Monday, April 17, 2017

If Not Contract, What?



Charles Goyette has written a piece on the United Airlines debacle: The Small Print vs. The Big Issue.

I have been both surprised and disappointed to discover that so many of the people I esteem as great defenders of free people and free markets have written to defend United’s right to deny a seat to the holder of a paid ticket.  The “involuntary denied boarding” clause is in the contract, they say, and it rules.  It is in there fair and square, they say, and the passenger should have known it.

Nobody books a flight and pays for it and is then told by the airline that it will honor the ticket only when it deems it convenient. But that is the practical effect of the “contract of carriage” fine print.

Before getting to the big question, a couple of thoughts.  First, United did not follow its own “small print” in this case, at least not from what I have read.  Second, anyone who flies with any regularity knows that flights can be oversold and volunteers are requested.  It isn’t merely a question of the “’contract of carriage’ fine print.”  Fliers know this happens without ever reading the contract.  Call it “custom.”

Goyette describes the overbooking practice:

Some explain in needless detail all the reasons that airlines overbook flights.  Those reasons are compelling for airlines, but they are a needless and irrelevant sidebar.

Of course, this is also beneficial to the travelling public – as airlines can ensure full flights with this practice, tickets prices, on average, are lower than they otherwise would have been. 

Now to the big question: if not the contract, what should govern?  A contract represents an agreement between two individuals; it gets no more “libertarian” than this.

What should “great defenders of free people and free markets” suggest instead of the contract?

Of course, custom and culture can govern – and much of our lives are “governed” this way.  Not perfectly libertarian, but beneficial if one wants to minimize or avoid the next possibility.

Alternatively, a government can govern: regulations, laws, legislation, etc.  Completely non-libertarian.

My fellow free-marketeers are correct that United Airlines only hurt itself by its thuggish behavior.

Sure, some contracts are burdensome, onerous, etc.; some companies display thuggish behavior.  If this is overly so, markets tend to resolve the issue.  As has happened in this case.

What has happened to United is a huge victory for the free market – the discipline was swift and sure, and my guess is that it isn’t over. 

In the meantime, my guess is that the bureaucrats are working on “regulations” to address this issue.  Is this really preferred?

Conclusion

So I ask again, if not the market and contract providing regulation and feedback, what?

13 comments:

  1. An integral component of a free market regime is the tort system: those whose tortious conduct is the direct and proximate cause of another's losses should be held to account.

    In America, we have, by and large, a disjointed, malfunctioning tort system. In a truly free society with a truly free market, a company like United would be subject to damages, perhaps even ruinous damages, if its tortious conduct was the proximate cause of a passenger's injuries.

    However, thanks to the "Airline Deregulation Act" (yes, the name of this statute, like countless others, is a joke as its meaning is the opposite of its name) of 1978, and cases like Morales v. TWA, 504 US 374 (1992), one who suffers injury at the hands of a United, will have a very difficult time even being allowed to pursue a case in state court because of the federal pre-emption doctrine.

    49 U.S.C. Sec. 1305(a)(1) pre-empts the states from "enact[ing]or enforce[ing] any law, rule, regulation, standard or other provision having the force and effect of law relating to rates, routes, or services of any air carrier...."

    To be sure, in a truly free, libertarian society, parties may contract to waive tort claims, but there would have to be adequate consideration - a bland, vanilla declaration that the consideration is a lower fare would not suffice as the same would constitute illusory consideration.

    In our current world of state owned (how many billions have been filched from airline passengers through all forms of taxation so that United could be bailed out, be shielded from competition, and get cozy deals with government owned airports?) and managed and regulated airline, I would argue, airline passengers do not have a real ability to waive tort claims.

    If the airlines faced ruinous damages for their tortious acts, perhaps they would better conduct themselves.

    Liberty Mike

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    1. All good and valid points, Mike.

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    2. BM, in the interest of being fair, the Airline Deregulation Act did permit for more competitive pricing which had been theretofore strictly regulated by the feds.

      It was the one good thing about the law.

      Liberty Mike

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    3. That damn commie Carter administration!

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  2. "(how many billions have been filched from airline passengers through all forms of taxation so that United could be bailed out, be shielded from competition, and get cozy deals with government owned airports?)"

