The Economics of Air Transport Security: Do we Complain too Much About Waiting to be scanned at Airports

Airneth column
March 2011
By Kenneth Button

The attacks in 2001, while clearly dramatic and causing a mass of human suffering, cannot really be seen as terrorist attacks in the traditional sense of the term. They were attacks on the financial, military, and political bastions of the United States, and as such nearly as much effort has subsequently gone into securing national emblems, such as the Washington Monument, as to protecting individuals. Unlike, say the campaign of the IRA in the United Kingdom or the 2004 railway bombing in Madrid, they were not indiscriminate attacks aimed at the general public, it just suffered collateral damage. Nevertheless, air travelers have enjoyed increased protection from potential attack, or at least increased attention from the authorities.

From an economic perspective it is difficult to assess the worth of the additional security, and most of the economic comment has been on its various costs, including those borne by the traveling public and freight consignors, and on the best ways of paying for them. Some marginal interest has been shown in the efficiency of the systems adopted, although almost exclusively in the context of meeting lower level objectives, such as speed of processing people through scanners, rather than actual security indicators.

The problem with assessment lies mainly in the nature of the problem. Terrorism, to use the term loosely, involves individuals playing games with “the system”, and unlike, say, traditional safety most of the challenges imposed involve uncertainty rather than risk, despite the vocabulary favored by politicians and the media. With risk, an actuarial probability can be calculated, and insurance premiums in theory could be estimated related to the probable harm done. This involves not only a large number of incidents upon which to base the calculations, but constancy on the part of perpetrator, or at least a consistent pattern of behavior. Terrorists, however, continually change their approach in reaction to outcomes and the strategies of the authorities; there is no reasonable way of working out risk. Simulations may be used, but without knowing the probabilities of the alternative scenarios emerging they often add little by way of insight; they just push the problem back a stage.

The only real way to assess whether security policy is being effective and offering value for money is to find out whether it actually reduces fear in the traveling community. Since the primary aim of terrorism is to negatively affect the psychology of the population, with inflicting physical damage only being a secondary consideration, the success of counter measures must be seen not in any reduction of incidents per se but in the confidence of the public in the security system. This obviously involves as much in the way of “smoke and mirrors” as effective prevention and deterrence; it is about what is in the minds of people.

From an economic perspective, there is an optimal amount of effort that should be put into this reassurance for the flying public, and there are efficiency considerations about ensuring costs, including those directly borne by the traveler in terms of time taken up at security checks and the costs discarded water bottles, are kept to a minimum. While there have been studies done on the costs of implementing security measures, including whether it is preferable to have state employed personnel involved or outsourced, private manpower, and the best ways to finance them, the benefits side of the equation has largely been left to anecdotal, journalistic assessment. As a result we really have little idea about whether we have too much security or too little, or whether the measures taken are those that really assure the public. Put simply, we have no idea whether the marginal cost of any security measure results in perceived net marginal benefits to travelers. This is clearly not efficient and, in a way, reflects a potential gain to the terrorists.

The problem can be seen clearly if one considers the elements that make up the cost and benefits curves associated with security. Simply focusing on optimizing the material damage done by a terrorist attack ignores the psychological benefits from people feeling safer; put another way, if the checks and inspections are perceived worth the time and effort expended by travelers in enduring them then they gain additional well being. The benefit curve is thus higher than if only reduction of physical damage is taken as the benefits. On the cost side, because it is unclear just what measures deter terrorists or thwart them, even if there is efficient management of instruments, there is inevitably going to be waste. Inefficient management adds to this problem and pushes the cost curve up further. Combining the underestimation of full benefits and costs leads to an under supply of security.

Does this mean that air travelers or freight consignors are wrong to complain about the trials and tribulations of going through airports? Possibly “no” in the sense that an efficient security system is likely to be more extensive than the current systems, but also possibly “yes” if the make-up and management of the system is inefficient, or if the full benefits, including the feeling of security enjoyed by air transport users, is not fully incorporated in the design of the system. As in many things, the devil lies in the detail, and this may involve much more micro assessments at the airport or even airline, rather than at the aggregate system wide, level over which many security actions now extend. But complaints are, nevertheless, important; in a situation where there is no real market, “voice” is really the only force for improving the system.

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