Reporting from Mexico City…
Cast your stones if you wish, but the perpetual gadfly in me feels the urge to book a United Airlines flight next time I travel (which is very soon). It pays, after all, to be contrarian.
After this major public relations H.A.M., United Airlines is probably rolling out the red carpet for every Joe Schmoe with a smartphone and a Twitter account.
Of course, what happened recently to the doctor on the United flight was despicable. There is absolutely no excuse for it.
(And, if TMZ is right, the other passenger getting stung by a scorpion recently was plain bad luck. If bad things, indeed, come in threes, I should probably give it a week or two before booking, right?)
But, the thing about the market, especially when married with today’s space-age tech and (subsequent?) “outrage culture,” is companies tend to learn their lessons fairly quickly — or they die. And United Airlines is receiving no shortage of punishment at the moment. (The proverbial blood, dear reader, has hit the tarmac.)
This is a far cry from other, more “public,” services. (We’ll get to that, though, in a moment.)
Like most problems of a business or social setting, solving this overbooking issue comes down to incentives. I’m sure United Airlines understands this now. (If not, I’ve made sure to tweet this missive to them.
United, if you haven’t figured it out yet, here’s a peaceful solution: The vast majority of your passengers have a price.
“I’m pretty sure,” celebritarian Avens O’Brien pointed out recently, “everybody has an amount of money they’d be willing to give up their seat on an
Sure, Avens said, some people simply will HAVE to be somewhere — not unlike the doctor who got bloodied up and dragged out. But most people have a price. And even if United paid someone $5,000 to get off the plane, it would’ve saved a TON of money by averting the public relations crisis it finds itself in today.
Rather than subjecting their passengers to horrifying scenes of, for example, a bloodied guy running back onto the plane (apparently) screaming “Just kill me!,” they might’ve instead had an excited #UnitedAirlines tweet which read: “OMG! I can’t believe it. United Airlines just gave me $5,000! Boomshakalaka.”
Yes, United is allowed to oversell seats and ask for volunteers to give up their seats for compensation. It’s in the contract. Yes, United has the right to remove passengers from their planes. It’s a private company. And it’s in the contract.
But the thing about market forces is just because a private company can do something doesn’t mean it should. And it certainly doesn’t always mean it’s going to be good for business. If a company does only what is within its rights, callously disregarding consumer sentiment, then another player who treats his customers better, if unhampered by arbitrary regulations and barriers to entry, will consume his market share in short order.
The market is oftentimes the best force for “social justice” available. No amount of cardboard glitter is anything near a mighty match for the almighty boycott born of outrage.
With a hat tip to Luke McGrath, whom you know as Managing Editor of our premier research service, https://pro.lfb.org/m/660910Laissez Faire Letter, some are calling for the government to step in and “do something.”
And, right on cue, New Jersey Gov. Chris Christie has called for a ban on the widespread practice of overbooking. About 70% of the flights out of Newark Liberty Airport, he lamented, are controlled by United. (#poutyface)
Unlike our dear compromised Christie, those who have at least a couple of neurons still smooching know getting the government involved is a terrible idea.
You wouldn’t solve a tiff between two teenagers in your neighborhood by calling in the Mafia to knock their knees out the next time they get a little rowdy — so why would you call in government guns to solve peaceful grown-up problems?
“PR disasters are a market force,” Avens said, “and they’re far more effective as a regulator than men with guns could ever hope to be.”
So here’s the real story behind the controversy…
The United Airlines debacle, as Ryan McMaken illustrates brilliantly in today’s featured article below, exposes a clear difference between government monopolies and private companies.
One side almost never pays for violating its customers in unspeakable ways, the other side nearly always does. We’ll let McMaken help you suss out which is which below.
(Hint: I don’t see the TSA rolling out any red carpets — or even apologizing — after this story went viral. A young boy with Sensory Processing Disorder (SPD) was detained for over an hour and treated like a criminal for no reason at all, causing him and his mother to miss their flight. There’s a description from the mother, Jennifer Williamson, underneath the video.)
United Airlines Violence Illustrates the Problem with Government Monopolies
United Airlines managed to provoke a firestorm of opposition over the weekend when the airline overbooked one of its flights and resorted to removing at least one passenger by smashing his face and physically dragging him off the plane.
At least two other passengers filmed the altercation between the non-violent passenger and the law enforcement officers — it’s unclear if they were private security agents or government police officers.
In response, the airline issued a creepily Orwellian “apology” for “re-accommodating” the passenger who had been selected “by computer” to make room for some airline staffers.
Theresponse over social media has been swift with countless posters on Twitter vowing to boycott the airline.
My purpose here, however, is not to dissect what United should have done differently or how they can better manage space on the airplane — which should be regarded as private property.1
It should be obvious that on a philosophical and moral level, United is entitled to remove anyone it wishes from its airplanes for any reason it pleases — provided the airline properly compensates all affected customers.
However, the fact remains that few passengers would like to be treated the way United treated its passengers in this case, and the airline must be prepared to deal with the consequences of what anyone can see is amateurish management of an airline.
It is in these consequences that we see the difference between a private competitive firm like United, and a monopolistic entity like a government.