    Everyone talks about not giving up freedoms for security, but this is exactly what businesses do on a regular basis. They'd rather be regulated and deal with big government than consumers. You know... so long as government doesn't get TOO big.

    And darned if I didn't just describe individuals, too!

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    1. Spot on

      Owyhee Cowboy

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  3. Gazette does seem to want to have his cake and eat it too:

    "Nobody here is arguing against a close reading of terms and contracts in complex business deals and agreements. But must we go through the principal activities of our daily lives — shopping, traveling, and all the rest – needing to have a lawyer on speed dial or Black’s Law Dictionary in our hip pockets?"

    It's a bit of an attack on the concept of contracts, even if only focusing on those situations he deems "unimportant".

    I like Liberty Mike's reference to tort law, which coincidentally is considered a part of "common law". I mention this because to me it harkens back to BM's writing on such law in the Middle Ages, and though today "common law" is considered to be based primarily on court ruled precedent it wasn't always so...it used to be considered a component of "culture" prior to the 19th century.

    Why do I mention all of this? Well, make no mistake that a "free market" features a cultural component, for better or worse.(and I like freedom regardless)

    In this case, when people find United enforcing an implicitly agreed to contract(via ticket purchase) in a culturally offensive manner- well, we can see outcome and resulting correction attributed to free market activities.

    I see the free market and culture as being inter-related. I could post some highly offensive examples of contracts that from a strictly libertarian standpoint would be perfectly acceptable under the principle of "self ownership"...but oh boy, said contracts have a TOUGH time being enforced in a Judeo-Christian society(and I could do the same for an Islamic society!). That however, doesn't make me "anti contract", it's just a reality and one should consider it when making contracts IMO.

    Excellent write up BM.( and obviously, when the bureaucrats get done eliminating or regulating overbooking rest assured it will raise airfares)

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    1. "In this case, when people find United enforcing an implicitly agreed to contract(via ticket purchase) in a culturally offensive manner- well, we can see outcome and resulting correction attributed to free market activities."

      Well put. Contracts are CYA, but culture decides the PR. Culture and its abilities... scary.

      All this talk of contracts reminds me of a series of papers I read - years ago - by a professor whose name escapes me (Last name began with an "H", I think.)

      There was a scenario in which an old lady inadvertently signs a contract for an expensive gym membership. Everything about it is legal, but the old lady is financially affected by the contract. This professor then went on to talk about a need, always, for an elastic judiciary within a society so that when things seem unjust (culture again), even though perfectly contractual, there is an exit option.

      He also had a neat quiz about constitutional law that was quite a challenge. Sigh... now I'm going to have to go and find it.

      Hossa? Hornen? Hosnan? Something like that.

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    2. Love Diskworld. Given the quote above maybe time to reread.

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  4. Hasnas! Prof. John Hasnas out of Georgetown U.

    Here's the link: http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm

    "THE MYTH OF THE RULE OF LAW"

    Some snippets:

    "I would argue that this ability to maintain the belief that the law is a body of consistent, politically neutral rules that can be objectively applied by judges in the face of overwhelming evidence to the contrary, goes a long way toward explaining citizens' acquiescence in the steady erosion of their fundamental freedoms. To show that this is, in fact, the case, I would like to direct your attention to the fiction which resides at the heart of this incongruity and allows the public to engage in the requisite doublethink without cognitive discomfort: the myth of the rule of law."

    " [...] As long as law remains a state monopoly, as long as it is created and enforced exclusively through governmental bodies, it must remain indeterminate if it is to serve its purpose. Its indeterminacy gives the law its flexibility. And since, as a monopoly product, the law must apply to all members of society in a one-size-fits-all manner, flexibility is its most essential feature."

    " [...] The fact is that the greater the degree of certainty we build into the law, the less able the law becomes to do justice. For this reason, a monopolistic legal system composed entirely of clear, consistent rules could not function in a manner acceptable to the general public. It could not serve as a system of justice."

    What about a libertarian society of only contracts and no central laws or monopolistic judiciary? Once again, the outcome would be left to the culturally dependent perception of justice, yes?

    "Take the universe and grind it down to the finest powder and sieve it through the finest sieve and THEN show me one atom of justice, one molecule of mercy. And yet... you try to act as if there is some ideal order in the world. As if there is some... some rightness in the universe by which it may be judged." - Death; from Terry Pratchett's 'Hogfather'

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