Best of the Week
Most Popular
1.War on Cash, Bank of England Planning Hyper QE, Scrapping Cash for Digital Currency - Nadeem_Walayat
2.Stock Market End Run Smash Crash Looks Imminent... - Clive_Maund
3.Europe Refugee Crisis, UK to Repatriate 120,000 Hungarian Economic Migrants Back to Hungary - Nadeem_Walayat
4.The Great Deflation Will Destroy All Bubbles – These Too - Harry_Dent
5.Deflation Signals Abound for U.S. Dollar, Forex Markets and Commodities - Rambus_Chartology
6.U.S. Housing Market Two Outs in The Bottom of The Ninth - James_Quinn
7.Poland, Czech, Slovakia and Hungary Refugee Hypocrisy After Flooding UK with 4 Million Economic Migrants - Nadeem_Walayat
8.The Two Real Reasons Crude Oil Prices Are Currently Slipping - Dr. Kent Moors
9.R.I.P. Interest Rates - Andrew Snyder
10.Steps from a Deep October Stock Market Selloff - Bob_Loukas
Last 5 days
A Key Oil Price Trend That Everyone Is Missing - 6th Oct 15
Stock Market Turn Appears to Have Been Made - 6th Oct 15
Designing a Dividend Growth Portfolio for a Specific Retirement Yield Objective - 6th Oct 15
Peter Schiff Predicts Gold Price Breakout - Video - 6th Oct 15
Theresa May Declares War on Immigration - Conference Speech Full Transcript - 6th Oct 15
Is Russia Plotting To Bring Down OPEC? - 6th Oct 15
Target Date Funds As Aid In Retirement Investment Portfolio Design - 6th Oct 15
Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - 6th Oct 15
Redesigning Internet and Facebook to Explore Their Full Potentialities... - 5th Oct 15
Nightshades Curb Your Enthusiasm - 5th Oct 15
U.S. Recession Watch, High-Yield – Rising Defaults - 5th Oct 15
The Social Challenge to Find Humanity in Capitalism - 5th Oct 15
Fed Interest Rate Hike: "I don't care. It doesn't really make much of a difference" - 5th Oct 15
Gold Rose 2.2%, Silver Surged 5.4% After Poor Jobs Number On Friday - 5th Oct 15
Gold, Silver Precious Metals: a Critical Week Ahead - 5th Oct 15
Stock Market Correction Still in Force - 5th Oct 15
Gold Price Change in Character - 5th Oct 15
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15
Gold And Silver – A Reality Check - 3rd Oct 15
Stock Market Primary IV Still, or Primary V Underway? - 3rd Oct 15
The Oil Industry’s Day of Reckoning - 3rd Oct 15
U.S. Interest Rate Hikes Keep On Slippin' Into the Future; Treasury Yields Sink Again - 3rd Oct 15
China's Stock Market Crashing; Time for Panic or Restraint - 3rd Oct 15
SPX Stocks Bulls Struggle to Regain the Upper hand... - 2nd Oct 15
The Two Faces of Stock Market Volatility - 2nd Oct 15
Money Supply and the Fed’s Serious Inflation Risks - 2nd Oct 15
Stock Market How Bad Can This Get, And How Fast? - 2nd Oct 15
A Worrying Set Of Recession Signals - 2nd Oct 15
Negative Jobs Report Sents SPX, TNX Lower - 2nd Oct 15
Don't be Fooled by the Recent Equity market Rallies. Its a Bear Market, Stupid! - 2nd Oct 15
US Bond Market - How to Fix This - 2nd Oct 15
Survival Secrets from Colorado Resource Investing Front Lines - 2nd Oct 15
What Two Risks From Rising Interest-Rates Could Each Trigger A New Global Crisis? - 1st Oct 15
Stock Market S&P 500 Volatility-Based Price Probability Range - 1st Oct 15
Dow Stock Market About To Crash Like October 1929? Get Your Physical Silver - 1st Oct 15
Stock Market Negative Expectations Once Again - Will It Break Down? - 1st Oct 15
Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - 1st Oct 15
Best Short-Term Commodity Market Opportunities - Video - 1st Oct 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

The TSA's False Tradeoff

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

By: Robert_Murphy


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."


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.

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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

Biggest Debt Bomb in History