Let's not forget the social effects of the class system. What better way to destroy social cohesiveness than this? Its similar to public schools without uniforms.
Within my rural, southern public school system,I was clearly marked out in the southern caste system as "white trash" in school because I wore $15 canvas sneakers rather than $60 name-brand shoes, jeans and t-shirt rather than polo shirt and khakis, etc.
In the adult world, the caste system still exists in a rather potent form: dating. If you are a man who is marked out in some way as earning less, you will get significantly less attention from women in general. The OKCupid data has confirmed this effect for men over the age of 23, and it is a very potent one.
In my experiences (both state and private schools, in the UK) the problem with no uniform was that it marked you out as cool or not-cool, not your economic status. And some of my classes included kids with working class parents and kids from millionaire families.
Sure it's still not great, as if you can't afford to buy the cool clothes then you're being judged none-the-less - but I think it's a lot less bad to be judged as not cool than as "white trash", and at least in my situation it was possible to be understanding ("his parents don't have much money, so I'm not going to mock him for having cheap shoes").
I wonder which of our experiences is more common. I hope mine - but I have no idea.
1. True segregation where the rich go to a separate school all-together / have separate planes, etc.
2. Everyone wears the same lowest-common denominator clothes / travel in the same travel class?
Each of these alternatives is economically inefficient, and the poor suffer more as a result as their fares cease to be subsidised by the rich.
I'd rather fly $500 return to Tokyo, because some rich guy upfront is paying $4000 for a flat bed, than pay $2000 because some left-wing loon demands everyone has the same class of travel.
"In the adult world, the caste system still exists in a rather potent form: dating. If you are a man who is marked out in some way as earning less"
This isn't really a caste system, it's just human nature. Women are generally attracted to men that have ambition and a good job is a good indicator of this.
Would you consider ugliness a caste system as well? Women that are less attractive will get less attention (and dates) on and offline.
The author Rory Sutherland is vice-chairman of Ogilvy Group UK.
I don't think we want the ad guys determining the pricing structure for airlines. Anyway, the reason for the wacky pricing on airfares is not some sort of implicit agreement to be socialistic about it. It's because the fixed costs associated with the flight are so high. It costs virtually nothing to add another person to the flight. Airline fares are a dance between filling up the flight while maximizing the average fare per seat. Price too high and you fly with empty seats. Price to low and you fill up but leave money on the table.
Odd sort of ad-hominem. The pricing structure of airlines certainly wasn't determined by ad execs. What he points out is that it isn't so bad: it does much better at maximizing utility than having all the seats the same and most of them more expensive.
His point was that if the airline pricing system is not so bad (and I'm not agreeing with that), then having it apply to other high fixed cost, low marginal cost things--like his daughter's bus--might also not be so bad.
Of course, the example of his daughter's bus makes me wonder if the whole thing isn't tongue in cheek and I'm not getting it because I'm not British.
I live in the far North, and recently flew down to Toronto, my first time "leaving" in over a year.
Of all the things that struck me about "The world", the number one thing was the "class system" that the airlines tried to impose. At every check-in counter there was a little sign saying economy on the right, business on the left. For the four flights I waited for an eventually got on, I heard the airline announce on the PA, at least 5 times each "Economy stay on the right".
I never did see a single person line up and get on from the "left" line.
It occurred to me, the point of separating the lines was not so that the business passengers would have a faster/better experience, it was merely used to remind the rest of us exactly where we sit on the class ladder: The Bottom.
I never did see a single person line up and get on from the "left" line.
About all I can say to this is "fly more often" or "fly on more airlines".
United, for example, has been restructuring their boarding process for a while, precisely to try to maintain some semblance of order -- too many people crowding the gate area before their group is called, trying to sneak on to the plane early to get access to overhead bins, etc.
