Fitness Apartheid (Ep. 180)

Listen now:
(Photo: Red Lion Hotel Denver)

(Photo: Red Lion Hotel Denver)

A New York City apartment building has a gym that only certain tenants can use. Which tenants? The newer ones who are paying market-rate rents — and not the ones who’ve lived there long enough to qualify for much cheaper, government-subsidized rent. Some tenants call this “fitness apartheid.” What do economists call it?

That’s what this week’s show is about. The episode is called “Fitness Apartheid.” (You can subscribe to the podcast at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript, which includes credits for the music you’ll hear in the episode.)

You’ll hear Theda Palmer Saxton and Jean Green Dorsey, both residents of Stonehenge Village, the building on the Upper West Side of Manhattan with the controversial gym. Stephen Dubner also talks to Steve Levitt and Daniel Hamermesh, a  professor of economics at Royal Holloway University of London and Professor Emeritus at the University of Texas at Austin. (Hamermesh was on the show most recently talking about discrimination and looks.) As you’ll hear, Levitt and Hamermesh have pretty different points of view:

LEVITT: I would call this disrespect. It’s intentionally showing through your actions that you have no respect for the old-guard people, and rubbing it in their face in a way that markets don’t really do. Markets are not moral or immoral, they’re amoral. Markets don’t care. In a market world, you say, ‘I don’t care if you live here or not. I don’t care who the identity of the person is. As long as you pay the right price and you don’t impose negative stuff on other people, it’s fine.’

HAMERMESH: The owner had to spend money creating this gym, right? How is the owner going to get the money back by giving it away for free to people who are already getting an extremely good deal? Essentially what the people who are rent-controlled want is a bigger subsidy than what they’re already getting. Isn’t that pretty greedy?

Also in the episode, you’ll hear a discussion of “poor doors” in New York City, and a discussion of whether first-class seating in an airplane is also discriminatory.


Bill

No surprise that people who feel entitled to live in someone else's building for practically free also feel entitled to use someone else's gym for absolutely free.

Jon

There is a price-based response available to the City. Have price discrimination in water service, with buildings that offer less than equal services to rent-control tenants paying $10/gallon.

Chris J. Rock

Stephen Dubner, do you seriously think bullying doesn't happen when there's a market? I tend to think A. bullying happens everywhere and B. the worst facet of bullying, violence, is very common even in the presence of markets in the absence of effective policing. Isn't police action a form of regulation?

Doesn't the behavior of organized crime prove that a price signal doesn't ring as loudly as a crack to the skull?

Chris J. Rock

Hope you don't mind a follow up to my last comment.

Basic economic rules of thumb tell us a lot about how to make profit, but isn't there something in the nature of the bully that craves destruction? Can't a bully lose out on some financial revenue to profit in the joys of intimidation and having broken the spirits of their fellow man? How does an economist negotiate with someone who just wants to see the world burn?

Sheng

Check your privilege.

Disappointing show.

Marc

I think the Levitt and Dubner chose this show and did it in this way to make the rent-controlled tenants look bad, so as to denounce rent control. It's a pity that the rent-controlled tenants, in particular the first woman who almost immediately Godwins to the absurd the minute she opens her trap, make it so easy for you.

MrHmyers

Dr. Levitt,
In one sentence you say two interesting things that are arguably opposite.
You argue Jill Abramson has a legal right to only provide interviews to females. I agree. Our freedom of association is protected by the Constitution. This would be less easy to argue if it were a black person only granting interviews with black people or a white person only granting interviews to white people. Just as absurd but still legal, as you point out.
Then in the same long sentence you wince when you admit having been on Fox News but almost proudly admit to having been on Al Jazeera. I can overlook the wince at Fox but not even a hiccup or hesitation for Al Jazeera?
Hard to believe this is the same guy defending a white person's right to interview only white people.
Just saying...

Brendan

With regards to 'poor doors' there is a pretty simple explanation these are done. Speaking from experience as someone who works for a developer that has built buildings with market units and 'social housing', the reason this is done is because after construction, the market units and social housing units are split into two legal titles. This is done so that the market units can be owned by one owner, and the social housing by another (in my cases, typically the city will own and manage these social housing units). Because there are two legal titles, the building code requires each to have its own separate entrance, lobby, and elevator bank.

Lee

Have these poor downtrodden considered perhaps it is unfair for them to live in the same place ats someone else at a lower price . Perhaps its only fair that those tenants who pay more deserve more amenities .

Gregory Horowitz

Having just listened to this podcast, I am frustrated that yet again intelligent people have overlooked the truly fascinating thing about price discrimination: It is essential to economic efficiency. Without it, many socially valuable goods and services would not exist. I think economists hate to point this out because it is such a stark rebuttal to the simplistic notion that "the law of supply and demand sets the appropriate price, and through this elegant mechanism the invisible hand creates the most efficient result." It is in fact demonstrable that setting a single non-discriminatory price will often fail to create an efficient result.

Consider the simple example of a ferry operator who incurs $20 in costs to make a trip across the river and can take 4 passengers. Three farmers would be willing to pay $4 each to make the trip to sell their goods on the other side, but no more. One merchant has a particularly attractive business opportunity and would gladly pay up to $10 for the trip. If the ferry owner must charge the same price to everyone, the trip won't be made -- he would have to charge more than $5 to cover costs, and would then only have a single willing passenger, not enough to justify the trip. If the ferry owner cannot discriminate, everyone is worse off.

This happens ALL THE TIME -- including, for example, virtually every time a commercial jet gets off the ground. For a case I was involved in years ago, I collected many amusing examples of price discrimination (e.g., Intel charged less for some microprocessors that actually cost more to make because they took a more expensive processor and incurred the additional step of disabling the math coprocessor; HP charged less for an identical calculator that didn't have additional built-in functions printed on the keypad; when my father balked at paying $20 for whitewall tires, they turned the tires around and charged him $15 for blackwalls; etc.).

We may debate what methods of price discrimination are socially and legally acceptable -- nobody would reasonably advocate allowing a manufacturer to price discriminate on the basis of race, for example, but we still allow "ladies nights" at bars -- but economists cannot dispute that discrimination is very often essential to economic efficiency. Just once, I would like to hear an informed public discussion of that fact. I'm afraid the Freakonomics team missed this opportunity. (Indeed, even worse, the podcast misleadingly suggested that the desire or need to discriminate only occurs when legislators tamper with the beauty of the free market in the first place!).

Read more...