Solving Obesity Externalities

It doesn't matter whether you listen to Bill Maher on the left or Sean Hannity on the right,  you'll hear guests on their show arguing that something should be done about obesity because one's weight imposes a cost on others.  Obesity, they argue, is an externality, and therefore requires government regulation to make private costs equal social costs. 

Many of these argument surround the health care expenses incurred by Medicare and Medicaid.  I don't think that is a particularly good argument, but I don't want to get into that in this post.  Rather, I want to remind readers of what the Nobel prize winner, Ronald Coase, taught us regarding externalities.  In particular, if your behavior is harming me, I now have an incentive to negotiate with you to lessen the harm done.  

It appears that at least one airline, has taken this lesson to heart.  According to the CNN story:

The head of Samoa Air has defended its policy of charging passengers by their weight, arguing such a system is not only fair but the future for other airlines.


What makes airplanes work is weight. We are not selling seats, we are selling weight.


According to the airline's website, "your weight plus your baggage items is what you pay for. Simple."

I suspect there will be quite a few folks who don't like this policy.  Yet, we already have to pay airlines if we want to check bags or sit in the seats with more leg room.  You're free to bring several bags or stretch out your legs, but the airline is going to make you pay for that privilege rather than charging it to all passengers.  

But, surely this isn't fair because (some) people can't affect their weight.  Yes, but I also can't affect my gender, my height, my age, or my race - all of which have been shown in various studies to affect wages, employment outcomes, and so on.  Men pay more for life insurance than women because we're riskier.  It is hard for me to see that it would be "fair" to force women to pay more for life insurance (to partially pick up men's cost) simply because men are likely to die sooner for some reasons under their control and some that aren't.       

It is almost certainly true that heavier passengers cost the airline more money (and thus raise the prices of airline tickets for everyone else).  Ultimately, the airline isn't discriminating against over-weight people, they're simply applying equality to every pound that enters their plane.  To do otherwise is to ask the thin to pay more than their "fair share."  

How is it that I can support an airline trying to solve an obesity-externality problem when I'm skeptical of the government doing the same?  Competition.  If you don't like Samoa Air's policy, don't fly their airline.  Moreover, if their policy turns out to be one that people (thick and think alike) don't like, there will ultimately be another airline that enters the marketplace to offer passengers a more desirable deal.  Samoa Air may ultimately find that trying to regulate their obesity externalities simply isn't worth the effort, and if that is indeed the case, I suspect you'll see a rapid reversal of policy after a few poor quarterly earnings reports.