(and typically, a separate-lane process is intended to avoid that -- most US-based airlines have basically given up on the idea that they can get an orderly boarding process by assigning groups based on row number, and have switched over to using the multi-lane system)
The author is clearly confused about libertarianism - as a libertarian, the points he's making are very 'no duh', and the characterization of the 747 as 'socialist' is odd (libertarians advocate for this sort of redistribution - and even less materially mutual beneficial redistribution - i.e. charity - all the time) but aside from his ham-fistedness about 'voluntary redistribution', it's a very eloquent and well-done article. I don't know about thrones in school busses, though.
The Paris metro did have 1st and 2nd class sections, but ended them in 1991 [1]
The London underground did as well, but ended them in 1940 during/because of the war [2]
In Paris, it seems that demand fell to non-sustainable levels. This was after enforcement stopped though, which seems like it could be a rather classic example of the free-rider problem!
This article conflates the ideas of pure price discrimination (where goods are identical) and premium pricing (where they are not).
No one is better at this than the travel industry. Remember that story about a travel website showing higher prices to people with Apple User-Agents? Yup.
If a restaurant wants to charge $1,000 for a premium cheeseburger on the off chance some rich person wants to distinguish himself, well, that's weird, but that's capitalism.
But if this "software" were to read everyone's mind and calculate exactly how much they are willing to pay for any good at any time, consumers will get fleeced.
The article is deeply confused as you point out. And you're right, since the effect of price discrimination is for producers to capture consumer surplus, you don't want that mind reading machine.
The notion that little Johnny needs to sit at the back of the bus on a hard seat while little Sally is upfront ensconced in a tufted, leather wrapped throne is beyond ludicrous. I wasn't sure if the author was was being serious or making some kind of Swiftian satire. There's nothing like reinforcing a centuries old class system to grease the wheels of social cohesion.
He was not seriously advocating such a system, merely saying that such a scenario would be the only way to get the richer parents to pay more, ala the airline model. Otherwise it's a simple act of charity.
I think the part where he said the poor kid "would be forced to sit on a spike," may have not been a serious proposal. Extrapolate from that what you will.
The author of the article explains his point clearly, and in a way it makes sense when looked at it from that perspective.
I'll offer another, more pessimistic perspective. He assumes that the users paying more will get extra service, while service level for the rest will stay the same. But, it's almost never the case. In practice, the level of service for regular price will just go down, and service providers will start to charge even for something that was free, or available at lower cost before this service differentiation started.
"If the first two carriages in each train cost three times as much as the others but offered free Wi-Fi, and were furnished not with basic seats but with the sumptuousness of an Edwardian-era New Orleans brothel, you could afford to run more trains."
You don't have enough trains in your subway? That's strange. It's supposed to be rapid transit isn't it?
If we in the UK have limits on the number of Tube[1] trains run in a given period, they're for safety or 'incredibly low number of passengers' (depending on where along the line you are) and really not finance reasons, to the best of my knowledge. The point is pretty moot.
[1]: He has to refer to the Tube, as National Rail already has classes not unlike as described. :P
> My contention is that it should be possible to devise software which solves this problem: everyone secretly reveals what they would be willing to pay
Riiiight. And what on earth is going to convince the wealthy folks to type "$100" into the system instead of "$3"?
> How can you avoid people gaming the system? The price each parent pays could theoretically be kept confidential, but in reality would not remain so.
The author completely overlooks complementary upgrades for frequent flyers. Frequent flyers are the lifeblood of the industry but not because they pay for a higher class level. They earn the higher class level for free by making many lower class level flights. On domestic flights very few first class passengers are paying extra. International is different but still has a large number of free upgrades (depending on the airline).
This is a fairly edge case, that only really occurs on US domestic flights. The majority of the world's frequent-flyer programmes do not give space-available upgrades in the way that say American or United do domestically.
The vast majority of those travelling in premium cabins (or their employers) paid cash for their ticket.
