorned with green pees: very few people want that, so they need to have it custom made? Or perhaps it is simply too costly for the airline to manage multiple reservations under a single name (even neglecting security regulations) except in very limited cases.
Andre
Nov 6 2018 at 12:25pm
Re: competition catering to clientele….
Heavier (and tall, because they’re heavier) people cost more to service. Much more. Studies have been done about the extra cost.
Airlines don’t cater one way or the other (in fact, avoid the issue entirely) because there’s only downside in taking a stand either way. Oh sure, they may say people must buy an extra seat, but I’ve never seen that.
The presumption is that we should be polite; because of the assumption that obese people are not responsible for their condition.
If an airline today made any actual noises (as opposed to the rules on paper, which are ignored) about obese people having to pay double (much less, enforcement – can you imagine the viral videos!), that would instantly cripple or doom the airline’s finances – the public backlash would be severe. None of the other airlines would follow suit, as they would all stand to benefit from the self-immolation of the first airline.
This is because 2/3 of the market is overweight or obese. If only 2% of people were obese, enforcement would probably be possible, and widely applauded. Many of us have seen the 300 pound person heading down the aisle and prayed, “please, not next to me.”
But when most of your market is fat, you don’t enforce obesity rules.
Pierre Lemieux
Nov 6 2018 at 12:51pm
Andre: As you mention, the obese and overweight make up 70% of Americans or so; but the obese are “only” 40%; and the extreme obese like my travel companion, much less than that. You are right to suggest that informal rules (étiquette is one kind) are similar to property rights in that they serve to remove interactions from the domain of conflict. This however has to be distinguished from the sort of mob rule that the PC intelligentsia supports. If you read the citations in my post, you will see that the two-seat rule is apparently applied, but perhaps it is only in really extreme cases, which is partly why it seldom if ever makes the news.
Andre
Nov 6 2018 at 1:41pm
“If you read the citations in my post, you will see that the two-seat rule is apparently applied”
No, the citation does not show this. It simply describes what airlines’ written rules are, offering no data on what happens in real life. What airlines do in practice is most likely rarely or never enforce their written rules. The fact that many of us have seen lack of enforcement with our own eyes supports this interpretation.
And yes, not all overweight people are obese. I thought the point of using the 70% figure rather than 40% was obvious, but here goes: if the 40% who are obese are targeted, the 30% who are merely overweight will take offense as well, with material consequence to the offending airline. After all, many of them who aren’t yet obese are on their way there, and those who will remain just overweight are well aware of their extra pounds, and won’t take kindly to rules targeting the adipose.
nobody.really
Nov 6 2018 at 4:08pm
Oh? Well, somehow Hurley was able to buy up ALL the remaining seats on Ajira Flight 316 in his effort to return to The Island (eventually crash-landing on Hydra Island, although not before Hurley, Jack, Kate, and Sayid were tele-transported back to 1977).
Let’s see you explain THAT.
Are you perchance acquainted with Derrie-Air, where the more you weight, the more you pay?
Under US federal law (and many state laws), firms providing “public accommodations” are prohibited from discriminating based on suspect categories. I don’t know that any court has ruled that weight is a suspect category. (Note that men tend to be larger than women, so perhaps this could be regarded as a form of gender discrimination?)
But I share Andre’s view that many people would react badly to a policy of “the more you weigh, the more you pay.” The topic is sufficiently fraught that people would avoid the airline just to avoid the topic.
Then again—Derrie-Air would become known as the airline full of slender people. Thus, it might become a mark of prestige to be seen boarding and exiting the flight—and perhaps a dating site. Prestige—plus the cost advantage of avoided fuel costs—might suffice to keep the airline flying.
Pierre Lemieux
Nov 6 2018 at 12:36pm
Many interesting comments above bring in the limelight the crucial distinction between the positive (where externalities thrive) and the normative (what should count as externalities and what should not). Nobody.really expressed the gist of this idea. Welfare economics has shown that public policy cannot be evaluated without value judgments. A system of private property rights is a good (I would say the best) mechanism to minimize externalities, but it itself requires some value judgments, although much fewer than other systems meant to coordinate individual actions.
We can probably say about externalities what Buchanan said about public goods: “The dividing line between private and public goods depends, in part, on how the property rights of persons are defined.” The photons that the light-reflecting cross on my property sends into the retina of the atheist passerby is defined out of the externalities set by my property right in my land; same for the unease I feel before certain lifestyles (Mishan’s “mere conscience of what is happening to others”).
