Today's lesson in perverse incentives -- airline bag fees. Sadly, Southwest Airlines succumbed in 2025 and started charging bag fees. (Via Quartz Daily Brief.)

Domestic airfare carries a 7.5% federal excise tax that funds the FAA through the Airport and Airway Trust Fund. The IRS has ruled that checked-bag fees aren't payment for the "transportation of a person", so they escape that tax entirely. 

That single distinction is the whole game. Move a dollar from the fare column to the fee column and the airline keeps an extra 7.5 cents. Gary Leff, who writes the aviation blog View From the Wing, calculated that American Airlines alone was saving over $75 million a year in taxes by charging for bags instead of folding the cost into fares. 

Southwest, by including two free checked bags for decades, paid more tax on the same trip than rivals who unbundled. Washington was penalizing the one airline that didn't nickel-and-dime.

... or at least the choice or the alternatives aren't always obvious.

Three very different situations I read about in my weekly look at advice columns surfaced the same common thinking error. I've heard this called "binary thinking," but I'm not wild about the term. False dichotomy is another one that doesn't quite sit right with me here, although I like it better.

I'll roll with the above title and state that not every situation has a clean-cut, either-or set of correct alternatives, or at least if there is a clear-cut solution, its application requires enough thought that applying the solution will require significant effort.

Indeed, just after writing the above, I'm inclined to see discovering the issue or application of a clear choice as issue(s) that can muddy any problem.

Two of the three letters I considered are similar in many ways, and pertain to family dynamics being strained by strong differences in ethics or political opinion.

In one of these, Carolyn Hax tackles the question of a woman who, although very different from her in-laws, is looking for a way to continue seeing them, rather than not visiting them at all, as her husband suggested. To that idea, Hax correctly argues that the choice isn't keep seeing them as usual OR not at all:

[D]on't underestimate avoidance as a permanent solution. Boycotting is extreme, sure, but... You can make the visits a wee bit shorter, a tad less frequent, a smidge more structured (a movie, a play, another venue where conversation is similarly discouraged). After a day or two, you can spin off on your own to visit a friend who lives somewhere (remotely) nearby. You can become Super DIL and go grocery shopping (alone), weed the flower beds (alone), do the dishes (alone) ... especially when politics erupt.

In other words, you can control the dosage more, and more good-naturedly, than you think. A fresher you can then focus on where your interests do overlap.

The similarity to the adage, The dose makes the poison, resolves the apparent contradiction of the woman being driven crazy by her in-laws, but still wanting them in her life. The rest of Hax's excellent answer concerns determining what, exactly, bothers the woman and helping her become able to make peace with not resolving that, at least any time soon.

An Ask a Therapist letter concerns a more serious problem that does merit leaving a relative out of certain family gatherings, but not cutting off all contact. Again, for good reasons, the writer wants to maintain contact with a wayward son and the sister he has alienated, but does not want to condone what her son has done:

Granted, this might feel like a hard limit for you to set, especially because your son might never repair the damage, but doing so accomplishes two things. First, it takes a clear protective stand: Those harmed shouldn't miss out on the joy of family gatherings; those who harm shouldn't be present in these settings. Second, it leaves room for you to continue to see your son separately -- though not neutrally.

Here, the time to cut all ties has plainly not come for the mother, who has some hope that it never will come.

The third letter, regarding the difficulties a couple face when one partner has determined a need to become sober, presents a very clear choice that someone is having trouble applying in the context of his marriage and wider social life.

That difficulty disappears when Dr. Nerdlove reminds the writer that, while his spouse can certainly support his efforts, she doesn't have to go sober herself, and that they needn't get rid of everything that came with drinking socially:

[T]hat doesn't mean that your relationship is doomed. It just means that you're going to have to figure out ways to accommodate what can feel like conflicting, even mutually exclusive desires. They don't have to be conflicting, mind you; it will just require some creativity and mutual accommodation to make it all work without threatening your sobriety.

One thing that can help is if you can figure out what, precisely, you miss about drinking, besides the literal alcohol. Many times, part of what people miss when giving up any vice is the routine -- lighting up a cigarette at certain times of the day, mixing drinks for yourself and your wife before settling in to watch a movie, going out to dinner and drinks on a Saturday night. It can be helpful to find ways to keep the ritual in your life, but without the booze component.

Other times, it could be the tangible aspects that you miss, such as how people who give up soda often miss the sensation of carbonation and the mouth feel of the bubbles or the tang of the caffeine on the tongue. Having something that can replace those sensations or those tactile aspects can make it easier to resist when you're flooded with urges to relapse.

There're a few options, if you're of a mind...

The full answer is ingenious in that it doesn't just address the very real relationship concern, but also the difficulties of making a major life change generally. Here, the choice was clear, but hard to apply, and hindered by the incorrect idea that many of the things that went with the vice would be lost forever when getting rid of that vice.

So after all of that, were there clear choices? Yes: (1) She wants to know her in-laws while keeping her sanity; (2) She wants to protect her daughter and possibly help her son; and (3) He wants to save not just his life, but his marriage, from his problem drinking.