In practice, Southwest airlines has one class of passenger. Everyone rides in steerage, but you can pay a little extra to jump at the front of the line and pick your favorite steerage class seat. They're able to operate profitably on a fairly consistent basis, this author is postulating a necessity that does not exist.
And I personally hate flying Southwest and avoid it if at all possible. Not only have I on multiple occasions bought a cross country first class ticket from Delta for less than Southwest's Wanna Get Away fare, but I almost always find US Airways and Delta offer cheaper fares than them. Plus I don't have to deal with the frenzy rush of pick you own seat, I feel like it's a bunch of cattle being wrangled into a plane.
Yeah, as long as the load factor is above 90%, the economy section of a plane pretty much covers the costs of a flight. Business and First Class are then almost purely profit. They could all be ID90s and still be profitable. (My information may be a few years out of date now... things _may_ have changed)
"How do you get people with wildly differing willingness or ability to pay to fund some common good other than through redistributive taxation?"
For cases like this why would I want something other than redistributive taxation?
Seems very similar to the way many successful SaaS businesses operate. Charging larger businesses $200/month with big margins makes it viable to provide $20/month 'freelancer' plans with low margins.
I thought the anecdote about 1st class trains in London being socially unacceptable was an interesting cultural anecdote. I've ridden Amtrak in the US both steerage class and first class and no one thought it was overly interesting or revolutionary. Perhaps because it was like an art deco day dream rather than decorated like an "Edwardian-era New Orleans brothel" per the article. Hmm, that gives me an idea about instituting a "mile long train" club... which would be pretty easy to implement in the 1st class cabins, not so easy for steerage.
One interesting experience WRT 1st class trains is unlike the authors strange ideas about sitting on spikes in a bus, the primary difference between steerage and 1st class on Amtrak trains was privacy. My own bathroom, my own closed cabin, etc. Same food as everyone else (although it was "free" with the ticket price). Same view out the window, we didn't get there any sooner than anyone else...
Oh and the 1st class only lounge in the Chicago station has to be seen to be believed. That alone might be worth the ticket price. Even impatient me, in luxurious enough surroundings, didn't mind waiting an extra hour or so. Its not like any airport waiting room I've ever seen.
> I thought the anecdote about 1st class trains in London being socially unacceptable was an interesting cultural anecdote. I've ridden Amtrak in the US both steerage class and first class and no one thought it was overly interesting or revolutionary
People view long distance travel differently than their daily commute when it comes to economic segregation. I imagine there would be an uproar in NYC if the MTA talked about a plan to create a first class car on the subway however no one bats an eyelash about Amtrak.
However, I bet you could find a price point where people wouldn't complain if you added a first class car to the London Underground or NYC subway system. I think there's a psychological effect in play where if it's a price that you could pay if you cut into your budget then it stings but if it's a price that seems ludicrous to you then you don't mind as much. I personally would feel more ok with a first class car if it was $100/trip vs. $10 (regular ride is $2.25).
1st class trains are actually pretty common on medium-distance train services into London (in contrast with the author's examples, first class on British trains is often barely distinguishable in terms of comfort from standard class to the point where you wonder why anyone would bother to pay for it)
1st class trains on the London Underground would be hugely unpopular because deliberately running overcrowded services below maximum capacity to skim a bit more money off the top is seldom popular, especially when no commuter is naive enough to believe they'll be compensated for the extra wait and crush with reduced fares.
Amtrak's more similar to planes than the London Underground, though, since it falls into the category of long-distance transportation rather than daily travel. Why first-class is acceptable for the former but not the latter is an interesting question, though.
[+] [-] JPKab|12 years ago|reply
Within my rural, southern public school system,I was clearly marked out in the southern caste system as "white trash" in school because I wore $15 canvas sneakers rather than $60 name-brand shoes, jeans and t-shirt rather than polo shirt and khakis, etc.
