Market Competition for Security Measures

[Tim May]

This debate is one of my favorites: security and the role of market 
forces. I regret not having the time/energy to tighten and polish this 
essay below. Some paragraphs are almost note-like. If you can handle 
John Young, you can handle this.


On Wednesday, October 24, 2001, at 04:23 AM, Ken Brown wrote:

> mmotyka at lsil.com wrote:
>> Our society has, for all practical purposes, endless vulnerabilities. 
>> If
>> as each vulnerability is exploited we plan on taking drastic steps to
>> secure it from future exploitation, the costs will be staggering and 
>> the
>> list of unsecured items will hardly diminish. The result of the current
>> approach is an authoritarian society with a neverending, 
>> self-justifying
>> security project ahead of it. Sounds like a wonderful place to live if
>> you're an insect.
>
> So we get either the Caves of Steel   or the Naked Sun?
>
> I'd go for the former, being a city boy, but I guess T. May, H. Seaver &
> D. Honig  might prefer the hyper-exurbia of the latter.  One step from
> the Machine Stops - set not in the ultimate city but in the ultimate
> suburb.

A debate near and dear to my heart. City vs. suburb, armor vs. 
dispersion. Closely related to issues discussed often in the 
"survivalist" invisible college, during war scares, Y2K, and the current 
situation. Some of us have taken responsibility for our own security by 
living in less-likely, more defensible targets. Others live in crowded 
areas, but have private security arrangements. Gate burb-claves, high 
security condominiums, etc. Privately arranged, not ordered by Big 
Brother.

Cf. "Schelling points for terrorism" (key words, if not exact title), an 
item I wrote a few years ago about which targets are more likely to be 
hit than others. Clearly there are some places more likely for attacks 
than other places. And there are places downwind from nuclear reactors, 
downstream from dams, downherd from rampaging looters, and so on.

Federalizing or socializing the costs of security is like federalizing 
or socializing flood insurance: it takes the efficiencies of the market 
away and creates distortions.

What is being missed in all of the "rush to a security state" debate is 
the role of _private security arrangements_. Some examples, with a focus 
here on airport and airplane security:

* one size does _not_ fit all. Not all passengers are equally likely to 
be security risks. This is common sense, but the civil libertarians call 
it "racial profiling." True civil libertarians know that owners of 
property (e.g. United Airlines) are free to implement security 
procedures as they see fit. If ABX Airlines wants to implement full body 
searches of passengers and XYZ Airlines wants to implement no security 
at all, to first order this should be a market decision.

(There are interesting issues of "danger to others." Friedman the 
Younger covers this in his recent book on economics. "Law's Order." To 
wit, XYZ Airlines, with no security procedures, might be denied use of 
various airports, etc. A standard tort issue. The outcome is not 
precisely known, but a move toward "market competition for security 
measures" would flesh out many of these issues and outcomes.)

* travel associations, with members vetted by other members, even with 
security bonds. Think "web of trust," but much more formalized. A "know 
your passenger" scheme that has no government involvement, no coercion. 
Those who are not "vetted" (with biometric/unforgeable credentials) are 
free to wait in the cattle lines with the other cattle before boarding 
the jets operated by private players.

(Yes, this involves prying into private lives and habits, but no more so 
than corporations tend to do. For example, a 3-year employee of 
Cybergistics is "known" to many in his company. His basic interests and 
hobbies are known. More importantly, his coworkers and managers have a 
pretty good idea if he's a whacko, or a recently-arrived student from 
the Sudan who quotes the Koran. This company can "vouch" for one of its 
employees flying.)

* Private security screening. Just as there are multiple airlines, in a 
free society, why not multiple screening companies? (No carrier would be 
"required" to accept the work product of a screening company, naturally. 
All a matter of market negotiations.) Some security screening would be 
done with the aforementioned "vouching." Some might be cases where 
customers pay several bucks a head to pass through various sniffers.

Again, those who don't have arrangements with either vouchsafing 
entities or screening entities at the terminal can stand in the 2-hour 
"public" line. Akin in many ways to health care, with those having no 
other arrangments going to the public hospitals (not that I endorse 
taxpayer-subsidized public hospitals).

* Close tie-ins with insurance. After all, the nature of insurance is 
_betting_. And it's a much better bet that a middle-aged white professor 
from Kansas is less likely to be a hijacker or bomber than someone like 
a 22-year-old immigrant from Pakistan with no career, no known 
associates who will vouch for him, etc. What would the "premiums" be for 
each of these potential travellers, and what screening steps would their 
respective insurance companies require?

* Increased use of private charters, which already have their own 
security arrangements. Again, with vouching. (Some corporate travel 
systems already use privately-owned jets, with pickup from passenger 
homes. One of my neighbors works with the leading such company: 
luxurious jets, very fast passenger loading times, private security 
arrangements. They _know_ their customers, through vouching and past 
travel, and they don't have to have corporate travellers arriving
"two hours early" for some bullshit inspection for fingernail clippers 
and copies of "Hayduke Lives!")

* Part of the market competition is also the security policy on the 
airplane itself. Some companies will have titanium/Kevlar doors to the 
cockpit, some will have the typical aluminum foil/balsa wood 
consructions. Passengers will vote with their feet and pocketbooks, as 
it should be. Security will be driven by market forces, not by top-down, 
one size fits all, central planning.

The basic point is to have the costs of security, of assurance, of 
insurance, *privatized*. Not for religious reasons of private vs. public 
funding, but to get the richness and flexibility that privatized, 
incentive-driven, risk-sensitive private markets provide.

The similarity with Stephenson's "burb-claves" and with already-common 
private security firms is obvious. Even similarities with the Mafia.

This idea is easy to implement, too. For example, let El Al begin flying 
within the continental U.S. Let them apply _their_ standards. Passengers 
can vote with their feet and their pocketbooks on whether they'll fly 
United or El Al.

And let _all_ carriers compete on the basis of their security policies. 
Many of them already have their own terminals at major airports, so they 
can in principle easily implement their own screening policies, their 
own vouching policies.

Lots more ideas come to mind, and are fairly easy to implement. The key 
is to get away from the "one size fits all."

Liberty-fearing people like Reason's Cathy Young can sign up for her own 
security policies: no "scary" free speech, no plastic knives, no 
fingernail clippers, no "Hayduke Lives!" novels allowed.

Sounds fair to me. Libertarians should be pushing the market approach to 
security.

Reactions?

--Tim May
"Ben Franklin warned us that those who would trade liberty for a little 
bit of temporary security deserve neither. This is the path we are now 
racing down, with American flags fluttering."-- Tim May, on events 
following 9/11/2001