The Difference Between Private Firms and Government Agencies
When United beats someone up for no good reason and throws him off a plane, both the victim and those who sympathize with him have immediate recourse to a solution: they can elect to never fly on United Airlines again. They can also attempt to convince others to never fly United either.
Such reactions are perfectly peaceful, moral, and perhaps even prudent. After all, if one wishes to reach one’s destination in a timely fashion, one might wish to avoid United, which it turns out, is the second-worst in the nation for bumping its passengers from flights. And, of course, if you’re tired and grumpy and really want to just remain seated in a seat you already paid for, you might also not want to have your face thrown into an armrest by the airline’s “security” personnel.
But the important fact here is that in most cases, passengers have the option and the choice of avoiding United Airlines and electing to fly on other airlines. Yes, it’s true that using other airlines might mean fewer non-stop flights or flights to less-convenient locations. After all, goods and services are not homogeneous even if we do casually refer to airline flights as if they were more or less interchangeable. But, the fact remains that for many people a call to “boycott United” is something that can actually be achieved without requiring that one drastically alter his or her daily life.
Things are much different, however, when we start talking about governments.
When a government agency beats someone up — or treats people in a way that most people regard as unjust or despicable — there is usually no recourse. Thanks to the state’s extensive monopoly power, one cannot simply say “boycott the Federal government” and select alternative services instead. One cannot decline to pay for a monopolistic government’s “services” whether they be road building, welfare programs, “security,” or publicly funded universities.
Any refusal to pay will be met with overwhelming force, fines, and possibly imprisonment.
Moreover, thanks to the sheer size, scope, and power of the US government specifically, the only way to avoid these mandatory “fees” is to completely uproot one’s entire life, moving 1,000 miles away (in many cases), and possibly never seeing one’s friends and family ever again. And even then, you may not be able to escape US power.
This of course, illustrates the absurdity of the “love it or leave it” mantra that jingoists often rely on to claim that anyone who doesn’t like the US should simply avail himself of other “options.”
These alleged options are not really options at all when they most likely require one to give up his career, his family life, and many of his assets.
Monopoly Power Invites Abuse of Power
And perhaps worst of all is the fact that the government knows it has monopoly power and acts accordingly.
As with any monopolistic firm, a state can get away with offering lower-quality service at higher prices. After all, if one has to pay for services “or else” why strive to offer high-quality services? Why keep costs low?
On the other hand, if it were easier to refuse payments, refuse services, or easily relocate to an area controlled by another state “firm,” then the situation would be quite different. Indeed, we do find that it is different for smaller states that are in fact more competitive and must act in ways that attract new investors and new residents. It has been demonstrated that small states tend to be wealthier than large states — and this may be due to the fact that small states tend to be more sensitive to those who wish to avoid it or leave it. As Peter St. Onge has noted:
[A]ccording to numbers from the World Bank Development Indicators, among the 45 sovereign countries in Europe, small countries are nearly twice as wealthy as large countries. The gap between biggest-10 and smallest-10 ranges between 84 percent (for all of Europe) to 79 percent (for only Western Europe).
This is a huge difference: To put it in perspective, even a 79 percent change in wealth is about the gap between Russia and Denmark. That’s massive considering the historical and cultural similarities especially within Western Europe.
Even among linguistic siblings the differences are stark: Germany is poorer than the small German-speaking states (Switzerland, Austria, Luxembourg, and Liechtenstein), France is poorer than the small French-speaking states (Belgium, Andorra, Luxembourg, and Switzerland again and, of course, Monaco). Even Ireland, for centuries ravaged by the warmongering English, is today richer than their former masters in the United Kingdom, a country fifteen times larger.
Why would this be? There are two reasons. First, smaller countries are often more responsive to their people. The smaller the country the stronger the policy feedback loop. Meaning truly awful ideas tend to get corrected earlier. Had Mao Tse Tung been working with an apartment complex instead of a country of nearly a billion-people, his wacky ideas wouldn’t have killed millions.
Larger states can afford to raise the cost of emigration and avoidance for existing “customers” and for potential ones. That is, larger states are simply more monopolistic than smaller ones.
When there is meaningful competition, people really do have options. They can avoid the firm they view as abusive and reward the abusive firms’ competitors. This isn’t to say that abuses within private firms will never exist. Even when firms are subject to stiff competition, there is no way to completely avoid human stupidity, incompetence, and criminality. What consumers need, however, is a way to escape these problems when necessary.
In the modern political debate, we’re told that exit and choice are not acceptable, and that we have democracy instead. That everyone should patiently wait for “reform” and have faith in “the system.” This, of course, is the equivalent of mandating that all current customers of United Airlines remain the airline’s customers forever — no matter how inept the airline becomes or how much it abuses its customers. If United’s customers don’t like it — by this way of thinking — they should seek “reform” from within and remain “loyal” no matter how many times the airline forces its customers to miss flights or be assaulted in their seats.
Such a view is absurd when talking about an airline, and it should be regarded as equally absurd when applied to a government.
[Ed. note: This article originally appeared on Mises’ webpage at this link.]