Tuesday, January 25, 2005
Penny Wise, Pound Foolish
A recent RAND study advises against equipping airliners and airports with systems designed to foil portable surface-to-air missiles. RAND's concern is that the installation of these systems will cost $11 billion, with an added $2.1 billion annual maintenance cost.
That sounds like a lot of money, but consider the cost of an American airliner being shot down by terrorists. RAND did that as well:
That measurement sounds fairly dire, but only talks about the short-term impact of a cessation of air travel. The study is vaguer on the question of long-term impact:
We're still floating around the same number, which seems to minimize the extent to which normal patterns of air travel would be disrupted. The study compares the impact of a downed airliner to the aftereffects of September 11. The analogy doesn't quite hold. 9/11 was a onetime deal - after it occurred, no cabin full of passengers was likely to assume after a plan was hijacked that they would be allowed to live. 9/11 gave rise to the vigilant passenger, as would-be shoe bomber Richard Reid discovered.
The panic a shootdown would inspire would be less easily dispelled, even if the perpetrators were captured. Absent concrete countermeasures, passengers will have no reason to think that future attacks are preventable.
Ever so thorough, RAND considers what passengers would be willing to pay to avoid the calamity of a downed airliner:
Speculative or not, I'd wager that this estimate is on the low end. But $12 billion has the merit of being a bigger number than $11.5 billion. Air travel is one of the pillars of the American economy; its disruption would have societal impacts too myriad to contemplate.
RAND contends that time will allow us to have more cost-effective solutions. How much cheaper do they have to be? How much time can we afford? Admittedly we have an administration too feckless to raise taxes for true homeland security (for that reason, the RAND diagnosis seems fairly savvy). But the only way we can find out the answer to the second question would be waiting until it's too late. RAND also contends that smart terrorists may determine countermeasures against airplane defense systems. Maybe they will, but installing these systems is guaranteed to lower the odds of their succeeding. If countermeasures improve the chance of a plane surviving an attack by 20%, they'll easily be worthwhile.
The costs of prevention, however high they may seem, will be utterly dwarfed by the costs of dealing with the disruption of air travel after the fact. Israel acknowledged this when it began outfitting its airliners in 2002. That we're still thinking this way three years after 9/11 is truly frightening.
A recent RAND study advises against equipping airliners and airports with systems designed to foil portable surface-to-air missiles. RAND's concern is that the installation of these systems will cost $11 billion, with an added $2.1 billion annual maintenance cost.
That sounds like a lot of money, but consider the cost of an American airliner being shot down by terrorists. RAND did that as well:
If we take into account the value of a lost aircraft and a conventional economic valuation of loss of life, the direct cost would approach $1 billion for every aircraft downed. The indirect economic damage from an attack would be far greater. These costs result from the loss of consumer welfare through preemption of a favored travel mode or reluctance to use it, as well as operating losses suffered by airlines subsequent to an attack. These amounts will depend primarily upon two factors: the length of any possible systemwide shutdowns in air travel and any kind of longer-lasting public reluctance to fly. Both factors are difficult to predict, but if air travel were shut down for a week (it was shut down for three days after 9/11), the economic loss would amount to roughly $3 billion during the shutdown itself. Extrapolating from the long-term effects of the 9/11 shutdown, losses over the following months might tally an additional $12 billion, for a total economic impact of more than $15 billion.
That measurement sounds fairly dire, but only talks about the short-term impact of a cessation of air travel. The study is vaguer on the question of long-term impact:
we find it plausible that demand for air travel could fall by 15–25 percent for months after a successful MANPADS attack on a commercial airliner in the United States. A weeklong systemwide shutdown of air travel could generate welfare losses of $3–4 billion, and when losses from reduced air traffic in the following months are added in, the result could exceed $15 billion
We're still floating around the same number, which seems to minimize the extent to which normal patterns of air travel would be disrupted. The study compares the impact of a downed airliner to the aftereffects of September 11. The analogy doesn't quite hold. 9/11 was a onetime deal - after it occurred, no cabin full of passengers was likely to assume after a plan was hijacked that they would be allowed to live. 9/11 gave rise to the vigilant passenger, as would-be shoe bomber Richard Reid discovered.
The panic a shootdown would inspire would be less easily dispelled, even if the perpetrators were captured. Absent concrete countermeasures, passengers will have no reason to think that future attacks are preventable.
Ever so thorough, RAND considers what passengers would be willing to pay to avoid the calamity of a downed airliner:
We estimate that the country would be willing to pay $12 billion to avoid an incident that would seriously affect travelers’ confidence for the next six months. That value increases to over $50 billion for an incident that would affect travel for a year and a half. Admittedly, these future loss factors are somewhat speculative.
Speculative or not, I'd wager that this estimate is on the low end. But $12 billion has the merit of being a bigger number than $11.5 billion. Air travel is one of the pillars of the American economy; its disruption would have societal impacts too myriad to contemplate.
RAND contends that time will allow us to have more cost-effective solutions. How much cheaper do they have to be? How much time can we afford? Admittedly we have an administration too feckless to raise taxes for true homeland security (for that reason, the RAND diagnosis seems fairly savvy). But the only way we can find out the answer to the second question would be waiting until it's too late. RAND also contends that smart terrorists may determine countermeasures against airplane defense systems. Maybe they will, but installing these systems is guaranteed to lower the odds of their succeeding. If countermeasures improve the chance of a plane surviving an attack by 20%, they'll easily be worthwhile.
The costs of prevention, however high they may seem, will be utterly dwarfed by the costs of dealing with the disruption of air travel after the fact. Israel acknowledged this when it began outfitting its airliners in 2002. That we're still thinking this way three years after 9/11 is truly frightening.
