The Failure of Federal Aviation Administration Regulation

By Cleveland, Paul A.; Price, Jared R. | Independent Review, Summer 2003 | Go to article overview

The Failure of Federal Aviation Administration Regulation

Cleveland, Paul A., Price, Jared R., Independent Review

The attacks on New York City and Washington, D.C., in 2001 raised many questions about security in the United States. At that time, the nation's defenses were compromised by Islamic terrorists who commandeered commercial aircraft and used them as weapons. In view of the hundreds of billions of dollars the federal government spends on defense each year, how were these attacks possible for hijackers armed only with box cutters (sec Higgs 2002)? One possible reason can be found in the bureaucracy of the Federal Aviation Administration (FAA). According to its rules, commercial airline pilots were prohibited from arming themselves on their planes. As a result, the pilots of the hijacked planes could not mount an adequate defense against even the very lightly armed terrorists. Although we cannot be certain that the airlines left to their own devices would have adopted security arrangements sufficient to have thwarted the terrorists, it is at least possible that they would have done so.

Beyond the possibility that the FAA's ban of weapons on planes compromised the nation's security in the September 11 hijacking episodes, the agency's bureaucratic control has been the unseen source of flight delays and airline inefficiencies. The U.S. airline industry has been under some kind of regulatory control almost from the beginning of air travel. In 1958, the Federal Aviation Agency, which later became the Federal Aviation Administration, was created with the passage of the Federal Aviation Act. In essence, Congress created the FAA as an independent federal agency spun off the Civil Aeronautics Board (CAB). The new agency was established to operate a nationalized air-traffic control (ATC) system and to adopt and oversee standardized safety requirements for air travel (Burkhardt 1967). The FAA's key functions under Title 49 in the United States Code remain the same today. Its purpose is to regulate the industry in order to promote safety and security and to develop and maintain a safe, secure, and efficient air-traffic management system. Indeed, the FAA itself claims to be an institution of nearly fifty thousand people dedicated to providing "a safe, secure, and efficient global aerospace system that contributes to national security and the promotion of U.S. aerospace safety" (FAA 2001a). However, if meeting these objectives is the FAA's mission, then it has failed in nearly every respect.

Ludwig von Mises, F. A. Hayek, and Israel Kirzner greatly expanded our understanding of the core problem of central planning. Specifically, they pointed out that central planning would always tend to fail because it could not overcome the basic knowledge problem. Whereas private planners can utilize market prices as a means of making and correcting their plans and ensuring the rationality of those plans, government planners are trapped in the plans they make because their own actions undercut the market and distort prices. Central planners typically are unaware of their own ignorance of the facts relevant to their social plans. Furthermore, because central planners, like all other planners, cannot know everything about the situation they are attempting to deal with, their working knowledge must take the form of what they think they know about the dispersed bits of knowledge that can be obtained. They use these bits to implement their social plans, unaware of other, equally relevant bits of knowledge. Because no one is omniscient, it is impossible for central planners to know where to find or even how to look for all the dispersed bits of information needed to achieve their goals. Moreover, because the central-planning approach essentially abandons free-market planning, the market prices that private planners use to such good effect are not available to, or are severely distorted by, central planners. The tragedy of central planning with regard to industrial policy is that even the best-intentioned central planner remains unaware of this problem because he does not appreciate his ignorance of his own ignorance (Kirzner 1992). …

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