Who Owns the "Right to Recline?" The Airline
By David Henderson
I wrote an article to that effect in 2011, noting that airline seats are an excellent case study for the Coase Theorem. This is an economic theory holding 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. That is, I own the right to recline, and if my reclining bothers you, you can pay me to stop. We could (but don’t) have an alternative system in which the passenger sitting behind me owns the reclining rights. In that circumstance, if I really care about being allowed to recline, I could pay him to let me.
So writes Josh Barro in “Don’t Want Me to Recline My Airline Seat? You Can Pay Me,” New York Times, August 27.
His economic analysis is fine.
But the ultimate owner of the right to recline is the airline, not the passenger. It happens to be the case that the airline assigns the right to the passenger. But one could imagine the airline acting differently if enough passengers were upset.
As I’m writing this, I’m starting to think that I’m quibbling. After all, if the airline has assigned the right to the passenger, then Josh is correct in saying that he owns the right.
But I think it’s more than a quibble, because Josh’s way of putting it ignores the fact that the airline owns the whole airplane and gets to decide how to allocate the space. He might not be misled and probably would agree with my claim about the ultimate owner. But I think some of Josh’s readers would be misled.
Why do I think that? Because look at the discussion over smoking in restaurants back in the 1990s when various state governments started to ban it. There was a huge discussion about externalities that smokers imposed on non-smokers. But that discussion ignored the fact that the restaurant owner has well-defined rights and, therefore, there is no externality. The Coase Theorem does not need to be invoked. The restaurant internalizes all costs and benefits. I’ve written about that in “Smoking in Restaurants: Who Best to Set the House Rules,” Econ Journal Watch, 2007, Vol. 4, Issue 3 and in “How Property Rights Solve Problems,” Econlib, April 2, 2012.
Barro challenges Donald Marron, former director of the Congressional Budget Office. Barro writes:
Mr. Marron says we ought to allocate the initial property right to the person likely to care most about reclining, in order to reduce the number of transactions that are necessary. He further argues that it’s probably the person sitting behind, as evidenced by the fact people routinely pay for extra-legroom seats.
Barro responds to Marron as follows:
Mr. Marron is wrong about this last point. I understand people don’t like negotiating with strangers, but in hundreds of flights I have taken, I have rarely had anyone complain to me about my seat recline, and nobody has ever offered me money, or anything else of value, in exchange for sitting upright.
But there’s an even better response.
First, notice that Marron talks about how “we” ought to allocate the initial property right as if “we” should have any say about it. So Marron at least doesn’t seem to get that it’s the airline’s property right. Even if Barro is not misled, Marron is. And notice that Barro didn’t challenge Marron, which suggests that maybe Barro is misled about who has the right. (Notice that my own worry above about whether I’m quibbling now seems less justified.)
Barro doesn’t quote Marron correctly, but he comes close enough. Marron actually writes:
I’d bet on the “reclinee” not the recliner. Which might explain why more airlines now offer the ability to pay extra for more legroom.
Here’s my second response to Marron:
It is true that airlines offer the ability to pay extra for legroom. Even I, by the way, a man who is only 5’5″ tall, sometimes pay for this legroom, especially if I’m planning to work and I don’t want the recliner in front of me to prevent me from having my computer on the tray table. But that they offer extra legroom and get takers says nothing about which people value the space more. Remember that the problem occurs when someone reclines into an area where the person suffering from the recline has not paid extra for legroom. The fact is that the majority of people on the airplane are not willing to pay for that extra legroom. So the evidence that some are willing to pay what the airline charges is not nearly enough evidence to address the issue at hand.
BTW, after starting to write this, I noticed that Megan McArdle has weighed in and, as usual, gives a lot of insight in a short space.