So it seems like a simple matter of a business decision, right? Airlines decide to start charging customers a fee for checked baggage. Oh, sure it’s annoying, and it’s a good reason to fly Southwest, but lots of people just pay the fee. But lots of other people do the next best thing: just pack less and carry-on more. Unfortunately, this new increase in carried-on bags demands more man-hours by TSA inspectors because they are handling a significantly higher volume. This of course costs money because they have to hire and schedule more hours. In testimony before Congress, Homeland Security Secretary Napolitano said the annual cost of airlines doing this to the TSA: $260 million!!! This is a classic example of what economists call “externalizing” a cost to someone other than the corporation. In this case, the TSA, therefore the Federal Budget, and therefore you and me. Great work, airlines!
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