The Airport Lounge School of Economics

25 thoughts on “The Airport Lounge School of Economics”

  1. Must we rely on over burdening the ecosystem to sustain the current demographic growth?

    I think we don’t, particularly as productivity enhancements make having too many kids, even in the South, a perilous rather than a profit enterprise. Education shall have a big say in it.

  2. I think the economics of such scheme work because we’re not yet taxing the externalities. Aviation has become so affordable that it’s actually cheaper to fly (particularly if you consider how much it saves you from forfeiting wages) than driving. It’s insane.

    The impact on the atmosphere…. Let’s not get started there. Aviation has become a volume business.

    1. The externalities problem will not be resolved by legislation aimed at pollution reductions. The political process is incapable of addressing long term problems with short term pain because we the voters will not tolerate it. Instead our overly leveraged attenuated supply chains will be disrupted by external shocks. What would war in the Middle East do to global energy systems and shipping, for instance? How would another 2008 style financial crisis ripple out across all our vulnerable arrangements? The value of local resilience is currently ignored in favor of delicate interdependent international systems that are inherently brittle. These things will be resolved over time – the hard way.

      1. Or “fragile,” as Nassim Taleb would say. Not all free markets, but corporate capitalism, has an inherent bias toward fragility. The delay of your flight within California because of bad weather somewhere else is an example of fragility chosen by the airlines. Which is why I doubt that air transport will be our salvation.

  3. Speaking of the unreality of academics, there is a cottage industry of people trying to massage data this way and that to try to disprove what the plain data and the anecdotal evidence plainly show. The American standard of living was unsustainably inflated by debt at a time when the sustainable standard of living has been slipping for decades.

  4. I’ve been wondering for a long time where the breaking point is, the point where a large portion of workers give up entirely on the traditional idea of “making it.” Most people who are trapped between economic insecurity and astronomical housing costs do not have the option of a 600 mile commute. As we go further down this trajectory the choices become ever more distant from any resemblance to middle class life. Is it better to work 80 hours a week, or is it better to live in a van, so that at least you have time to sleep and read and eat real food?
    I know a lot of people in eastern Connecticut who have opted out. They have become really good at keeping a low profile and living on very little money. I think this has dangerous political implications. It sure doesn’t bode well for a stable community. When I talk to people who are still middle class and feeling secure they often don’t even see this, they are stuck in a mindset that anyone can work hard and make it, so they don’t understand, or refuse to understand, that circumstances would be stacked against them if they were starting out now.
    The police here know who the homeless people are. They see them in vans and campers in the commuter lots and Wal-Mart lots, and leave them alone for now. But when too many people are living in vehicles or camping, the war on the poor enters a new phase.
    I love your blog, Johnny. It’s insightful, practical, without hyperbole.

    1. I too don’t understand those who can’t even feel a smidgen of sympathy for those who struggle. Especially being it is not a rare condition. Corporate restructuring has endured essentially nonstop for 35 years. And yet the unemployed are still treated as lepers or damaged goods. A recent poll found the odds of being laid off in any given year for the prior decade was 15%. That is a lot of folks getting clobbered.

      I haven’t seen any economic analysis, but I wonder how much of the tax shortfall at all levels of government are due to stagnating or declining incomes for a majority of the population.

  5. That’s a bizarre commute. I’ve known at least 4 people who commute from Sacramento to SF, but wow Redding to OC?

    Your point about shifting costs is an interesting one. Everyone is acting within what they probably feel is enlightened self interest, but who pays the bills when they come due? The answer is we already are. As one example, people without health insurance simply go to the emergency room for medical care, usually long after preventative measures could’ve contained the situation. If you’re poor enough, they can’t legally make you pay. I know because I did it myself one time when I was poor.

    Seems like it would be better to be adults & acknowledge these hidden costs upfront so we can contain them, as a civilized society… sigh.

    1. Our larger institutional systems are sclerotic and dysfunctional and reform isn’t an option at the moment. So individual people make logical choices that make perfect sense under the circumstances. My expectation is that an external shock (spin the magic wheel – earthquake, financial crash, supply chain disruption, war…) will create enough pain that the old systems will have to be scrapped and replaced. But that might be years or decades away.

  6. Housing costs in Redding might seem cheap to us living in the Bay Area, but they are actually somewhat high relative to local wages. Your nurse example was indeed exploiting some arbitrage.

    Are you certain the traveling nurse wasn’t being provided with good benefits? A lot of firms, especially smaller ones, our outsourcing their pay and benefit expenses to third party providers. These firms can obtain big company benefits at big company costs, meaning that their smaller clients can provide benefits at lower cost than they could obtain them themselves, all for the convenience of a couple of checks a month and much less overhead and headache. Payroll burden (taxes & benefits) is commonly 35-50% on top of base salary, so any break there is a relief.