In the adult world, the caste system still exists in a rather potent form: dating. If you are a man who is marked out in some way as earning less, you will get significantly less attention from women in general. The OKCupid data has confirmed this effect for men over the age of 23, and it is a very potent one.
[+] [-] corin_|12 years ago|reply
Sure it's still not great, as if you can't afford to buy the cool clothes then you're being judged none-the-less - but I think it's a lot less bad to be judged as not cool than as "white trash", and at least in my situation it was possible to be understanding ("his parents don't have much money, so I'm not going to mock him for having cheap shoes").
I wonder which of our experiences is more common. I hope mine - but I have no idea.
[+] [-] eroded|12 years ago|reply
1. True segregation where the rich go to a separate school all-together / have separate planes, etc.
2. Everyone wears the same lowest-common denominator clothes / travel in the same travel class?
Each of these alternatives is economically inefficient, and the poor suffer more as a result as their fares cease to be subsidised by the rich.
I'd rather fly $500 return to Tokyo, because some rich guy upfront is paying $4000 for a flat bed, than pay $2000 because some left-wing loon demands everyone has the same class of travel.
[+] [-] paulhauggis|12 years ago|reply
This isn't really a caste system, it's just human nature. Women are generally attracted to men that have ambition and a good job is a good indicator of this.
Would you consider ugliness a caste system as well? Women that are less attractive will get less attention (and dates) on and offline.
[+] [-] codva|12 years ago|reply
I don't think we want the ad guys determining the pricing structure for airlines. Anyway, the reason for the wacky pricing on airfares is not some sort of implicit agreement to be socialistic about it. It's because the fixed costs associated with the flight are so high. It costs virtually nothing to add another person to the flight. Airline fares are a dance between filling up the flight while maximizing the average fare per seat. Price too high and you fly with empty seats. Price to low and you fill up but leave money on the table.
[+] [-] ganeumann|12 years ago|reply
His point was that if the airline pricing system is not so bad (and I'm not agreeing with that), then having it apply to other high fixed cost, low marginal cost things--like his daughter's bus--might also not be so bad.
Of course, the example of his daughter's bus makes me wonder if the whole thing isn't tongue in cheek and I'm not getting it because I'm not British.
[+] [-] grecy|12 years ago|reply
Of all the things that struck me about "The world", the number one thing was the "class system" that the airlines tried to impose. At every check-in counter there was a little sign saying economy on the right, business on the left. For the four flights I waited for an eventually got on, I heard the airline announce on the PA, at least 5 times each "Economy stay on the right".
I never did see a single person line up and get on from the "left" line.
It occurred to me, the point of separating the lines was not so that the business passengers would have a faster/better experience, it was merely used to remind the rest of us exactly where we sit on the class ladder: The Bottom.
[+] [-] ubernostrum|12 years ago|reply
About all I can say to this is "fly more often" or "fly on more airlines".
United, for example, has been restructuring their boarding process for a while, precisely to try to maintain some semblance of order -- too many people crowding the gate area before their group is called, trying to sneak on to the plane early to get access to overhead bins, etc.
(and typically, a separate-lane process is intended to avoid that -- most US-based airlines have basically given up on the idea that they can get an orderly boarding process by assigning groups based on row number, and have switched over to using the multi-lane system)
[+] [-] dnautics|12 years ago|reply
[+] [-] malkia|12 years ago|reply
[+] [-] justinsb|12 years ago|reply
The London underground did as well, but ended them in 1940 during/because of the war [2]
In Paris, it seems that demand fell to non-sustainable levels. This was after enforcement stopped though, which seems like it could be a rather classic example of the free-rider problem!
1: http://articles.chicagotribune.com/1991-05-12/travel/9102110...
2: http://en.wikipedia.org/wiki/London_Underground_O_and_P_Stoc...
[+] [-] brnstz|12 years ago|reply
No one is better at this than the travel industry. Remember that story about a travel website showing higher prices to people with Apple User-Agents? Yup.
