Airfare and arts: What are you paying for?

I travel around a bit, so I'm on the constant search for cheap flights. I flew over the weekend to Omaha to be with my family for Christmas. I went Southwest, one of my favorites, due to their low and predictable prices. Spirit is also incredibly cheap, offering fares often under $50. Explaining my flight options to my family, someone said, "how can some airlines offer fares so cheap, when others are so expensive?"

I thought for a moment, and knew the answer. Fares are cheap when there is less variety or choice in where and when you fly. You can only fly to a limited number of cities, and/or fly on very specific days. They keep prices low because they ONLY offer what is most cost-efficient for their company to produce, which may mean flights close to their headquarters, or flights between popular cities.

This reminded me of Rushton's explanation about the cost of books (the literary art form). Why are books cheaper in grocery stores or big-lots stores than they are in bookstores? Because the grocery stores only offers the absolute best sellers, a small variety, only what they know will sell and cover its own cost (John Grisham, Mary Higgins Clark, etc). Bookstores, whether small/independent or Barnes & Noble, offer more variety, so prices are higher to cover the cost of stocking lesser-bought books like poetry (they're a bookstore; it's their job to have variety, but they still have to pay for it somehow).

This also applies to performing arts, as explained by Doug Booher. Shows can be more expensive at performing arts centers that have more variety, because the blockbuster shows are underwriting the more experimental shows that don't cover their costs. The same with museums - they bring in the blockbuster special exhibitions that will bring in enough admission fees/sponsorships to cover other smaller or lesser-known but equally artistically important endeavors.

The arts are considered a “mixed commodity” because they are in part a private good – they can be sold to an individual purchaser and their benefits are enjoyed specifically by him (the ticket to a concert, for example). They are also in part a public good, because their presence enriches society as a whole (preservation of collective cultural heritage, prestige and identity conferred upon a body of people, developing aesthetic public tastes, etc, suggested by economists Baumol and Bowen). I might argue many other services are like this that we don't realize; enriching society in the form of options from which we may not individually benefit, but rather benefit indirectly, collectively, simply from their presence. (Example: Do we perceive our country to be more free, mobile, and well-off, if we have seemingly infinite commercial flight options, even if we ourselves do not take advantage of them? And are we as a whole benefited by this mindset? Do we take pride and comfort in knowing we COULD go somewhere if we need or want to, or that our children will have the opportunity to take advantage of these options in the future, contributing to more peace of mind? It may not be tangible, exactly, but the spillover externalities could be far-reaching.)

Point is, in many situations, when you're wondering about the price of something, consider if you're paying ONLY for what you yourself get (private good), or if you're paying for the options you have, or for the availability of lesser-popular offerings, the mere presence of which, it might be argued, enrich society as a whole.