Saturday, November 22, 2008

Furor over Auto Exec's Planes Not Justified by Counterfactual Analysis

The last two days have seen an uproar over the use of private jets by the auto industry executives lobbying Congress for billions in financial aid (1) (2) (3). Similar complaints attended the government rescue of financial institutions a couple of months ago (4) (5). Common to these criticisms is the notion that one should not be asking for financial assistance while at the same time spending “excessively.” The problem with this normative claim is that it could be deployed even if the facts were completely contrary. Were a company to own a private jet and not use it to fly executives to Washington, for example, the company could be charged with needlessly wasting money on plane tickets while a perfectly good Gulfstream sits idle on the tarmac.

Indeed, it may make better fiscal sense to indulge in these so-called ‘excesses’ (6). Perhaps corporate jets ferry executives, their staffs, and their business partners to meetings with greater speed (saving expensive time) and with greater accommodations (saving expensive tickets otherwise bought from commercial airlines). Were this the case, then in a counterfactual where a company does not own private jets, the company could be just as fairly criticized for not employing better fiscal sense by having such planes already on hand.

Putting these empirical questions regarding cost aside, it is hard to see the value in a criticism that can be equally valid when deployed even amidst contrary fact patterns.

(1) Milbank, Dana. "Auto Execs Fly Corporate Jets to D.C., Tin Cups in Hand." The Washington Post, November 20, 2008.

(2) Lavan, Rosie. "Big Three jet into furore over funding call." Times Online, November 21, 2008.

(3) Dutton, Monte. "What if Ford auto exec had driven to congressional hearings in a hybrid rather than private jet?" Gaston Gazette, November 20, 2008.

(4) "Lawmakers steamed over ritzy AIG retreat after bailout.", October 8, 2008.

(5) Mamudi, Sam. "Senate chair gets mad over AIG retreat." MarketWatch, October 9, 2008.

(6) Stephen, Max. "Private Jet Rental - Not Just For The Rich & Famous.", Accessed: November 21, 2008.

1 comment:

Michael Young said...

Your analysis apparently missed something -- the fact that a roadtrip is almost certainly cheaper than either a private jet or a commercial jet.

I suspect, actually, that cost has nothing to do with any of this. The point rather is to see these CEO's groveling, and knocked down a peg or two. The point is humiliation, or what we think might count as humiliation. I'm inclined to think that this itself is (always) insidious and morally objectionable, even if I don't feel too terribly bad for these guys. After all, they may, through such grovelling, get a few billion dollars to bailout companies which are and have been failing for a long time.

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