What to do when you’ve paid extra for an aisle seat and a person asks you to switch with his wife so that they can sit next to each other? Do you say yes or endure his irritation through the entire flight?
Watching, an economist might have cited a negative externality. The airline needed the revenue and the person in the aisle seat wanted more legroom. Between 2 parties, the transaction was satisfactory. Then, though, the negative externality materialized when a third individual became unhappily involved. The third individual also “paid” for the aisle seat through his inconvenience.
A negative externality represents the cost “paid” by an uninvolved third party. Not being able to study in a dormitory because of loud music and respiratory ailments from factory emissions are examples of third party “cost.” On the other hand, a doctor and patient generate a positive externality, a benefit to others, through a vaccination.
As the proliferation of fees shifts our flying behavior, I wonder how much new externalities are adding to our cost.
Considered through economic lenses, this NY Times article and this Huffington Post article on airline preferential seating bring to mind many third party costs. Here, here and here, econlife looks at airline fees.
Please note that this post has been edited.