A promotion from Norweigian Cruise Line.
A promotion from Norweigian Cruise Line.

Richard Epstein of MarketWatch takes on an article by Nelson Schwartz in a recent edition of The New York Times that takes issue Norwegian Cruise Line's policy that gives 275 elite guests (out of the total 4,200 passengers) upgraded cabins and preferential access to the rest of the ship.

The descriptive analysis has to start with the simple observation that tiers of service are fundamental in every area of social and economic life. It is obvious enough that people with greater levels of wealth tend to congregate together. The instinct toward separation applies at all levels of the income scale. Every collective social activity involves the use of common facilities, which are a form of limited-access public good that applies to all persons who purchase private accommodations in the common facilities—e.g., cabins or staterooms on cruise ships, seats on trains or airplanes, or tickets to theaters and sporting events.

Here’s why. Most people budget their funds to have a uniform level of quality across both the separate and common dimensions of the services they purchase. They do not want to pay for public accommodations that are markedly inferior—or superior—to their private accommodations. It follows therefore that the common elements of service diverge strongly for different classes of customers.

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