Industrial Insight

Interesting… | July 31, 2011

http://www.nationalreview.com/agenda

Coase in Flight

July 29, 2011 6:25 P.M.
By Josh Barro

Gene Weingarten, whose work I normally love, is currently running an inane campaign to get people to stop reclining their seats in economy class on airplanes. He’s even put together a passive-aggressive card that you can hand to your fellow passenger, scolding him for being so rude as to recline.

Sorry, Gene. The property rights in reclining a seat belong to the person who is sitting in it. I will recline if I please.

Of course, if Weingarten really hates sitting behind someone who is leaning back, he already has an option: he can pay his fellow passenger to agree to keep his seat upright. This is a straightforward application of the Coase theorem, which Wikipedia summarizes as follows: “if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.”

It’s hard to think of a more tradeable externality than this one: while pollution can have negative effects on millions of people, there are only two parties to the question of whether an airline seat should recline, and they are sitting three feet away from each other.

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