Numbers matter. Some numbers matter more than others. Numbers that rank organizations, products, and etc. matter an awful lot. Sociologists Espeland and Sauder showed in an excellent recent paper various ways that rankings produce reactions – “reactivity”. For example, law schools were ranked on the LSAT and GPA scores of entering students, but not in night or part-time programs. Thus, some schools shifted marginal admits into those programs, or founded new programs, in order to improve their rankings. Espeland and Sauder have tons of great examples of this sort of behavior.
In a similar vein, Goodheart’s law is an economic maxim that states: “Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” One mechanism for this breakdown is that the statistical regularity is only a partial view on an underlying process – whatever that process happens to be (i.e. GDP captures economic activity, but not perfectly). By emphasizing and trying to force a relationship in the measured relationship, political actors may change the very process that produced the relationship, in part because they miss some of the unmeasured bits. Indicators are especially problematic – for example, if percent of girls attending school is an indicator of gender equality or development, policies designed to push up that percentage but ignoring all the other factors that produced it in the first place may move the indicator without affecting all the other things it used to be correlated with (gender disparity in wages, say).
So, what does this have to do with airline surcharges? Reading through a BoingBoing post lamenting the implementation of new fees for everything from checked bags to blankets, I wondered again, why are airlines adding all these annoying fees instead of just raising prices? In the past, facing hard times, airlines raised prices.* Why not now?
One answer might be that the price of the ticket has become more consequential because of the proliferation of search engines for flights. Priceline, Kayak, and Expedia don’t factor in surcharges, in part because many of them are (pseudo)optional (for example, fees on both checked and non-checked bags are pretty much just price increases, but one could theoretically fly bag free). So, a ticket from an older, established airline with high fees shows up as the same cost as a lower-priced competitor. It would take customers a fair amount of work to figure out ahead of time how fees would factor into the “true” price for themselves – instead, we just pay the listed price and kvetch about the surcharges. In other words “ticket price” used to be a good indicator of the cost of a flight – indeed, it was almost a sufficient statistic. Now, because ticket price ended up being used to rank flights within helpful programs for choosing a flight, the relationship between cost and ticket price has been (somewhat) broken.
What do you think?
* Note, this is a guess. If anyone has facts about previous annoying fee implementations, post a comment!