Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

The TSA's False Tradeoff

Politics / Gold and Silver 2010 Nov 25, 2010 - 11:28 AM GMT

By: Robert_Murphy

Politics

Best Financial Markets Analysis ArticleThe national furor over the TSA's new procedures — culminating in yesterday's "Opt Out Day" — has elicited the typical response from the bureaucracy and its apologists. Why, these invasive scans and "enhanced pat-downs" are only for your good, in order to ensure safe flying. You don't want another attack, do you?


This is a false tradeoff. Especially in the long run, there is no tension between freedom and safety. If airport security were truly returned to the private sector, air travelers would achieve a much better balance of privacy and legitimate security measures.

The Calculation Problem

Whenever considering government versus market provision of a good or service, we should recall Ludwig von Mises's famous critique of socialism. Specifically, Mises argued that even if the central planners were angels, intending only the best for their subjects, and even if these angels were fully informed of the latest technical knowledge, nonetheless they would be groping in the dark when they tried to design a blueprint for the entire economy.

The socialist central planners would suffer from a calculation problem, meaning that they couldn't evaluate whether a given enterprise — such as a car factory or a farm — was making efficient use of society's scarce resources. Sure, the car factory might be cranking out vehicles that the comrades enjoyed driving. But that alone is not enough to prove that the car factory is economically efficient. For all the planners know, the resources (steel, rubber, labor hours) going into the production of the cars could be diverted into other lines, increasing the production of items that the comrades enjoy even more than the cars.

The market economy solves this problem effortlessly through market prices and the profit-and-loss test. If a car factory is using up resources that consumers would prefer go into alternate sectors, this fact manifests itself objectively when the accountant announces that the car factory is "losing money." After all, to be unprofitable simply means that the car factory cannot earn enough revenues from its customers in order to pay the prices for resources that other entrepreneurs are able to afford. That is the sense in which consumers are "voting" (through their spending decisions) that the car factory either reform or shut down.

In Mises's view, the fundamental superiority of the market economy over socialism was not that entrepreneurs happened to be bold innovators, while government bureaucrats were dull yes-men. No, the problem was an institutional one. In the market economy, the factors of production are privately owned, which allows the generation of market prices for every unit of every resource. Thus people in the private sector get immediate and constant feedback on the success or failure of their operations. There is nothing analogous in government, because its "customers" cannot withhold their purchases if they don't like the "services."

The Calculation Problem and the TSA

When it comes to the apparent tradeoff between privacy and security, the TSA suffers from the same calculation problem that plagues all socialist agencies. The proper balance of the various considerations cannot be discovered through some "objective" procedure if it doesn't involve private property and market prices.

Consider: Even if there are no further terrorist incidents on planes, that won't prove that the new patdowns and scans were the right thing to do. For one thing, it's possible that there are other security procedures, which do not humiliate large numbers of customers, that would yield the same success of zero incidents. In that case, the current TSA procedures would be inappropriate because they cause needless suffering with no offsetting benefit.

"In the long run, there is no tradeoff between freedom and security."

But more importantly, it's possible that the "efficient" number of terrorist incidents — for the rest of US history — is not zero. In fact, no matter what procedures are implemented, it's always possible that wily terrorists will still manage to beat the system. In real life, we can never guarantee safety. This is why so many pundits' discussions of airline travel miss the mark completely: they assume that there is some objective answer of "the right" amount of security, when this is a complex economic question.

To see this last point, we should switch from terrorism to something far less emotional: car crashes. If the government completely nationalized automobile production (something that may happen eventually), and insisted on making a uniform model for every driver in America, we would hear the pundits discuss various issues in the abstract.

For example, Rachel Maddow might argue that the government-issued cars should have three sets of seat belts, air bags for every passenger, and a top speed of 55 miles per hour in order to contain healthcare costs (which would also have been completely nationalized by this point). On the other hand, Sean Hannity might go ballistic over the nanny-state regulations, and point out that the Founding Fathers didn't even have mirrors on their stagecoaches.

The Market Is the Only Solution

Yet such hypothetical arguments over "the correct" amount of vehicle safety would be absurd if they conceded the premise that the government should set the standard and apply it uniformly to everyone (except for the politicians, who would get to drive vintage Ferraris). The only way to solve the conflict would be to privatize car production and allow consumers to spend their money, focusing on whatever attributes they cared about the most.

The same conclusion holds for air travel. Only in a truly free market — where different airlines are free to try different approaches to safety — could we approach a sensible solution to these difficult questions. Passengers who don't mind invasive scanning or sensitive inspections could patronize airlines offering these (cheap) techniques — assuming they were really necessary to achieve adequate safety. On the other hand, passengers who objected to these techniques could pay higher ticket prices in order to fly on airlines that hired teams of bomb-sniffing dogs, or set up very secure prescreening procedures (perhaps with retinal IDing in order to board a flight), or implemented some as-yet-undreamt-of method to keep their flights safe, without resorting to methods that their customers found humiliating.

The Role of Insurance

Most people who are sympathetic to the free market would endorse the above sentiments, but with one nagging concern: How does the airline take into account the huge damages imposed on others if one of its planes is hijacked?

One possibility is that the legal system would hold airlines strictly accountable for such property damage, and that the airlines would need to purchase massive insurance policies before obtaining permission to send giant steel containers full of jet fuel hurtling over skyscrapers and shopping malls.

I spell out the mechanics of such a system here. For our purposes, let me deal with one possible objection: Someone might say, "But what happens if an airline has lax security, and terrorists use it to cause an enormous amount of damage, wiping out their insurers? That's why we ultimately need the government in charge of security."

Yet I could pose the same question: What happens if the TSA screws up, and a major terrorist incident occurs? Will John Pistole and his immediate staff be fired? Will the TSA itself have its budget gutted? And who is to say that even the US federal government could "afford" such a catastrophe?

Once we consider the incentives (and lack of consumer feedback) plaguing the TSA, we realize that not only will it err on the "invasive" side of the spectrum, but that it will do so ineffectively.

Here's one obvious example that numerous people have pointed out: What's to stop a terrorist from placing a plastic explosive in an area where it would not be detected by even an "enhanced patdown"? Therefore it is not even true that these scandalous new procedures "at least keep us safe."

Conclusion

As Murray Rothbard pointed out, most of the vexing "social problems" of the day would fade away if we lived in a voluntary society based on private property. This result holds in the specific application of airport security.

In the long run, there is no tradeoff between freedom and security. To paraphrase Franklin, those who would consent to temporary groping in order to avoid terrorism will end up with both.

Robert Murphy, an adjunct scholar of the Mises Institute and a faculty member of the Mises University, runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, the Study Guide to Man, Economy, and State with Power and Market, the Human Action Study Guide, and The Politically Incorrect Guide to the Great Depression and the New Deal. Send him mail. See Robert P. Murphy's article archives. Comment on the blog.

© 2010 Copyright Robert Murphy - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Paul
25 Nov 10, 14:55
crotch bomber

Bearing in mind that the "Crotchbomber" in who's name much of this securtiy layering has been added was assisted around the screening processes at Schipol airport by persons witnessed yet still unknown, then security is not what this TSA nonsense is about. Obediance maybe but certainly not security.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules