Art Carden  

Coase on a Plane, or, an Idea, Recycled

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I agree with co-blogger Bryan that most voters are rationally irrational. My sense is that there are also a lot of voters and people in positions of influence who know just enough economics to be dangerous. As Steve Horwitz and I pointed out in a recent essay for the Library of Economics and Liberty, "market failure" is where the conversation begins, not where it ends.

A couple of hours ago, I got off a flight where I was seated near a couple of very, very loud children: before we departed, a few of my fellow passengers were craning their necks and looking for the source of the disturbance and--I hope--pitying the mother. This brings me back to a set of questions I've always wanted to ask on an exam or to a job candidate. From a 2009 post on Division of Labour:

Crying babies and loud children are among the common complaints of frequent flyers; indeed, I can say from personal experience that a screaming infant can make for a long flight. Describe the reciprocal nature of the externality. How does the private market internalize the externality? To what extent does the possibility of an upgrade to first class help mitigate the externality? What is the role of reasonable expectations in deciding on a policy? What is the parent's responsibility? What is the responsibility of the other flyers?

Answers, anyone?


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COMMENTS (16 to date)
David R. Henderson writes:

I don't think it's an externality. I'll wait and see if anyone else has my view and explains my view before I step in.

Mike writes:

So what is the definition of an externality?

I lean toward saying that any action affecting a person and does not arise out of an explicit agreement with them is an externality.

Other passengers are affected by a crying baby, and the baby has not paid them for that privilige. Nor, in most cases, have the passengers paid the baby not to cry.

The parents of the baby are among the people most affected by the crying (some develop an immunity but in general it seems they experience a lot of discomfort, which is magnified by the embarrasment they feel). Parents generally attempt to come to an agreement with crying babies, but the negotiations often fail.

Since parents are usually the ones to bring babies onto airplanes, they partially responsible for the impact on other passengers. They are slightly more likely than the babies themselves to compensate the other passengers for this inconvenience. Sometimes passengers ajnd airline employees attempt to negotiate with parents in an attempt to motivate them to make a more convincing offer to the babies.

Nickolaus writes:

I suppose one option would be to make the parents with children pay more for a baby's fare and use that to lower the cost of the tickets for everyone else.

Salim writes:

This is a tricky situation. If you want to think about it as an externality, you have to think about the parents' actions, not the babies'. The babies didn't decide to take the flight.

I would view this as a matter merely of preference and personality. Babies (and families) are who they are, and that includes a markovian process between states of cuteness and crying. To ask for a Coasian solution to this would be almost as bad as asking if we could pay [black,Muslim,female] people not to share our flight.

Now, some might see nothing wrong with offering someone money to go sit somewhere else because you don't like them. But it's clearly a violation of liberty to force that person - a black, a Muslim, or a parent - to accept the offer if it's made.

johnson86 writes:

The argument that it's not an externality: All the flyers are voluntary participants to a transaction that puts them in close proximity, with an implict term of the transaction being that one cannot necessarily get away from crying babies (or even people who smell). The price received by the airline reflects this implicit term/cost, and therefore there is no externality. If passengers value a no-crying experience, an airline will offer it to them for the right price. The fact that a market doesn't provide for every individual's preference is not a market failure or evidence of an externality.

The argument that it's an externality: Airplane cabins are public space like the interior of any public carrier. When one passenger invades another passengers space, whether by smell, noise of a baby, or physically because they don't fit in their seat, they are paying for the benefit of flying, and they are imposing a cost on that other passenger that is not reflected in the price (because their ticket price does not reflect that cost).

I thought it was definitely an externality at first, but after writing it out, I think basically all customers are buying tickets that come with the option of being loud within reason (or smelling within reason or being fat within reason), and the fact that not everybody needs or uses that option does not make the exercise of such option an externality, any more than it is an externality that tickets are not priced on weight and volume.

ryan p writes:

I definitely don't think this is an externality. It might be if you were on a state-owned airline, but as it is, any cost imposed by the parents of the crying child (measured in terms of willingness to pay) shows up in a fall in demand for the airline. If the lost revenue there is greater than the increased demand for flights by parents with small children (e.g., relative to the case where small children aren't allowed on planes, say, or where there's a per decibel service charge), the airline loses money and has an incentive to change its policy. Any costs imposed by one passenger on another are mediated by the price mechanism, and so the externality is pecuniary (aka "fake," to use a technical term). This implies there can't be an inefficiency except insofar as firms aren't profit-maximizing or consumers are irrational.

