Posts Tagged ‘market economics’

Who Gets to Sit in First Class Airline Seats?

October 25, 2014

This was a question exercising Richard Wolff, a self-styled Marxist economics professor, in a recent talk on Alternative Radio. Its programs monotonously demonize capitalism or U.S. “imperialism.” Wolff’s talk was in the former category, mocking the idea that the market is some perfect mechanism for producing ideal economic outcomes (an idea nobody actually holds).

UnknownHis airline seat conniptions were prompted by being flown First Class to some speaking gig. He liked it – in contrast to flying “steerage,” and as a card-carrying leftist was rankled by the inequality.*

What we have here, Wolff said, is a “distributional problem.” And he held forth at some length with alternative, putatively fairer ways to (re)distribute First Class seats. Anything but just selling them, to people willing to pay.

manna-from-heavenThis “distributional” fixation shows the fundamental mistake of lefty economics. Wolff sees First Class seats – and, by extension, any other good or asset – as just out there, as though created by some sort of spontaneous generation, like manna falling from the sky, the only question being how to divvy them up (with everyone, presumptively, having equal entitlements).**

Wolff recognized that if First Class seats are conferred by one of his egalitarian methods, rather than sold, airlines would make less profit. But, he said, “who cares?”

images-2This too shows the magical thinking of leftist economics. As though profit is somehow ill-gotten, illegitimate, exploitative, and all goods and services ought instead to be forthcoming, somehow, free of profit. Magically.

Now here’s reality. If airlines couldn’t profit, they wouldn’t fly. You wouldn’t have seats, First Class or Sardine class. And all the people who work for airlines wouldn’t have jobs.***images-3

Maybe you think air travel, and all other goods and services, should be provided by government, for public benefit, with no dirty profit. Some countries actually do have government-run airlines. They tend to be mismanaged white elephants that suck money from taxpayers and out of public budgets, subsidizing air travelers at the expense of everyone else.

First Class seats, that Wolff calls a “distributional problem,” are not in fact some good that’s out there waiting for an economics professor to allocate. They would not exist if they weren’t profit centers. And, while it’s true that to fetch high prices UnknownFirst Class seats have to be cushy, the takers are less beneficiaries than they are victims, albeit voluntary victims; sheep being sheared. Because in relation to “steerage,” and the amenities First Class seats entail, they are stupendously overpriced (that nice glass of wine effectively costs you hundreds). It’s really an extortion racket: pay up or suffer the indignity of mixing with the peasants.

In fact airlines get the bulk of their profits from First Class. Without that, regular seats would have to cost much more, probably pricing out most travelers, who wouldn’t fly at all, making the whole enterprise unviable. images-1First Class travelers subsidize the rest, so air travel is affordable to ordinary folks, and planes get filled, airlines can operate and make a little profit, and everyone is better off.

That, Mister Marxist Professor Wolff, is market economics, and it’s a damn good thing.

By the way, when I said “a little profit,” I wasn’t being cute. In fact, the airline industry, over its entire history, has made very little profit at all, in relation to the vast amount of investment. Unknown-4Competition has seen to that. So the public has received the colossal benefit of trillions of miles of transportation, provided essentially at cost. The meager profit garnered by airlines is surely a small price to pay for what we gain.

That again is market economics. A damn good thing.

* Though, as my wife noted, he didn’t refuse the seat, switch with some more deserving traveler, or fly economy and donate the difference to the poor.

** I’ve written about John Rawls’s famous book, A Theory of Justice, similarly treating wealth as just something out there, to be distributed, with nary a word about its creation.

*** On one flight I was treated to an ad wherein the airline’s head extolled all the numerous employees who made the flight possible, many unseen by passengers. I was indeed struck by the vast complexity of the enterprise, and how oblivious most of us are to all the cooperative efforts of the legions of people who make our civilization work.

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Modi for India

December 27, 2013

imagesI have a mental “Wall of Shame” with pictures of the world’s baddies (and relish X-ing out the face of any who (like Qaddafi) goes down). In 2002, Narendra Modi earned a spot on that wall.