John Hare
Nov 6 2018 at 12:50pm
I also do not see the situation as symmetrical. You paid for that seat for the duration of that flight. Encroachment is trespass just as if someone enters a motel room you have paid for within your consent. You cannot outbid a thief.
Pierre Lemieux
Nov 6 2018 at 1:00pm
John: It’s not that clear what you have bought. You can be bumped (albeit with some compensation now). There is no wall around your seat. Except if you have a window seat, there is a right of way in front of your seat. And note that the airline and your fellow passengers regularly send unwanted photons within your seat area–not to speak of scent particles. This illustrates why the airline’s property right on your seat is important to make efficient trade-offs.
Francisco Capella
Nov 6 2018 at 2:07pm
Contracts are incomplete, so it might not be clear what I have bought. But I have probably bought the same thing or service as my neighbour, so we are equals: if he may invade my space, I may invade his (pushing my elbow against his body, for instance); or nobody can exceed his space, which is defined by the boundaries of the seat (this being the right common sense solution).
If there were walls this problem would not exist (others would, like noises and scents). But walls are expensive (production, setting, weight), cause other problems (some neighbours may want to talk, see, touch each other) and not the best solution: instead of positive real barriers, we use normative barriers, forbidding the invasion of others’ space withour their consent; you have to internalize your problem and have no right externalizing it.
Regarding photons, noises, scents, normative solutions are not that hard: there are minimal natural default emmissions, in many cases near zero or barely noticeable (below some threshold). My very minor nuisances are equivalent to your very minor nuisances, one for the other, and they are too expensive to fully eliminate. When a situation becomes more asymmetrical with one party emitting too much, there you have a problem, and also a clear responsible party.
John Hare
Nov 6 2018 at 12:53pm
Without your consent.
JFA
Nov 7 2018 at 8:57am
There is also the question of whether this is actually an externality. Presumably, the potential inconvenience you experienced (i.e. the probability of sitting next to an obese person) is already baked into the price of the ticket. If so, then there is indeed no externality. Just like excessive noise (within the building) at a busy restaurant with poor sound dampening construction is not an externality as this inconvenience has already been reflected in the price of the meals.
Patrick R. Sullivan
Nov 8 2018 at 9:47am
BTW, in The Theory of the Firm Coase explains how to organize those transactions costs away. Which is what airlines should be doing about this problem.
Mark Z
Nov 7 2018 at 5:44pm
I find Canada’s regulation (and I assume there are people in the US who would support the same kind of regulation) against making people buy multiple seats for consuming multiple seats to be interesting. I imagine the justification for it would be similar to the justification for outlawing charging buyers of health insurance more for pre-existing conditions: it’s not necessarily ‘their fault’ for consuming more health insurance/seats, since their conditions may be at least in part genetic.
I wonder if people are willing to take this reasoning to its logical conclusion: should it be illegal for restaurants to charge people more money for more food? After all, people who are naturally larger have to consume more food to survive, through no choice of their own. Is it not unfair? Perhaps we should make restaurants charge a fixed price per person while allowing the person to vary the size of their meal at no extra cost in accord with their dietary needs?
Being facetious now, I wonder how much more the average man’s food expenditure is than the average woman’s? Perhaps we should call this the Blue Tax, and air indignant commercials demanding legislative remedies to this gender injustice.
Spencer Broome
Nov 8 2018 at 10:17am
I have to say that the title of this blog post is what reeled me in. In being both humorous and factual, you have managed to get me thinking. In my economics class, we discussed externalities which allowed me to comprehend this post a bit better seeing as how I was able to more easily understand it. Throughout reading the many paragraphs here, the gears of my mind began spinning and contemplating the externality paradox.
As you said, both of you could have made the same actions to dissolve the issue, yet neither of you did. I think I understand why as well. In your case, you could not have expected the situation to happen, so why pay for a better seat? In the case of your “fat and involuntary travel companion”, he may have been financially unable to purchase an upgraded seat or even two seats. This could have been the only option for him and there was nothing he could do about that except roll with the punches.
To me, this exemplifies perfectly how externalities are. They can come out of left field, leaving you no time to react. Worse yet, you might know it is coming but not be in any situation where you can avoid it, leaving you to accept your fate. I really appreciate this post as it was able to humor me while also helping me grasp a better understanding on an economic occurrence.
Andre
Nov 8 2018 at 2:24pm
“…and there was nothing he could do about that except roll with the punches.”
…and punch with the rolls…
Comments are closed.