The liberal commentator and former Labor Secretary was ranting the other day about how at least one the airline jacked up its fares out of JFK in advance of the big storm. On a flight to California, ticket prices skyrocketed to $4,000, and the carrier oversold by 47 seats. So the airline offered $400 vouchers to 47 volunteers who took a later flight.
Assuming that the 47 extra passengers had each paid $4,000 to get onto the plane at the last minute, and the 47 who gave up their seats for them received $400 in return, the trade would have been "rational" in narrow market terms. After all, the seats were "worth" $4,000 to those who bought them at the last minute, and switching to the next flight (whenever that might be) was "worth" $400 to those who agreed to do so. But the transaction was also deeply exploitative. The airline netted a huge profit because of the impending storm. I couldn't help think this was a miniature version of the America we'll have if Mitt Romney is elected president. Rational and efficient in terms of supply and demand, guaranteed to maximize profits, but fundamentally unfair."
Well, maybe. But Reich is a tad selective when he rags on the unfair marketplace. From economist Mark Perry, who writes the Carpe Diem blog:
Here's what I find exploitative and fundamentally unfair: The Las Vegas Review-Journal reported in 2002 that "Reich is in the Washington Speaker Bureau's top-fee category, among 28 speakers who garner one-time speaking fees of $40,000 or more," and he therefore is able to net huge personal profits for his 30-minute talks (or less than 15 minutes for the talk in Las Vegas at the UNLV Foundation, according to the Las Vegas paper). OK, actually, I think it's great that Professor Reich uses market-based pricing for his speeches, and I applaud him that he can charge $40,000 speaking fees (according to the Las Vegas Review-Journal) based on market demand for his time, but then he really shouldn't complain when an airline uses market-based pricing to allocate scarce seats on a plane when demand is high during a natural disaster.
Michael Bernick has his own Reich story and it's a doozy:
It was in early 1999, my first year as director of our state labor department, the Employment Development Department. Governor Davis was concerned about the low wage workforce in California: the farm workers, the nurse assistants in long term care facilities, the non-union hospitality workers. At EDD, we decided to contact former labor officials to get their thoughts on job ladder/skills upgrading efforts. The EDD office called Mr. Reich. We did not speak with him--he did not take calls, at least at that time. Reich's assistant, though, informed us that Mr. Reich would consider coming to California at some payment, I believe $5,000-$10,000. What I do recall clearly is that as part of any arrangement, Mr. Reich required a first class airline ticket. In other words, he might consider coming to California to discuss low wage workers if we gave him a large sum of money and a first class airline ticket.