-- CAV

Excerpted from an update to my post Libertarian and Lockean Creationism: Creation As a Source of Wealth, not Property Rights; Hayek’s “Fund of Experience”; the Distinction Between Scarce Means and Knowledge as Guides to Action:

***

Update: See Per Bylund’s taxonomy of types of information in Per L. Bylund, “Austrian Economics and Knowledge,” Q. J. Austrian Econ. 29, no. 2 (June 08, 2026): 1–24. Abstract:

This article develops a typology of knowledge in economics, drawing on the works of Carl Menger and F. A. Hayek, to clarify how different types of knowledge affect production, coordination, and entrepreneurial profit. It organizes economically relevant knowledge along two axes—the physical world versus the catallactic world, on the one hand, and general versus applied, on the other—and adds a temporal dimension to distinguish knowledge problems from uncertainty. The framework reveals that while physical-world knowledge sets the boundaries of what can be produced, catallactic-world knowledge guides what should be produced and how. The article applies this typology to Austrian theories of the market process, showing that uncertainty arises when value knowledge is unavailable at the time of action and that entrepreneurial profit stems from bearing this uncertainty rather than from superior knowledge. This conceptual separation advances the understanding of economic causality and the distinct functions of knowledge in market processes.

The problem of uncertainty is a matter of the value produced, which is the end point and goal in economic action as well as the basis for assessing choices made in economizing production. https://t.co/NM9ScPtqQe

— Per Bylund (@PerBylund) August 13, 2026

See also other tweets here:

I don’t disagree with any of what you say about knowledge, but I think it is too vague to make the point. Yes, property is necessary for prices and prices are necessary for economizing. But Mises and Hayek ultimately have different bases for the prices they see as necessary for…

— Per Bylund (@PerBylund) August 13, 2026

I think it is somewhat misleading to reference Mises’s “cannot know” as a knowledge problem in the same way as Hayek’s contribution and analysis. They refer to different types of problems, as I clarify here: https://t.co/LYXt7EiuJj

— Per Bylund (@PerBylund) August 13, 2026

Now my point in this post and in my writing about IP is more general: that action is necessarily guided by ideas, knowledge and information—knowledge of causal laws, and other knowledge such as contingent or factual knowledge about the world, and so on. The general point about the nature of action and the distinction between the roles of causally efficacious scarce means and their employment, on the one hand, and that of the knowledge that guides action, on the other, does not require a further breakdown of various types of knowledge that the actor considers relevant or useful in guiding his action.

So Bylund’s breakdown does not matter for the general point I am making—that causal and other knowledge is essential to and guides action—but it is interesting nonetheless. However, though it is depicted in a neat and apparently comprehensive 4-quadrant chart with sharp horizontal and vertical lines dividing the boxes, I am not sure it is 100% rigorous or exhaustive. This does not mean it is not conceptually useful for analysis nor that such distinctions are not useful to some actors. For example we find it useful to distinguish innovation from invention, or invention from discovery, even if these terms are not rigorously defined and the distinctions and divisions therebetween not sharp or clear. (( See Masnick on Innovation vs. Invention; on Irrelevant and Nonrigorous Distinctions: Innovation, Invention, Ideas, Knowledge, Data, Discovery… ))

As for exhaustiveness: when someone says here are the X categories of something, my hackles are raised: I always wonder if they can prove their breakdown is exhaustive and complete. You can do this in some cases, of course. For example, you can show that all action is jogging or non-jogging (or would that be jogging and “not-jogging”?), but you can’t say some liquid is either coffee or water, since there are other types of liquid.

For example “things” (what most people might call “property”)¹ may be classified as either movable or immovable by definition, since “movable” is defined as the residual category: “All things, corporeal or incorporeal, that the law does not consider as immovables, are movables.”²

But what about types of goods? Are all goods either present or future goods; or either producer (capital) or consumer goods? Or does the capital/consumer division just refer to two obvious or main types, with others being possible—just as contracts may be nominate or innominate, with the former being “those given a special designation such as sale, lease, loan, or insurance” and the latter being those³ Or are there other types of goods, e.g. “sui generis” goods that are neither capital nor consumer goods, e.g. money?⁴

And what about, similar to the goods categories of consumer and producer goods, the parallel concepts leisure and labor? Are they exhaustive? Is all action either labor or leisure, or might there be other types of action? Labor and leisure are subcategories of action based on how we classify the type of end of the action: it the thing pursued and end in itself (leisure, consumption) or some intermediate end (labor, production)? Or maybe not all action is 100% either one and is a mixture: if I enjoy my job is it labor or leisure? (Likewise, the public-private goods dichotomy is also not sharp.)⁵

So: is all “knowledge” either general or applied; or appertain the physical or “catallactic” world? And what about other distinctions as between concepts like knowledge, ideas, recipes, information, data, and so on, which all play a role in the guiding part of human action and which are all sometimes used more or less synonymously and sometimes not? I don’t know.

Read more>>

1. Libertarian Answer Man: Self-ownership for slaves and Crusoe; and Yiannopoulos on Accurate Analysis and the term “Property”; Mises distinguishing between juristic and economic categories of “ownership”.
2. La. Civil Code, Art. 475; Intellectual Property Rights as Negative Servitudes; Are Ideas Movable or Immovable?. See also Louisiana Civil Code, Art. 448.
3. Louisiana Civil Code, Art. 1914.
4.  Walter Block on Money as a Sui Generis Good.
5. Public Goods and Intellectual Property.

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