ARTICLE: The price we pay for air safety
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Mr. Kenny provides a provocative, interesting article about the economics of aviation safety. His thesis is that the US’ regulatory power causes other nations to follow the FAA regime and the consequence of that imposition of US standards may lead to anomalies. His premise is well explained by this example:
Compared with less than $100 per life-year for mandatory seat belts and child restraints, or $7,000 per life-year for air bags, air safety regulations were pricey, even 20 years ago. Juxtaposed with the costs of health interventions in developing countries, the differences are stark. The cost per year of life saved for vaccination programs can be as low as $7, and still 17 percent of Kenyan kids don’t get basic vaccines.
Superficially this sounds like regulatory imperialism; the US leveraging the attractiveness of its aviation markets to compel other countries to comply with our aviation safety standards. The sophistry of the argument is that spending on seat belts versus vaccination is NOT a zero sum game. There is no connectivity between spending on aviation safety compliance and spending of health initiatives.
Equally circular is his hypothesis that lowering the cost of compliance would lower the fares, then increase traffic/revenues and then result in the government would increase spending on vaccines. One could turn this argument on its head. Compliance with the FARs results in the carrier’s access to the high yield US markets and in turn taxes imposed by the airline’s government on those profits should allow increased funds for public health spending.
The US compels all FAA proposed rules to demonstrate a positive cost/benefit analysis. That exacting economic test is said to block some new regulations. Typical of many debates among economists, it is also argued that the conjoint impact of all of these rules is to stultify the growth of aviation and other industries.
Returning to the global perspective of “The price we pay for air safety” article, it might be interesting to take some of the variables found in OMB Circular A-94 and to question their applicability to international rules. The assumptions and analyses, under which the FAA’s rules are assessed, involve US numbers. The value of a passenger, the imputed net present value and a myriad of other factors reflect what the impact of a rule will be on a US company. Since those absolute values affect both the numerator and denominator, it may be that the ratio is the relevant and that calculation translates on a transnational basis?
That exercise suggests that the author’s complaint ultimately may have merit. No, his hypothetical tying of seat belts to vaccines may be specious, but, yes, there may be reasons to question whether the rules need to have extraterritorial applicability. To incorporate a new analysis of a proposed rule’s applicability to multiple countries, if not regions, would add significant time for evaluations. If there is merit to the need to assess the transnational impact of proposed rules, it would be useful to convert the qualitative complaints of this article to quantitative proof and then bring that study to OMB’s attention. IATA is there something to this thought?Share this article: