Privatizing Airline Safety and Security

By Cleveland, Paul A.; Tacker, Thomas L. | Ideas on Liberty, November 2002 | Go to article overview

Privatizing Airline Safety and Security


Cleveland, Paul A., Tacker, Thomas L., Ideas on Liberty


The events of 9/11 underscore the importance of improving the safety and security of air travel. The government's response to the terrorist attacks employs a command-and-control approach. That approach ought to be questioned. After all, it was the Federal Aviation Administration's system that failed on 911. Why should we expect additional controls to be more successful? Are there other choices?

Among potential options, Robert Poole has long proposed privatizing airline safety and security through the insurance industry.1 The financial risks involved provide the insurance companies incentives to regulate the airlines effectively and efficiently without imposing costly rules that serve little or no purpose. Competition and entrepreneurship would then shape the evolutionary development of air safety and security, rather than politics and monopoly bureaucracy. The fallacies in the command-andcontrol approach show why private security should be adopted.

To expose those fallacies we can examine the FAA's own strategic plan for 2001.2 The introduction states, "The Federal Aviation Administration (FAA) consists of nearly 50,000 people dedicated to improving the safety, security, and efficiency of aviation and commercial space transportation in a way that protects the environment and national security."3 Among the values it claims to respect are timeliness and accountability. It also asserts that it is "the leading authority in the international aerospace community."4 This raises some questions.

First, what evidence can the FAA provide to support that assertion? The security failure of 9/11 stands as a major piece of evidence against it. In addition, the claim ignores all the knowledgeable people who actually work in the industry. It is unclear from FAA documents if the agency recognizes the value of these experts. If officials disregard those authorities, is it because the officials are in a better position to judge the measures most needed to secure the skies? If not, then their claim to being the ultimate authority on air safety, security, and efficiency is sheer arrogance.

Second, how were FAA employees held accountable for the security breach that led to the tragedy? Apart from some bad press initially, the institution and its personnel experienced few bad consequences from those events. On the contrary, Congress expanded the agency's bureaucratic control. Thus the FAA actually prospered in spite of its failure. This would seem to call into question whether the agency's commitment to accountability has any significant meaning. The question arises, to whom are officials of the FAA accountable?

Third, why should anyone believe that the institution is committed to respecting other people? The agency certainly showed little respect for pilots when it prohibited them from being armed in their aircraft. This rule treats pilots as irresponsible individuals who cannot be trusted with such weapons.5 Had the pilots actually carried firearms, it is unlikely that the hijackers could have succeeded with only box cutters. The pilots at least think so, since their union advocated lifting the gun ban. The FAA and the administration initially denied this request.

These questions can be easily answered when one realizes that the FAA and its workers are not liable for failure. The agency instead is rewarded.6 Those who have suffered losses have no redress.

Discovery and Innovation

The problem with the command-and control-approach to securing air travel is that it ignores the market process. Austrian-- school economists have amply explained why, because of the "knowledge problem," central planning does not work. The knowledge problem consists of people's ignorance of all the factors related to their situations. While private market activity can readily overcome the problem through the use of the price system, central planning cannot.

Israel Kirzner has explained that the price system eases the knowledge problem not because prices embody accurate information, but rather because "disequilibrium prices. …

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