Robert Reich was relieved that he was a passenger on one of the last flights to leave NYC before the airports closed on Monday. But he’s upset that the airline had “jacked up” ticket prices to $4,000 for the last flights leaving NYC for California. Even at $4,000 per ticket, the flight was oversold by 47 passengers, and the airline then paid 47 volunteers $400 each to take a later flight, “whenever that might be.” In his own words, Professor Reich explains:
Assuming that the 47 extra passengers had each paid $4,000 to get onto the plane at the last minute, and the 47 who gave up their seats for them received $400 in return, the trade would have been “rational” in narrow market terms. After all, the seats were “worth” $4,000 to those who bought them at the last minute, and switching to the next flight (whenever that might be) was “worth” $400 to those who agreed to do so.
But the transaction was also deeply exploitative. The airline netted a huge profit because of the impending storm.
I couldn’t help think this was a miniature version of the America we’ll have if Mitt Romney is elected president. Rational and efficient in terms of supply and demand, guaranteed to maximize profits, but fundamentally unfair.
MP: Here’s what I find exploitative and fundamentally unfair: The Las Vegas Review-Journal reported in 2002 that “Reich is in the Washington Speaker Bureau’s top-fee category, among 28 speakers who garner one-time speaking fees of $40,000 or more,” and he therefore is able to net huge personal profits for his 30-minute talks (or less than 15 minutes for the talk in Las Vegas at the UNLV Foundation, according to the Las Vegas paper).
OK, actually, I think it’s great that Professor Reich uses market-based pricing for his speeches, and I applaud him that he can charge $40,000 speaking fees (according to the Las Vegas Review-Journal) based on market demand for his time, but then he really shouldn’t complain when an airline uses market-based pricing to allocate scarce seats on a plane when demand is high during a natural disaster.
And if Reich thinks that the market for giving speeches is an example of a market that is “guaranteed to maximize his profits” as a supplier of speeches, but is “fundamentally unfair,” because his prices and profits are so high, then I would challenge him to reduce his speaking fees significantly to a much lower, and much more “fair price.”
HT: Dean Harrington
Update: In an email, Robert Reich writes that he has no connection to the website in my original post that reported his speaking fees range between $37,500 and $100,000, and he requests that I report that I cannot verify that website’s information about his speaking fees. In the revised post above, I have removed the references to that website, but have added a link to an article in the Las Vegas Review-Journal that reported in 2002 that Robert Reich’s speaking fee was “$40,000 or more.” However, because that was ten years ago, I cannot confirm that the $40,000 speaking fee is accurate today; obviously it could be more, or it could be less.