  7. I love this insight. I spend a lot of time trying to show this truth to whoever will listen. Like you I remember those earlier bubbles and I’m certain that anyone chasing that old standard of living will be perpetually disappointed. So much homelessness, food insecurity, and lack of job stability are hidden from those whose lives are presently comfortable, which sadly, includes policy-makers and older academics. Any real education about the economy can only be had at street (or airport) level.

    1. I puzzle over why economists and policy makers can’t grasp how inequality, debt, and economic concentration are choking our economy. Or persist in blaming the victims of a winner take all system that leaves too many out in the cold.

      1. Because they have a different interpretation of the fact pattern. Their interpretation is: we told you that increasing mandatory benefits would lead employers to reduce hiring, especially permanent hiring. You did it anyway. (They agree with you about who the victims are… they disagree about the culprits.)

  8. Those are two good demonstrations of how nuts housing prices are around here. If the other families in that 5 bedroom also have children then there are probably a dozen or so people in that house, which is an extraordinary density by modern standards. That just emphasizes how easily these pricey homes could metamorphose into tenements (and to some extent already have). I wonder if the neighbors know.

    1. Re: tenements. My great grandparents came over from Sicily about a hundred years ago. They lived in a one bedroom apartment in New York. They had ten children. That’s twelve people. There was one toilet down the hall that they shared with other families in the building. The bath tub was in the kitchen. Water was heated on the stove. My great grandfather lost both his legs while on the job working for the railroad company. No Social Security. No workers comp. No pension. Zero. Then the Great Depression hit and they had to take in boarders to pay the rent in the same one bedroom apartment. My great grandmother did the cooking and laundry by hand. That – and the ten kids – helps explain why she died at age thirty nine. So… a dozen people living in a five bedroom house in suburbia? Not so bad…

      Twenty years later my grandparents’ generation were able to buy modest tract homes in suburbia. Levittown was a miraculous paradise in comparison to how they grew up. Things can and do change.

      1. Curt’s quick suggestion of future tenement living doesn’t mean that you were talking to your great-grandparents’ modern equivalent at all — you were and are at airports, let’s remember, not bus stations.

        A large portion of workers never had the true belief that the modern idea of ‘making it’ was within reach if they do not give up on it (to borrow Other Tom’s words). Though I’m from Texas, where “emancipatory politics” is ridiculed as an oxymoron, I can tell the alternative is getting clearer at this point: women and Afro/Latinx Americans will get tossed the keys when the sedan runs out of gas.

        If they get nowhere on an empty tank, you know affluent/white/Baby Boom or otherwise vested interests will be the first to scoff, “See, we all knew you were not fit to govern us, but you wouldn’t admit it, okay? Here we are, rather nobly taking a back seat, now, but we did keep doing y’all a favor to take charge as long as we did, all right?”

        If, on the other hand, those now exiled from social and most other forms of “capital” do manage the supposedly impossible, and get us closer to driving forward somehow (hopefully without even the current First World shortcut/workaround of overlooking most people, both marginalized and otherwise, both inside and outside of one’s country), creating broad-based wealth of certain kinds. . . I guarantee the backseat drivers will suddenly be diving for those keys all over again.

  9. The nine-year recovery is a mirage, as is the unemployment rate. It’s all gigs instead of jobs and lower workforce participation.

    1. I personally remember the economic downturns of 1973, 1979, 1987, 2001, and 2008.

      I resisted the urge to share my opinion with the traveling nurse that we’re in another asset bubble which will pop sooner rather than later. Buying another house at this time is begging to experience another foreclosure drama.

      On the other hand, after the next crash property and equities will be on the market at reduced prices for those who have cash on hand and minimum debt.

    2. Without that drop in labor participation, unemployment would be twice the current level. Which is why the notion we are at full employment is such a sick joke.

  10. Unbelievable. We’re burning gobs of fossil fuels, exacerbating climate change, to fly in nurses, who can’t afford to live in the communities where they work. The system is sooo screwed up

  11. Katz and Krueger (2016) found that 94 percent of net job growth between 2005 and 2015 was in the “alternative work” category (read: mostly contractors). I wonder if this trend is similar in other Western countries like Germany, Sweden, France, etc., or if this is mostly a phenomenon in the U.S.

    1. It appears to be happening everywhere. From personal travel experience, it is definitely happening in Germany, the UK, Italy, and South Korea (as referenced by locals I’ve spoken with).

  12. Given the markups often present in contracting, I too wonder how it can be cheaper than regular employment on a long term basis. Yet many companies maintain contractors for years.

    I wonder if there is fuzzy accounting that doesn’t tally all costs. Sort of like how rampant outsourcing or offshoring too often degraded quality so much it didn’t save much, if any, money, after repeatedly fixing the problems created, or customers lost.

    A $260000 house that rents for $1000 is a pretty low cap rate, so even in Redding housing appears overpriced relative to local incomes and rents.

    1. @Stevie, it’s ideological: the sort of people who run companies nowadays hate workers. And then there’s peer pressure: being a good class warrior is part of they show off to their peers.

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