The TSA and the economics of institutions

Will the furor over the TSA move the discussion about individual freedoms forward?

At the suggestion of an editor, I wrote a sequel to last week’s proposal to abolish the TSA (and I just published a third piece for your reading pleasure while you’re passing the time in an airport security line). Tyler Cowen offers a cool-headed and dispassionate analysis, noting (correctly) that there are probably more important challenges to our liberty and our safety than the TSA. I don’t expect a solution to emerge magically, but I view the furor over the TSA as an opportunity to introduce good ideas into the discussion and move the proverbial ball forward. At the margin, the TSA matters.

My back-of-the-envelope theory of social change includes the proposition that people are generally moved to consider one set of ideas when they encounter a very vivid set of complementary ideas. If people are mad about being groped on their way through airport security, then perhaps they will start to ask why we aren’t allowed to bring liquids on flights or why we have to take our shoes off when we go through scanners. Or why we have a TSA (or a state) to begin with.

I hope this also leads to new research questions. As I’ve mentioned before, Chris Coyne and I are working on a couple of papers in which we are arguing, essentially, that there should be a free market for institutional constraints and a free market for enforcement of those constraints using the Memphis Riot of 1866 as our setting (here is the first paper). One of the points emerging from our research is that the interaction between government control and private control really matters, even for nominally free competition. In Memphis, there was vigorous competition among black and Irish draymen at the docks. The docks were under government control, which introduced uncertainty into who had rights to offer draying services near the docks. In addition, political control of violence meant that some people could inflict enormous costs on others at minimal costs to themselves.

The application to airport security is straightforward. Since the government ostensibly owns the friendly skies and since airports are government-owned, the market’s search process has not been allowed to operate. The divergence between market incentives and political incentives along numerous margins distorts economic calculation.

I don’t expect any major changes right now and would be very surprised if the TSA ceded much ground, but I think that at the margin–and with apologies to Tyler Cowen and Alex Tabarrok–we are taking small steps toward a much better world.

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