Friday, May 12, 2017

Airline seats and the market

A story about airline seats caught my eye, because it tells us something about markets. CNN Money reports:

American Airlines is planning to decrease the front-to-back space between some of its economy class seats by another two inches.
The airline says it plans to add more seats on its coming Boeing 737 Max jetliners. To do that, it will shrink the distance between seats, also known as pitch, from 31 inches to 29 inches on three rows of the airplane, and down to 30-inches in the rest of its main economy cabin.
...
With the change, American will become the first large U.S. carrier to offer legroom with a pitch that's nearly on par with ultra-low cost carriers Spirit Airlines and Frontier Airlines. Those seats are an industry minimum 28-inches apart.
By comparison, economy class pitch on Delta Air Lines and United ranges between 30 and 31 inches, while JetBlue Airways, Southwest Airlines and Alaska Airlines have between 31 and 33 inches.
...
As the big airlines match each other move for move, the risk is that 29 inches becomes the standard for flying economy in the United States. American has been a bellwether before for the airlines. For instance, it was the first big U.S. airline to introduce bag fees in 2008.
Airlines have enjoyed strong profits and low fuel fuel prices after a decade of consolidation. They're adding seats now to help offset rising employee wages.
"This is one of the best economic environments the U.S. airline industry has seen in decades," said Harteveldt. "There is no need to race to the bottom."
But a race to the bottom is indeed what we have. Interestingly, because humans are really just animals, one way you can see we are getting to "the bottom" is the increasing number of cases of violence that have been breaking out, in airplanes and at airports, as humans are increasingly stressed out by the travel conditions (see recent cases of Dr. Tao, a fight on a Southwest Airlines flight caught on video, fights due to frustration with Spirit Airlines' cancellations, and of course the infamous case of Dr. Dao, about which United Airlines has apologized (and paid compensation).

Airline violence has been a problem in China in recent years, too. According to the SCMP in 2013, Hong Kong Airlines reported that they had incidents of violence on flights between Hong Kong and China an average of three times per week, and so started teaching their flight crew martial arts. 
In China, passenger violence is usually blamed on the "low quality" of Chinese tourists.  Certainly, manners and "education" are important in preventing people from fighting all the time, but the stress of being in crowded spaces, of not having control, and being among strangers, all lower any person's trigger point for overreacting and even violence. (BTW, on the strong reaction to the Dr. Dao United incident in China, see this very insightful commentary).

In the US, there is a religious faith in the power of the market to solve everything. And indeed, market forces have reduced airfares and really created a much larger and more efficient industry. Where flights need to be negotiated by international agreements (e.g. between the US and China), prices are often inflated by the lack of competition. But what we see with airline seats is a market failure. American Airlines discovered many years ago that while consumers overwhelmingly say they want wider seats and more leg room, they are not willing to pay for it. They tried to meet customers' demand, but found that when they went to buy tickets, consumers preferred to save the money. This is especially true now with the internet, where it is very easy to compare prices. Expedia and Kayak and other travel sites all list fights by price; they do not list leg room (known as seat pitch). 

So airlines start charging separately for baggage, and for choosing your seat, so the ticket can actually look cheaper when the customer goes to buy it. To some extent this is the way the market should work: people pay for what they want, and poor people (and students) take the middle seats. 

But the pressure to reduce costs also gradually makes the airlines stuff as many passengers as they can in an airplane. Customers gradually get used to the newly crowded conditions--except those that lash out. Only some sort of industry standard will prevent airlines from continuing to reduce seat space. (I can foresee extra charges if you are fat, wide, or "excessively" tall; that is the natural next step). Congress told the airlines that either they come up with rules or congress will do it for them. 

The problem is that since so many people "believe" in the free market and do not understand that in some cases markets can fail, I don't see this being solved any time soon. A Red State columnist even criticized congress holding hearings on the United incident, predictably claiming any government interference would just raise prices for consumers and not improve service. Congress did hold hearings, and both Republicans and Democrats criticized the airlines, but it seems even this issue will be political, with Democrats calling for regulations and Republicans against regulations. The possibility of a free market with some regulations to set minimum standards is impossible to achieve. American Airlines reducing their seat size right after the hearings in Congress seems to prove that this market failure will not be solved or even addressed any time soon.


Friday, May 05, 2017

Racism and individualism

I heard a very interesting NPR Fresh Air interview withRichard Rothstein yesterday on the podcast while doing errands (transcript here). He has just published a book that shows how US federal government policies during the New Deal (1933-1941) had systematically discriminated against Blacks. He noted, for example, that the term “redlining” referred to government maps that had neighborhoods marked with a red line where government loans were not allowed because residents of those neighborhoods were Black. I thought I had heard him on Fresh Air before, so I googled his name. Sure enough, I found that he was a guest on Fresh Air almost two years ago.

In my google search, I stumbled across a right wing blog by Jack Coleman of the Media Research Center’s “News Busters” (which claims to expose "liberal bias") that has a severely distorted take on Rothstein’s argument, and it—and especially the comments section—show serious lack of understanding of social forces.

