Sunday, May 17, 2009

Regulation and safety

I think that many people make a connection between regulation and safety. Regulation brings rules. Rules bring order. Order helps to protect people. This seems to be a driving factor in the debate over financial sector regulation and the credit card industry, with calls for regulation usually justified by the need to protect consumers. But does this logic really hold?

Let me make what many will surely find a controversial proposition: we should do away with airline regulation. To most people this probably seems at least borderline insane. People would be left at the mercy of greedy airline executives that would surely cut corners on safety in the interest of making a dollar. I am not sure, however, that this really makes sense.

After all, greed and self-interest would seem to dictate that the airlines should strive for safety regardless of government regulation. With a Boeing 737 starting at over $50 million crashed airplanes represent a fast route to bankruptcy. Leaving aside the cost of the plane, having planes fall out of the sky is sure to produce a drop-off in business. One also has to imagine that the pilots have a certain amount of self-interest in the safety of the planes they fly.

In fact, you can make an argument that regulation may even worsen airline safety. With government safety rules on the books airlines may simply decide to de facto outsource their risk management to the government. Rather than actually thinking critically about whether they are meeting their true safety needs they may instead strive to ensure that they are compliant with regulation.

An interesting case is the crash earlier this year of a Colgan Airlines plane that resulted in 49 deaths. In the fallout from the crash numerous questions have been raised about safety practices at Colgan and other regional airlines. The most common narrative seems to be that greedy airlines executives overworked their employees and neglected training to save a few bucks, placing their passengers in jeopardy. Indeed, there are signs that the pilot of the particular flight wasn't up to the task of flying in icy conditions.

Far less attention, however, has been paid to this:
The airline that operated Continental Connection Flight 3407 never knew that the pilot, Capt. Marvin D. Renslow, had failed three federal flying tests before his hiring.

Moreover, the carrier, Colgan Air, never double-checked with federal officials to see whether Renslow’s application — which listed only one failed “check ride” — had revealed his complete test record.

...“Consistent with standard practice in the airline industry, Colgan did not attempt to access information on prior general aviation check ride failures by its applicants,” he said.
Because of restrictions imposed by the Privacy Act of 1974, the FAA would release those records only if the pilot agreed in writing to their release, said Laura Brown, an agency spokeswoman.
In other words, not only did regulation fail to prevent the crash but federal legislation may have actually contributed to the airline hiring a sub-par pilot.

It's perhaps useful to also remember that one area of airline operations where the feds have complete control is security. We all know how well that has been working out.

The notion that regulation ensures superior performance, or even enhanced safety, strikes me as a dubious proposition.

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