Julien Couvreur writes:

I don't know if that is what David has in mind, but maybe the crying baby on a plane isn't an externality because the whole situation is under the control of one organizer (the airline).

A few solutions:
-some airlines might offer child-free flights or zones
-distribute earplugs
-drug the infants to sleep :-S
-create super noise cancelling technology
-come up with a peaceful method to keep infants quiet (and make millions)

Philo writes:

I think you will have a hard time making the case that this sort of situation is *never* an externality, since (I think) your definition of ‘externality’ is *a situation that would be improved upon by bargaining if transaction costs were zero*. It might be that the other passengers had noticed the babies’ bad behavior before the flight took off, and would have been willing collectively to pay the mother enough to induce her to take a different flight (or to rent a car, etc.), had they been able to get organized and had they been confident that the mother’s side of the agreement would be enforced. (And there are other externality scenarios.) I don't know how common this is, but it's not impossible.

David C writes:

In other similar situations, such as in a movie theater, societal expectations are that the parent should remove the child from the space. They can't do this on an airplane.

Airlines have already started to place additional costs on larger people which is a similar issue.

I can see the argument that this isn't an externality, but if this isn't an externality, then nothing is. If you buy a house, and two months later somebody runs through it with their car, that's not an externality because when you bought the house, you internalized the potential risk that somebody might one day run over it with their car.

Andrew writes:

@David R. Henderson,

It seems as if a crying infant fits the typical definition of an externality, as an action that has a direct, unintentional, and uncompensated effect on the well-being of another individual.

A person on a plane's happiness partly depends on the level of noise around them, so a crying infant has a direct effect on the person's happiness. The crying infant's action is intentional, however the effect on other passengers on the plane is clearly unintentional. To finish, the crying infant is not fined for their actions, so they are in effect being uncompensated for their actions.

MikeP writes:

To what extent does the possibility of an upgrade to first class help mitigate the externality?

Ah, finally the missing piece to my Rent-A-Lap-Child business plan.

How does the private market internalize the externality?

Whenever I fly with a baby, I bring 130 pairs of noise-cancelling headphones. The airline is kind enough to allow them in a second carry-on.

Finch writes:

I'm generally in the "crying baby is not an externality" camp. If you want to escape, fly private. Your tickets are cheap because crying babies fly too.

But as a human, I want to add that if you don't like crying babies, grow up. Crying babies are one cost of a healthy society. Go over and thank the parents. Help them with their bags or something.

MingoV writes:

Upgrading to first class does not eliminate the crying baby or noisy child problem, because travelers with infants and young children often get seated near the front of the coach section. Thus, there is little mitigation from paying for first class. (That would change if a soundproof door separated first class from coach.)

My personal solution to noisy travel situations is to play music through earphones that reduce external noise by 35 db.

John writes:

I always find comments along the lines of "just enough economics to be dangerous" or "ignorant of economic theory" from economist, and especially free-market types, somewhat puzzling or disturbing.

Most economists seem to think that economics is about understanding what people within economies are doing. People already have the inarticulate knowledge about ordering their affairs.

To suggest then that one is suddenly unable to extend their decision-making skills they have when acting for themselves into another setting fails due to a lack of that knowledge. There seems to be either a hidden central planner in these people or they simple fail to grasp that it's not the economic knowledge but the change in institutional setting.

Either take seems to suggest that such rhetoric should be carefully examined.

Ken P writes:

I always feel sorry for the crying baby.

Nick J writes:

This is an unambiguous case of an externality. An externality is a cost or benefit imposed on someone else by an action. An externality is not a situation that could be improved by Coasian bargaining, and just because something can be remedied by market forces doesn't mean it's not an externality. Many markets that work well have significant externalities.

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