First the distortions. Coleman begins by implying that though FDR is an iconic leader for liberals, his record with the New Deal is problematic. He then includes a transcript of sections of the Fresh Air interview, with key parts in bold, to highlight the facts raised by Rothstein. These facts (accurately reported) include:
  • The Public Works Administration of the New Deal had explicit segregation policy, “So public housing policy created racial segregation where none existed before.”
  • The Federal Housing Administration would not give loans to Blacks, so the suburbs that sprang up after WWII were all white.
  • “Public housing became all-black in the inner city. And these two policies -- of public housing and Federal Housing Administration subsidization of suburbs -- are the two major factors that have created the segregation that we know today.”

 Coleman also highlights a part of the interview where Rothstein mentions that George Romney (Mitt’s father and former governor of Michigan) had tried, as Nixon’s Secretary of Housing and Urban Development, to only offer federal funds to communities that desegregated, but was blocked by the Nixon administration. He somehow thinks this exonerates Republicans from being charged with racism; seems to me it only exonerates Romney the Elder. Coleman also notes that unions prevented Blacks from joining, and that this discrimination was endorsed by the National Labor Relations Board, so was not merely a local action. Only after 1964 was this reversed. Again, this is supposed to indict all labor unions (American conservatives hate unions), but my take is that racism was deep-seated and made worse by state action, not that racism was somehow inherent in labor unions.

Rothstein’s point is made clear when he notes that for most Americans, homeownership is the main way that wealth was created and accumulated, and since subsidized home ownership was not possible for Blacks, it resulted in much lower levels of wealth for Blacks. While Blacks earn 60% as much as whites, they own only 5% as much wealth as whites. This provides Blacks with less of a buffer, which is why Blacks suffered more than whites from the Great Recession of 2008.

(As an aside, Rothstein repeats many of these points in his 2017 interview, including these 60% and 5% numbers. I checked the transcripts to see if the 2017 interview was not a repeat of the 2015 interview, but it is a new interview, albeit with some repetition. A good interviewee knows how to tell a story and focus on the core message, even if he/she is repeating himself. If I had been interviewed, I might have assumed listeners had heard me the first time, or would be annoyed by my repetition. As it happens, I only vaguely remembered the first interview, so he was right to repeat himself.)

Coleman’s take on all this is to imply that liberals have suppressed this information because it conveniently “perpetuates the myth that the Republicans are solely responsible for racism in this country.” This “myth” is, in fact, a surprise to me. A myth of a myth. While the Republicans are indeed the party of racism today, they were clearly the opposite from Lincoln through to Eisenhower. Coleman displays fake surprise that a Berkeley professor would do such research, and that such a story would end up on “liberal media.” This is rather disingenuous, since it is liberals in general who are concerned with questions of inequality (conservatives assume a free market would reduce inequality; they do not believe Picketty). Coleman likes the story only because he thinks it undermines the ideals and practices of the New Deal, which conservatives love to hate.

Implicit in Coleman’s critique is also the idea that if it had not been for “government interference,” there would not have been any discrimination. That is not how most liberals will take this story. They will see it as a case of how despite the liberal intentions of the FDR administration, Black interests were sacrificed because of racist notions at the time. Liberals will not see this story as undermining the New Deal. But conservatives are right that “good intentions” and government programs have the potential to cause great harm. Of course, not acting can also cause or perpetuate great harm.

The most up-voted comments to Coleman’s blog shows that right wing Americans are intensely individualistic. One comment is a resentful attack against “victimhood”, particularly of “blaming conservatives and Republicans, and whites in general.” Addressing Blacks, he/she says:
Stop blaming whites, stop blaming slavery, stop blaming Jim Crow and segragation [sic] and start taking an independent initiative to make a better life for yourself and your family. Continue to blame whites and don't be surprised to find your children and grandchildren still living in ghettos for generations to come.
 A comment to this comment says:
Until a spotlight is turned on black inner city culture...nothing will change. It's not about race...but it's always been about culture. Getting an education, being married, and bringing up your children to do the same is a large part of the answer. Why can't anyone say that in public today?
Because it is simplistic and wrong?

That writer falls back on the common “blame the victim” argument: Blacks are poor because of their individual behavior, because of their (implicitly) dysfunctional culture. Americans are intensely individualist and ahistorical. These commentators are not interested in how the past affects the present. Interestingly, they are not even following the logic of the blog (and the book), which is that federal government intervention made poverty worse for Blacks. These readers assume that by getting an education, being married, etc., one can single-handedly pull oneself up by the bootstraps, as the expression goes. The institutional factors like redlining that disadvantaged Blacks are completely ignored. While Rothstein is making institutional racism even more dramatically clear with his research, these commentators insist on individuals being Horatio Alger. They are saying, OK, racism happened, but get over it! Move on! If only it were so easy.

There are important individual choices that each person makes that affect their lifecourse. But any basic social science course (by which I mean sociology, anthropology, political science; not economics) will also teach us that we do not make these choices entirely freely. Interestingly, conservatives in Europe are more aware of the importance of institutions and historical forces in shaping our individual choices. American conservatives have perhaps studied too much economics, and reduce everything to the individual. We need better ways of integrating the structural forces of society with individual choices. This has, in fact, been one of the main issues in anthropology over the past 40 years. But there is little hope for the US politically if many people cannot see structural forces, and even misread research like Rothstein’s and think it only means individuals need to make better choices.