Tyler Cowen has a
post up looking at a Washington Post article on airports considering private options to the TSA. The underlying assumption here is that competition will improve service and satisfaction but neither Cowen nor the Post writer address the big question:
Why should market forces act differently on security than they did on the rest of the industry?
From the moment you miss the shuttle to the long wait for your bags to come down the conveyor belt, air travel may provide the worst customer experience of any major industry. It's true that introducing market-based incentives a few years helped give us cheap flights (though I don't know enough about the underlying economics to say whether they actually bent the curve), but it did nothing to improve a system that was inconvenient, poorly designed and indifferent to the needs (not to mention feelings) of passengers -- pretty much the same problems that market forces are supposed fix in airline security.
In most industries, competition forces players to maintain reasonable customer service and to come up with customer-facing innovations, but only because almost all of the customers can easily choose between different products offered by different sellers. Cars are a good example.
Three years ago, I bought my first new car, a Nissan Altima hybrid. It had been about a decade since I had bought a car and I was amazed by the innovations that were available in mid-priced autos. Some of the innovations were impressive from a technological standpoint like regenerative braking and continuously variable transmission (the first automatic transmission I actually enjoyed driving), others were just well designed like dual climate controls and cleverly arranged storage compartments, but all were indicative of tremendous effort and ingenuity focused on providing me with a car I would like to own.
Nissan invested all of this into my car because they knew that Toyota and Ford and Volkswagen and a number of other companies also made cars I would like to own, just as the dealers I bought the car from knew that other dealers also carried the make and model I wanted.
Market forces don't address every potential automotive concern. There are externalities and asymmetries of information to be taken into consideration but putting those aside, competition has done a great job. The auto industry has produced a stream of innovative, appealing products because the makers and the dealers both know that I have plenty of choices.
But what would happen if customers were frequently forced to buy one particular make and model and having a choice in dealers might mean going a hundred miles out of your way? Then the automotive industry would probably look a lot like the air travel industry.
There are major constraints on where you can build an airport. Even if you put aside safety and environmental concerns, there are limits to how many airports an area can support. At the risk of stating the obvious, every flight is associated with two of these airports and your flying options are based on the worse of the two. For example, I'm based in L.A. My co-blogger, Joseph, teaches in a college town in the Southeast. I have an unusually large selection of airports, including LAX which, as far as I know, is serviced by all the major carriers, but if I want to do a face to face collaboration with Joseph I have to fly Delta because that's the only major airline that services his airport.
For the majority of itineraries, passengers have little choice as to airports and often as to airlines (market forces exert enough pressure on airlines to give a reputation for good customer service some value -- look at Southwest -- but not enough to make it standard -- look at almost everybody else). This lack of choice greatly limits the pressure market forces can exert on airport-based services. How many people would drive an extra hour or two (we're talking about a round trip) to save a few minutes in the security line and to have access to a better food court?
If anything, competition will do less to improve customer satisfaction with security than it will with the rest of the services airports provide. Whether done by the TSA or private firms, the basic procedures remain the same and it's the procedures that have people upset.
Of course you might get people driving out of their way to avoid things like full body scans, but that's an entirely different discussion.