If a restaurant wants to charge $1,000 for a premium cheeseburger on the off chance some rich person wants to distinguish himself, well, that's weird, but that's capitalism.
But if this "software" were to read everyone's mind and calculate exactly how much they are willing to pay for any good at any time, consumers will get fleeced.
[+] [-] rayiner|12 years ago|reply
[+] [-] Patrick_Devine|12 years ago|reply
[+] [-] eroded|12 years ago|reply
[+] [-] reeses|12 years ago|reply
[+] [-] levosmetalo|12 years ago|reply
I'll offer another, more pessimistic perspective. He assumes that the users paying more will get extra service, while service level for the rest will stay the same. But, it's almost never the case. In practice, the level of service for regular price will just go down, and service providers will start to charge even for something that was free, or available at lower cost before this service differentiation started.
[+] [-] guard-of-terra|12 years ago|reply
You don't have enough trains in your subway? That's strange. It's supposed to be rapid transit isn't it?
[+] [-] tekacs|12 years ago|reply
[1]: He has to refer to the Tube, as National Rail already has classes not unlike as described. :P
[+] [-] crazygringo|12 years ago|reply
Riiiight. And what on earth is going to convince the wealthy folks to type "$100" into the system instead of "$3"?
> How can you avoid people gaming the system? The price each parent pays could theoretically be kept confidential, but in reality would not remain so.
What does that even mean?
[+] [-] UVB-76|12 years ago|reply
A sealed bid auction is all fun and games until participants voluntarily disclose their bids to other participants.
[+] [-] driverdan|12 years ago|reply
[+] [-] eroded|12 years ago|reply
This is a fairly edge case, that only really occurs on US domestic flights. The majority of the world's frequent-flyer programmes do not give space-available upgrades in the way that say American or United do domestically.
The vast majority of those travelling in premium cabins (or their employers) paid cash for their ticket.
[+] [-] aredington|12 years ago|reply
[+] [-] rblatz|12 years ago|reply
[+] [-] davewasthere|12 years ago|reply
[+] [-] dnautics|12 years ago|reply
[+] [-] praptak|12 years ago|reply
By the way, Joel Spolsky has a very good explanation of the mechanisms behind airplane fares, including why you might not want to go this way: http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
[+] [-] jot|12 years ago|reply
[+] [-] beefxq|12 years ago|reply
[+] [-] VLM|12 years ago|reply
One interesting experience WRT 1st class trains is unlike the authors strange ideas about sitting on spikes in a bus, the primary difference between steerage and 1st class on Amtrak trains was privacy. My own bathroom, my own closed cabin, etc. Same food as everyone else (although it was "free" with the ticket price). Same view out the window, we didn't get there any sooner than anyone else...
Oh and the 1st class only lounge in the Chicago station has to be seen to be believed. That alone might be worth the ticket price. Even impatient me, in luxurious enough surroundings, didn't mind waiting an extra hour or so. Its not like any airport waiting room I've ever seen.
[+] [-] mason55|12 years ago|reply
People view long distance travel differently than their daily commute when it comes to economic segregation. I imagine there would be an uproar in NYC if the MTA talked about a plan to create a first class car on the subway however no one bats an eyelash about Amtrak.
However, I bet you could find a price point where people wouldn't complain if you added a first class car to the London Underground or NYC subway system. I think there's a psychological effect in play where if it's a price that you could pay if you cut into your budget then it stings but if it's a price that seems ludicrous to you then you don't mind as much. I personally would feel more ok with a first class car if it was $100/trip vs. $10 (regular ride is $2.25).
[+] [-] notahacker|12 years ago|reply
1st class trains on the London Underground would be hugely unpopular because deliberately running overcrowded services below maximum capacity to skim a bit more money off the top is seldom popular, especially when no commuter is naive enough to believe they'll be compensated for the extra wait and crush with reduced fares.
[+] [-] plorkyeran|12 years ago|reply