Psychic harms and property rules

Get your photons off of my lawn!

Here's Steve Landsburg:

George Johnson of the New York Times writes that:

In a saner world, where science and the law meshed more precisely, a case like Firstenberg v. Monribot would have been dead on arrival in court.

Arthur Firstenberg, you see, is suing his neighbor, Raphaela Monribot, for bombarding him with photons from her iPhone, her WiFi connection, her dimmer switches and her fluorescent bulbs (all as side effects of her ordinary use of these devices). Mr. Firstenberg believes (or claims to believe) that said photons are damaging his health — a belief with essentially no scientific basis.

Mr. Firstenberg requests $1.43 million in damages, so perhaps we should think of this as an exercise in bosonic “ka-ching” theory. The case has gone on for five years, and might be headed to the New Mexico Supreme Court. Estimated court costs so far exceed a quarter of a million.

Psychic harms of this sort have been a problem for a while. How do we decide to allow photonic transgressions that cause psychic harms but not allow other transgressions that (in thought experiments) only cause psychic harms?

Here's David Friedman's resolution, from a couple years ago, to a prior Landsburg thought experiment:

More precisely, the property rule under which I have a right to read porn [EC: despite the psychic harm potentially imposed on prudes] and you can only stop me by offering to pay me not to do so produces its result by ignoring the cost my porn reading imposes on you, since, as with the case of risks imposed by careless driving, including that cost requires an unworkable contract between all of the prudes and all of the would-be consumers of porn. The property rule under which you have a right to forbid me, or anyone else, from reading porn, produces its result by ignoring the cost your ban imposes on me, for the same reason. Neither property rule gets the cost/benefit calculation correct, but the former rule is a great deal less expensive to enforce than the latter, which is an argument for it.

What about a liability rule? That is the point at which the subjective nature of the harm comes in. It is true that, from the standpoint of economics, all harm is ultimately subjective—having my arm broken or my car dented would not be a cost under sufficiently bizarre assumptions about my preferences. But some subjective costs are a lot easier to measure externally than others. When I claim damages for my wrecked car, there are market prices out there for repairing or replacing it that provide a court with a reasonable basis for estimating the cost. When I announce that your reading of porn, or oil drilling in a wilderness I never plan to visit, inflicts large psychic harm on me, there is no such basis for checking my claim.

The photon case should use a property right rule where I have the presumptive right to emit photons (though you can pay for abatement), because it's easy to fake psychic harms from photons and it's unverifiable.

Previously:

• Thought experiments and taking harm
• Psychic externalities
• Psychic mountain harms

Air Coase

No matter how much the screaming baby on an airplane annoys you, it really isn't imposing a Pareto-relevant externality. Recall that a Pareto-relevant externality is one where there are gains from trade that fail to obtain. The airline here is residual claimant: if it could earn more by having baby-free flights, or by restricting children to some segments of the airplane, it would do it. Airlines aren't going to throw money away by failing to implement baby-abatement policies if implementing them would earn them higher profits. Absence of baby-abatement airline policies is then evidence that inconvenience imposed on parents by a change in policy outweighs the inconvenience babies impose on other fliers.

Turns out there are two airlines that cater to demand for kid abatement.

Malaysia's two main airline groups have provided a way through the morass by creating kids-free zones in their biggest planes on long-haul routes.

Malaysia Airlines went first in 2011 when it banned kids in first class on its 747s and extended the policy in 2012 when it introduced the superjumbo A380 on twice-daily flights from Kuala Lumpur to London.

The A380 kids policy applies only to the upper deck's tiny economy section of 70 seats behind the 66 seats in business class. However, it's not an outright ban: the airline still has bassinets in the upper deck economy section and will allow kids if there's a kids overflow from the lower deck.

In any case, there are still baby bassinets on the upper deck in business class, so MAS is simply trying to make the upper deck quieter than it otherwise might be.

AirAsia X, which flies from Kuala Lumpur to the Gold Coast, Sydney, Melbourne and Perth and now has an interlocking shareholding with Malaysia Airlines, this month also introduced kids-free "quiet zones" in the forward section of its economy class, where kids under 12 aren't allowed. If you want a seat in the quiet zone, it's offered as an optional extra for which a surcharge applies.

"The airline is not banning kids from travelling, but instead, is enhancing the array of product offerings on board to suit its guests individual needs and preferences," says AirAsia X chief executive Azran Osman-Rani.

I love it when a Coasean-bargaining plan comes together.

There are situations where there are real Pareto-relevant costs imposed on you by other fliers despite the airline being residual claimant: government policy in some countries makes it illegal for airlines to charge heavy fliers more, or to require them to take an extra seat. Governments thereby create market failures by externalising the internality.