That was the year of a veritable pogrom by (majority) Hindus against (minority) Muslims in the Indian state of Gujarat. It was horrible; a thousand or more died. The state’s recently elected leader was Modi, of the BJP, a Hindu nationalist political party.

Narendra Modi

Narendra Modi

It would be too much to call him responsible for the atrocities – but only just. He was certainly responsible for doing way too little (almost nothing) to stop them. And ever since, he’s refused to express any remorse over what happened.

Now Narendra Modi is the BJP’s candidate for India’s prime minister.

India, since 2004, and for most of the time since independence, has been run by the Congress Party; and the party has been run by the Gandhi family dynasty (no relation to the Mahatma; it’s Nehru’s descendants).

Manmohan Singh

Manmohan Singh

The current party chief is Sonia Gandhi, the Italian-born widow of the assassinated Rajiv; she sensibly passed up the prime minister’s post in favor of Manmohan Singh, a well-intentioned technocrat who had played a big role in India’s early 1990s economic reforms. Previously India had been mired in stultifying socialism, “the license raj,” and the consequent “Hindu rate of growth” (i.e., very little growth at all).

That had kept India as the poster country for squalid poverty – a country where most people didn’t even have toilets and went in the streets. images-1Half still do. But the mentioned reforms undid socialism’s worst effects, boosted economic growth, and began lifting millions out of poverty.

It’s true, and inevitable, that the progress has been very uneven, great numbers remain in deprivation, and inequality may even have increased as more have grown rich. But the country as a whole is richer, the middle class is expanding, and poverty numbers have been shrinking. It’s simply due to a freer economy. Lefties hating market economics will try to insist India’s poverty has worsened. That’s nonsense.

I heard anti-capitalist crusader Arundhati Roy indict a litany of alleged evils of free market economics in India. I kept thinking: she’s missing it completely. Nothing she denounced is actually free market economics; to the contrary, it’s non-free market economics, it’s India’s culture of cronyism, corruption, and over-regulation that stifles competition and economic opportunity; it’s government perverting the free market. Unknown-2So fixated was Roy on demonizing “capitalism” that she couldn’t see this Indian elephant in the room.

Which, despite the 1990s reforms, is still there. India’s growth has been slipping back down toward the “Hindu” rate. Desperately needed is another round of reform, to attack the true problems behind Ms. Roy’s indictment, and further open up the economy. But the 81-year-old Singh and his Congress party government seem to have completely run out of steam, paralyzed by inertia and populist political pandering, as well as cronyism and corruption.

Unknown-3Waiting in the party’s bullpen is the next Gandhi scion, Sonia’s son Rahul – a nothingburger who nobody, not even he, can imagine leading a nation of a billion people. India has had enough of the Gandhis and their Congress party.

Which brings us back to Narendra Modi. Who, in contrast to the Gandhis, is a self-made man from low-caste antecedents. And who has done in Gujarat what so desperately needs doing for all India: he’s curbed corruption, run the state effectively, opened up its economy, slashed stifling regulation, and attracted investment. Unlike typical Indian politicians, Modi eschews all language of wealth redistribution, talking instead of wealth creation. And it hasn’t been just talk. Under Modi, Gujarat’s economic growth and improvement, and consequent poverty reduction, have greatly outpaced the rest of India’s.

Yet Modi continues unrepentant about the 2002 riots, and his BJP remains a Hindu supremacy party. Bad stuff; though Modi has softened his Hinduist rhetoric, now insisting leaders must be secular, and that economic development trumps religious factionalism. And if he won’t apologize to Muslims, he seeks to change the subject: “I want to ask poor Muslim brothers whether they want to quarrel with poor Hindus or fight against poverty. I want to ask poor Hindus whether their concern is disputes with poor Muslims or the fight against poverty. . . Let’s defeat poverty together.”images-3

We do not live in Heaven where perfection reigns. Human life is messily imperfect and often presents us with problematic choices. But choose we must. India should vote for its future, not its past, and choose Modi.