Category Archives: Economics

The Jobs Fallacy

Politicians fight for jobs and their constituents love it. Governments write reports that laud politicians on their success at achieving jobs often double counting. Who gets the thousands of jobs that are created when a factory or government building opens? The same people on average who lose a job when a factory closes. Who gets the jobs that are created when those primary jobs created demand for additional services? The same people who lose the jobs in other parts of the country where people are leaving. The number of jobs gained nationwide is not positive sum unless people there is immigration or a fall in unemployment. Once you set monetary policy and tax policy and immigration policy, government subsidy for jobs is a zero sum game or a negative sum game.

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Shape of the Next Industrial Revolution

In Offshoring: The Next Industrial Revolution in the current issue of Foreign Affairs, Prof. Alan Blinder, former Federal Reserve Vice Chairman, shows us why the New Economy had good currency at the Fed while he was there. He posits that as manufacturing takes up fewer and fewer jobs, the economy is going to mostly be two types of services: personal services and impersonal services. The former will be what almost everyone does in rich countries while they import impersonal services from poor ones.

This strikes many of the same chords as Glenn Reynolds’s new book, Army of Davids (reviewed here and here).

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Long Overdue

Northwest is going to start charging extra for some seats:

Northwest Airlines is expected to announce today that it will begin charging customers more for seats with added legroom, including coveted emergency exit row and some aisle seats. The price: an extra $15 for each leg of the flight. Northwest calls them “Coach Choice” seats.

Airline experts believe such nickel-and-diming of air travelers is just beginning. By as early as the summer travel season, they say fliers could be paying for nonalcoholic beverages and the privilege of checking luggage.

Bundling all of these services is one of the last holdovers from the old days of the CAB and airline regulation, in which they used amenities to compete, because the ticket prices were regulated. But by doing so, they aren’t letting the market work, and they’re not getting any signals as to what passengers actually want. When I do carry-on, but pay the same ticket price as someone who is checking two pieces of luggage, I’m subsidizing them. It makes perfect sense to me to have a basic fare for people who just want to get from here to there, and have others who want more to pay for it.

Of course, it works great for me, because I don’t like aisle seats, and it may make it easier to get my preferred window (something I’d happily pay fifteen bucks for to be assured of it). Not all seats are created equal, and just as there is a separate first-class section (though those are disappearing from some airlines, like Delta’s Song, as well), it makes sense to price them separately rather than this nonsensical egalitarian notion of first-come first-served. I had the Worst.Seat.Ever on my red eye from LA Friday night–a center seat in an exit row that wouldn’t recline. I’d have paid quite a bit to swap for at least the window, if not one that would recline (I suppose I could have just asked if anyone wanted to sell me their seat…)

The best thing to me, though, is that if we separate out the services of delivering passengers and luggage, it will make it easier to transition to a regime in which the luggage flies on a separate plane. I don’t worry about hijackings since September 11 (not because of the idiotic, expensive and time-wasting security measures, but because the passengers will never allow it to happen again). But I do worry about bombs in luggage, something that we’re almost certainly not doing as good a job of screening as we could (again, because of the misallocation of resources attempting to disarm passengers). I’d feel a lot safer if I knew that the luggage was on a different, cargo airplane. And taking down a cargo aircraft with a two-man flight crew wouldn’t have anywhere near the emotional impact of killing hundreds of passengers, so the bomb-in-the-luggage would be a much less appealing activity to terrorists.

[Update a few minutes later]

It strikes me that it could also make sense to put in a few “wide load” seats, that they could charge more for. While people who are too large for standard seats would still feel put upon that they have to pay more (an unjustifiable grievance, to me) they wouldn’t have to pay twice as much, as they do now when they have to buy a second seat. It would also make happier the people who currently have to get squished sitting next to them. One size does not fit all, even (or especially) in airplane seats.

[Update at 11 AM EST]

Per one of my commenters, maybe I’m weird, but I find the phrase “comfy aisle seat” an oxymoron. I hate aisle seats. I almost prefer a center seat to an aisle.


Because if I’m in the aisle, I have to let people in and out when they (almost inevitably) decide they want to get in and out. In addition, my arm on the aisle-side armrest is always getting jostled by everyone wandering up and down the aisles, not to mention drink carts.

I just want to get into my window seat, where I can hunker down for the flight, relax, not have to let anyone in or out, and look out the window. I cannot fathom people who prefer aisles, but apparently many do.

Post-National Olympics

In today’s Wall Street Journal, the editors note (subscription required) that we care more about individual athletes than the US team:

Today, without a common political foe to concentrate our patriotism, personalities have come to dominate broadcasts. This is an explanation, not a complaint; no one’s hankering for those Cold War tensions of yore.

I think this direction should be encouraged. Rather than the Greek and modern version of national teams competing in sports instead of war, it should transcend nationalities. “Like the NBA,” an Olympic basketball team should have athletes from many countries. Relays and other team sports should be composed of Star-Trek style international members.

A good way to bleed the power out of nationalism is to attack its very definition as mobile citizenship and superstates like the EU have done.