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I spent Thanksgiving on a 12- hour flight from Europe to Los Angeles, wedged in the middle of a row, with the back of the seat in front of me about a foot from my face. (The plane was made by Airbus, rightly described by my Bloomberg View colleague Adam Minter as “a pioneer when it comes to passenger discomfort.”)
Fortunately, when I slid down in my own seat, which I kept upright, I did have enough room for my legs. And I was lucky to be reading on a tablet, not trying to work on a laptop. But the experience gave me an opportunity to contemplate the war that periodically rages between passengers who expect to recline and passengers who feel equally entitled to use their trays and flex their knees.
Airline seats offer a perfect illustration of Ronald Coase’s famous analysis in his 1960 article, “The Problem of Social Cost.” Coase’s crucial insight was that the way we tend to think about unwanted spillovers misses half the story. “The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong,” he wrote. “We are dealing with a problem of a reciprocal nature. To avoid the harm to B would inflict harm on A. The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?”
The traditional sort of thinking leads people on both sides of the airline-seat debate to get self-righteous, arguing that legroom and the ability to work is more important than comfortably reclining, or vice versa. Each camp finds the other rude. Each camp wants to improve its situation by inflicting harm on the other. It’s a “problem of a reciprocal nature.”
But, as Josh Barro has observed, the airlines have clearly defined the property rights. Passenger A (the recliner) has the right to harm Passenger B (the unfortunate soul behind him). Citing a common simplification of Coase’s work, Barro claimed that “it doesn’t matter very much who is initially given a property right; so long as you clearly define it and transaction costs are low, people will trade the right so that it ends up in the hands of whoever values it most.” So, he argued, “If my reclining bothers you, you can pay me to stop.”
This solution, however, is highly unrealistic. It waves away the central theme running throughout Coase’s work: the problem of transaction costs. Making and enforcing contracts, Coase emphasized, isn’t free. And when it comes to airline seats, it’s a lot more costly than Barro admits.
In theory, I could have offered the guy in front of me money to sit up, but even assuming that my fractured Italian had been up to conducting the negotiations and that he wouldn’t have gotten nasty in response to my overtures, how would I have enforced the deal? It’s not a simple problem, and certainly not a cost-free one. Suggesting that as long as property rights are well-defined, you can simply make a deal misunderstands what Coase was all about. He was obsessed with transaction costs. They explain why we have institutions (including firms), not just individual bargains.
Airline passengers don’t need costly bargaining. They need a better assignment of property rights. So here’s a more feasible proposal for peace in the back of the plane. Instead of giving all seats the right to recline, divide the plane laterally, with reclining seats on one side and non-reclining seats on the other.
Those of us who don’t care about leaning back and would rather not have other people in our laps could then pick the non-reclining side. The Josh Barros of the world could still lean back in comfort, but they wouldn’t get the benefit of sitting behind those of us who keep our seats upright. If one side proved more popular, the airline could charge more to sit there. There would be fewer surprises and less conflict. I’m not the only one to think this is an obvious solution. All we need now is an airline willing to give the idea a try.
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