Security Screening for New York Helicopters
There's a helicopter shuttle that runs from Lower Manhattan to Kennedy Airport. It's basically a luxury item: for $139 you can avoid the drive to the airport. But, of course, security screeners are required for passengers, and that's causing some concern:
At the request of U.S. Helicopter's executives, the federal Transportation Security Administration set up a checkpoint, with X-ray and bomb-detection machines, to screen passengers and their luggage at the heliport.
The security agency is spending $560,000 this year to operate the checkpoint with a staff of eight screeners and is considering adding a checkpoint at the heliport at the east end of 34th Street. The agency's involvement has drawn criticism from some elected officials.
"The bottom line here is that there are not enough screeners to go around," said Senator Charles E. Schumer, Democrat of New York. "The fact that we are taking screeners that are needed at airports to satisfy a luxury market on the government's dime is a problem."
This is not a security problem; it's an economics problem. And it's a good illustration of the concept of "externalities." An externality is an effect of a decision not borne by the decision-maker. In this example, U.S. Helicopter made a business decision to offer this service at a certain price. And customers will make a decision about whether or not the service is worth the money. But there is more to the cost than the $139. The cost of that checkpoint is an externality to both U.S. Helicopter and its customers, because the $560,000 spent on the security checkpoint is paid for by taxpayers. Taxpayers are effectively subsidizing the true cost of the helicopter trip.
The only way to solve this is for the government to bill the airline passengers for the cost of security screening. It wouldn't be much per ticket, maybe $15. And it would be much less at major airports, because the economies of scale are so much greater.
The article even points out that customers would gladly pay the extra $15 because of another externality: the people who decide whether or not to take the helicopter trip are not the people actually paying for it.
Bobby Weiss, a self-employed stock trader and real estate broker who was U.S. Helicopter's first paying customer yesterday, said he would pay $300 for a round trip to Kennedy, and he expected most corporate executives would, too.
"It's $300, but so what? It goes on the expense account," said Mr. Weiss, adding that he had no qualms about the diversion of federal resources to smooth the path of highfliers. "Maybe a richer guy may save a little time at the expense of a poorer guy who spends a little more time in line."
What Mr. Weiss is saying is that the costs -- both the direct cost and the cost of the security checkpoint -- are externalities to him, so he really doesn't care. Exactly.
Posted on April 4, 2006 at 7:51 AM • 50 Comments