Cost/Benefit Analysis of Airline Security
This report, “Assessing the risks, costs and benefits of United States aviation security measures” by Mark Stewart and John Mueller, is excellent reading:
The United States Office of Management and Budget has recommended the use of cost-benefit assessment for all proposed federal regulations. Since 9/11 government agencies in Australia, United States, Canada, Europe and elsewhere have devoted much effort and expenditure to attempt to ensure that a 9/11 type attack involving hijacked aircraft is not repeated. This effort has come at considerable cost, running in excess of US$6 billion per year for the United States Transportation Security Administration (TSA) alone. In particular, significant expenditure has been dedicated to two aviation security measures aimed at preventing terrorists from hijacking and crashing an aircraft into buildings and other infrastructure: (i) Hardened cockpit doors and (ii) Federal Air Marshal Service. These two security measures cost the United States government and the airlines nearly $1 billion per year. This paper seeks to discover whether aviation security measures are cost-effective by considering their effectiveness, their cost and expected lives saved as a result of such expenditure. An assessment of the Federal Air Marshal Service suggests that the annual cost is $180 million per life saved. This is greatly in excess of the regulatory safety goal of $1-$10 million per life saved. As such, the air marshal program would seem to fail a cost-benefit analysis. In addition, the opportunity cost of these expenditures is considerable, and it is highly likely that far more lives would have been saved if the money had been invested instead in a wide range of more cost-effective risk mitigation programs. On the other hand, hardening of cockpit doors has an annual cost of only $800,000 per life saved, showing that this is a cost-effective security measure.
From the body:
Hardening cockpit doors has the highest risk reduction (16.67%) at lowest additional cost of $40 million. On the other hand, the Federal Air Marshal Service costs $900 million pa but reduces risk by only 1.67%. The Federal Air Marshal Service may be more cost-effective if it is able to show extra benefit over the cheaper measure of hardening cockpit doors. However, the Federal Air Marshal Service seems to have significantly less benefit which means that hardening cockpit doors is the more cost-effective measure.
Cost-benefit analysis is definitely the way to look at these security measures. It’s hard for people to do, because it requires putting a dollar value on a human life—something we can’t possibly do with our own. But as a society, it is something we do again and again: when we raise or lower speed limits, when we ban a certain pesticide, when we enact building codes. Insurance companies do it all the time. We do it implicitly, because we can’t talk about it explicitly. I think there is considerable value in talking about it.
(Note the table on page 5 of the report, which lists the cost per lives saved for a variety of safety and security measures.)
The final paper will eventually be published in the Journal of Transportation Security. I never even knew there was such a thing.
EDITED TO ADD (8/13): New York Times op-ed on the subject.
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Richard Braakman • July 21, 2008 6:18 AM
Discussing costs of saving human lives gets easier when you realize there’s a cost on the other side too: spending more money on safety will mean raising taxes and consumer prices so that a certain number of people will become homeless or unable to pay for medical costs. That also costs lives.