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The Conceit of the Regulators

Would Multibillion-Dollar Companies Jeopardize Customer Safety Without Government Oversight?

JULY 01, 2008 by JOHN STOSSEL

Unless the government watches closely, the airlines will kill you.

That seems to be what many reporters and politicians believe.

“The result of inspection failures and enforcement failure [by the Federal Aviation Administration] has meant that aircraft have flown unsafe, un-airworthy and at risk of lives,” says Representative James Oberstar, chairman of the House Transportation Committee.

“The FAA has clearly displayed a dangerous and cavalier lack of regard for tough safety enforcement,” says Senator Hillary Clinton.

And Lou Dobbs of CNN wondered “whether airlines are putting profit ahead of passenger safety.”

Let me get this straight. The only reason airlines care about safety is because of the FAA? So without government, multibillion-dollar companies would jeopardize millions of passengers by unsafely flying $50-million airplanes?

The media and politicians suggest that airlines would cut corners to make money, but how would that work exactly? Crashing airliners is a route to bankruptcy, not profits.

But air-travel safety has joined mortgage defaults and global warming as “crises” of the month.

Populists in politics and the media get attention by scaring people into thinking the skies are dangerous. The politicians want more power and attention; the clueless media are genuinely scared.

The latest “crisis” was launched when the FAA fined Southwest Airlines, which has an excellent safety record, $10.2 million for missing inspection deadlines. When Representative Oberstar criticized the FAA for being too close to the airlines, the agency sprung into overreaction. “An industry-wide ‘audit’ commenced, and FAA inspectors set about finding something—anything—to show Mr. Oberstar and other Congressional overseers that the agency was up to the job of enforcing federal maintenance requirements to the letter,” said the Wall Street Journal.

One result was the cancellation of 3,300 American Airlines flights and the stranding of 250,000 passengers over several days while 300 MD–80s were grounded so their wiring could be inspected.

American Airlines then did something rare and even heroic. It criticized the agency that regulates it for suddenly changing inspection procedures in ways that have little to do with safety. “We don’t know what the rules are,” said an American technical crew chief for avionics. Some rules contradict each other, the airline said.

The FAA disputes American’s claims, but The New York Times reports that “John Goglia, a maintenance expert and former member of the National Transportation Safety Board, said that the rules had, in fact, changed. . . . The differences in American’s work, he said, were so small that ‘those airplanes could have flown for the rest of their careers and those wires would not have been a problem.’ ”

What about alarmist claims that the FAA has been lax in enforcing its own procedures? If the claims are true, then where are the bodies? The best evidence that FAA enforcement is unnecessary is to assume it’s been lax—and then to note that airline travel, though busier than ever, has never been safer.

We need to rethink the premise that government inspections keep us safe.

Clifford Winston and Robert W. Crandall of the Brookings Institution write: “[T]he fundamental problem with most regulation is that the regulatory agency does not have sufficient information, flexibility and immunity from political pressure to regulate firms’ behavior effectively. Fortunately, the market, and in some cases the liability system, provide sufficient incentives for firms to behave in a socially beneficial manner.”

To see who really regulates air safety, do a thought experiment suggested by George Mason University economist and Freeman columnist Donald Boudreaux, who blogs at Cafe Hayek:

Suppose that all government regulation of airlines were abolished today. Does . . . Congressman [Oberstar] suppose that airline executives would tomorrow fire all inspectors and maintenance crews, indifferent to the prospect of losing multimillion-dollar assets in fiery crashes? Does he not see that airlines with poor safety records would have difficulty attracting customers? Is he unaware that airlines’ insurers have ample incentives to work closely with airlines at keeping air-travel safety at optimal levels? In short, is Mr. Oberstar really so dimwitted to think that airlines will be safe only if they are regulated by government?

Yes, I think he is.

And sadly, most of his colleagues, and mine, agree with him.


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July/August 2008

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