Security Incentives

It’s an exceedingly rare instance where I disagree with Bruce Schneier but in his recent post regarding the Transportation Security Administration (TSA) I have to say he was incorrect:

Hard to argue with most of that, although abolishing the TSA isn’t a good idea. Airport security should be rolled back to pre-9/11 levels, but someone is going to have to be in charge of it. Putting the airlines in charge of it doesn’t make sense; their incentives are going to be passenger service rather than security.

Personally I won’t argue with his statement as far as security goes, somebody should be in charge of airport security, but that entity shouldn’t be the federal government. This debate is really one of economics though as Schneier apparently has a misunderstanding regarding incentives.

The airliners primary incentive isn’t passenger service or security, it’s profits. Like any business the airliners are in business to make money and in order to do that they must keep costs down and ensure customers are happy. Usually when I mention the need for airliners to keep costs down they assume I’m talking about bookkeeping items like employee wages, fuel costs, and airplane maintenance. Those are not the only costs though as airliners must also ensure the protection of their property.

Airplanes and airports are expensive properties to replace. Airliners are not going to be happy if their aircraft are constantly being hijacked, flown into buildings, or simply blown up. Insurance claims may cover the cost of replacing the airplanes but at high insurance costs and the possibility of insurance companies refusing to cover airliners with atrocious security-related failures. Because of the costs involved in replacing airplanes airliners have a large incentive to ensure proper security measures are taken to protect their investment. Airports are no different and thus there is incentive to protect them.

Airliners also have an incentive to protect their customers. The reason for this is rather obvious, an airliner who has an atrocious security record will soon find itself out of business. If we look at a hypothetical situation between two competing airliners we can better see this fact. For this hypothetical situation we’ll say there are two competing airliners; Security Air and Insecurity Air (I’m not creative with names, sue me). Security Air has a marvelous safety record and have only had one airplane hijacked. Their competition, Insecurity Air, on the other hand has an absolutely dismal security record with airplanes getting hijacked on a monthly basis. Given the choice between these two airliners it’s fairly obvious what one is going to have the market advantage.

Private entities like airliners have to play a balancing act though between security and convenience. Taking this example further let’s say after Security Air experienced their hijacking a competing company was formed call Transcontinental Secure Airlines, or TSA for short. TSA decides to play the security game and have implemented extreme security measures including full strip searches of passengers, random cavity searches of passengers after they get on the plane, and seat on the plane is equipped with a stun gun to subdue unruly passengers. How many customers do you think they will have? None is most likelihood.

We also have the other side of the coin to consider, what is the government incentive for keeping airplanes secure? Truthfully the government has no incentive to keep airplanes secure. No profit incentive exists because government are funded entirely by theft. The TSA has a strong incentive to instill fear in passenger and state bookkeepers to ensure the continuous flow of money and authority. In fact putting the government in charge of security is the last thing you want to do. When security fails at an airport the government rewards itself with more rules, regulations, and powers.