Robert Reich was relieved that he was a passenger on one of the last flights to leave NYC before the airports closed on Monday. But he’s upset that the airline had “jacked up” ticket prices to $4,000 for the last flights leaving NYC for California. Even at $4,000 per ticket, the flight was oversold by 47 passengers, and the airline then paid 47 volunteers $400 each to take a later flight, “whenever that might be.” In his own words, Professor Reich explains:
Assuming that the 47 extra passengers had each paid $4,000 to get onto the plane at the last minute, and the 47 who gave up their seats for them received $400 in return, the trade would have been “rational” in narrow market terms. After all, the seats were “worth” $4,000 to those who bought them at the last minute, and switching to the next flight (whenever that might be) was “worth” $400 to those who agreed to do so.
But the transaction was also deeply exploitative. The airline netted a huge profit because of the impending storm.
I couldn’t help think this was a miniature version of the America we’ll have if Mitt Romney is elected president. Rational and efficient in terms of supply and demand, guaranteed to maximize profits, but fundamentally unfair.
MP: Here’s what I find exploitative and fundamentally unfair: Robert Reich’s speaking fee is $37,500 to $100,000 according to the website below, and he therefore is able to net huge personal profits for his 30-minute talks.
OK, actually, I think it’s great that Professor Reich uses market-based pricing for his speeches, and I applaud him that he can apparently charge speaking fees as high as $100,000 based on demand, but then he really shouldn’t complain when an airline uses market-based pricing to allocate scarce seats on a plane when demand is high during a natural disaster.
And if Reich thinks that the market for giving speeches is an example of a market that is “guaranteed to maximize his profits” as a supplier of speeches, but is “fundamentally unfair,” because his prices and profits are so high, then I would challenge him to reduce his speaking fees significantly to a much lower, and much more “fair price.”
HT: Dean Harrington
I haven't seen the discussion of airline ticket prices on any other board, including Flyertalk. Google brings up no recent articles.
First, if someone had already purchased the ticket, they wouldn't have had to pay $4,000 for a seat.
Second, the $400 bump fee is mandated in law. Customarily, airlines also refund the full cost of your ticket when that happens - at least on Southwest.
Third, what reservations system allows 47 overbookings?
I think that he made it up as a class lesson in mythology.
Here is RR original post. The entire blog post sounds like a made up story or meme, much like racist taunts, lesbians being attacked or murderers with a middle name of Wayne. He is telling socialists what they want to hear.
He also completely misses the point of the AFI article - even Reich and his agent work to guarantee their maximum profit. The same behavior by capitalist politicians is fundamentally unfair.
Leaving New York City yesterday bound for California on one of the last flights out of JFK before the airport closed, a flight attendant told me I was lucky to already have my ticket. In light of the pending hurricane, the airlines had just hours before jacked up ticket prices on the flight to $4,000 (I had paid a few hundred dollars when I bought it last week).
As a result of the last-minute rush for tickets, the flight was oversold by 47 passengers. So the flight attendants offered money to any passengers who volunteered to switch their tickets to the next flight out of NYC, whenever that might be. The first offer of $200 wasn’t enough to elicit 47 volunteers, nor were the subsequent ones of $300 and $350. An offer of $400 finally did the trick.
Assuming that the 47 extra passengers had each paid $4,000 to get onto the plane at the last minute, and the 47 who gave up their seats for them received $400 in return, the trade would have been “rational” in narrow market terms. After all, the seats were “worth” $4,000 to those who bought them at the last minute, and switching to the next flight (whenever that might be) was “worth” $400 to those who agreed to do so.
But the transaction was also deeply exploitative. The airline netted a huge profit because of the impending storm.
I couldn’t help think this was a miniature version of the America we’ll have if Mitt Romney is elected president. Rational and efficient in terms of supply and demand, guaranteed to maximize profits, but fundamentally unfair.