prior probability

Times writer Josh Barro and cultural economist Tyler Cowen have recently used the so-called Coase Theorem to analyze the economics of cheap airplane seats — the ones with little leg room, so that reclining your seat imposes a non-trivial cost on the person behind you. Recall that, as Mr Barro deftly explains in his essay Don’t want me to recline my airline seat?, the Coase Theorem is an economic theory holding that it doesn’t matter who is given a property right at first (such as the right to recline your seat, or in the alternative, the right not have the seat in front of you recline), for so long as the right in dispute is clearly defined and negotiation costs are low, people will generally trade the right so that it ends up with the person who values it most.

In his Coasean analysis of airplane seats, Mr Barro thus writes: “When you buy an airline ticket, one of the things you’re buying is the right to use your seat’s reclining function. If this passenger so badly wanted the passenger in front of him not to recline, he should have paid her to give up that right.” The problem with this analysis, however, is that property rights are, in fact, not “clearly defined” in this situation. Although we understand Mr Barro’s argument, one could also argue that when you recline your seat, you, the seat recliner, are trespassing the property rights (i.e. leg room) of the person behind you.

For his part, Tyler Cower commits a common error by downplaying or ignoring (take your pick) the reciprocal nature of the airline seat problem when he writes in his post The economics of reclining your airplane seat: “Relative to current norms, who does more to make the whole question ‘an issue’ — the seat recliner or the purchaser of the recliner-blocker? Clearly it is the purchaser of the blocker and thus Josh Barro is broadly in the right, the norm should continue to allow people to recline their seats as that minimizes fuss, which is more important than getting the right outcome with the seat itself.” Contrary to Professor Cowen’s analysis, this is a reciprocal problem — i.e. a problem jointly caused by both parties — because, yes, although the person who purchases a “recliner-blocker” is imposing a cost on the person in front of him (by preventing that person from reclining his seat), at the same time the person in front (by reclining his seat) is also imposing a cost on the person behind him.

For our part, we would not apply the Coase Theorem to cheap airplane seats, except to note that the problem is indeed a reciprocal one. Instead, we would apply a different model, the Prisoner’s Dilemma. In brief, airline passengers in cheap seats are locked into a Hobbesian Prisoner’s Dilemma (Hobbesian because there is no central authority with the power to enforce law mid-flight) because, when you recline your seat, you are “defecting” instead of “cooperating” (to use the terminology of game theory). The first passenger to recline his or her seat, in effect, defects from the implied social contract in economy class (aka “steerage”) to respect other people’s leg room rights. Moreover, this perceived affront to one’s rights (“perceived” because the problem is ultimately a reciprocal one) creates an obstacle to Coasean bargaining … The lesson here, to us at least, is to not be the first to defect.

Dude, don’t be the first to defect!