Responding to news that air planes are later and more crowded than ever, Dean Baker makes an interesting point:
I remember back in the days when there was a debate over the accuracy of the consumer price index (CPI), all the big honchos in the profession argued that the CPI overstated inflation because it didn't fully pick up improvements in quality. I was arguing the other side, pointing out that there were also cases where the CPI missed deteriorations in quality. Air travel was one of my main examples.
One of the reasons that air travel has come down in price is that airplanes are almost completely filled. This is obviously efficient from the standpoint of the airlines, because the marginal cost of carrying an additional passenger is close to zero as long as there are empty seats.
However, it makes a big difference to the passengers whether a plane is filled or one third empty. On a plane that is one-third empty, everyone has a vacant seat next to them (or a window/aisle seat). How much more would you pay to be guaranteed a vacant seat next to you?
Air travel, of course, is not the biggest deal in the world. But thinking about economic changes in terms of their net impact, rather than merely their basic cost differential, is important. For instance: (many) Americans are getting richer. To do this, they are working far more hours -- many more than anyone else in the world, and many more than their parents worked. Is this good? Maybe. Part of the change is that women have high labor force participation now. But maybe not. Part of the change is that it's harder for families to get by, and many jobs expect for more than a 40-hour workweek. Either way, the costs of creating a culture that expects ever more hours on the job should be taken into account when discussing rising incomes. It almost never is.
