Travel Expenses and Price Discrimination
The argument against it is obvious. Paying me a fixed sum instead would make it in my interest to minimize expenses—find an inexpensive motel, shop around online for the best available car rental deal. Billing them for a luxury hotel might have undesirable consequences—I have never tried the experiment. But short of that, it is much easier for me to monitor myself, make sure I am getting the best available deal, than it is for them to monitor me.
In other contexts, one argument against a lump sum contract is that it gives the recipient an incentive to reduce costs not only by careful shopping but also by producing a lower quality product, using low quality construction materials to build a house, for instance. Similarly, someone flying me to Europe to give a talk may be reasonably concerned that a lump sum payment instead of an honorarium plus expenses will result in my getting a cheap tourist class flight, perhaps even a red-eye. Buying me a business class ticket instead—a pleasant luxury, but one I have never purchased with my own money—may result in a more rested speaker and a better talk.
It is hard to see how that applies here. The inexpensive Motel 8 I actually stayed at—I approve of the Federalist Society and so am willing to make some effort to save them money even if they don't structure their contract with me to give me a financial incentive to do so—gave me as good a night's sleep as a more expensive motel or hotel would have. The rental car I located via Carrentals.com got me from the Portland airport to Eugene and back with no difficulty. So why is an honorarium plus expenses the usual arrangement for speaking fees?
To see one possible answer, imagine that the Federalist Society wants me to give two talks, one at Stanford and one at Harvard. I live in San Jose, so a lump sum payment sufficient to get me to Cambridge will have to be enough to not only buy my time but also pay the cost of a trip across the country. That same payment is considerably more than they need to get me to give a talk at Stanford, which is about a half hour drive from my house. By instead offering a fixed honorarium plus expenses they get what they pay closer to the minimum amount they have to offer me to get me to give each talk.
They are, in other words, engaging in price discrimination—by a buyer not, as in the usual textbook examples, a seller. They could do the same thing by offering a lump sum, but one that varied according to some estimate of transport costs, thus retaining the advantage of giving me an incentive to hold down expenses; perhaps I should suggest it to them. But if transport costs vary a good deal by where you are going, when you are going, how far in advance you buy your ticket, and the like, their method may be easier.