orangeek's blog

Who - and how - is ruling the business?

For many years now the United States Office of Management and Budget (OMB) has recommended the use of cost-benefit assessment for all proposed federal regulations
[...]
Yet despite the massive expenditures involved, a senior economist at the Department of Homeland Security recently acknowledged that “We really don't know a whole lot about the overall costs and benefits of homeland security.

Abstract

Following this approach [of a cost benefit analysis], Stewart and Mueller conducted an assessment of increased United States federal homeland security expenditure since the 9/11 attacks and of expected lives saved as a result of such expenditure. The cost-benefit analysis suggests that the annual cost per life saved ranges from $64 million to $600 million, greatly in excess of the regulatory safety goal of $1-$10 million per life saved. This means that $300 billion spent by the United States government to protect the American homeland from terrorism since 2001 fails a costbenefit analysis. These findings focus on the total homeland security budget.

Give a value to life saving countermeasures

Elizabeth Paté-Cornell suggests that a cost per life saved of $2 million or less is appropriate for current practice, and the United States Department of Transport adopts a figure of $3 million. For most activities a cost per life saved not exceeding $1-$10 million is typical. This value is consistent with many studies as well as values currently used by most United States federal agencies. In other words, if the annual cost per life saved exceeds $1-$10 million, such risk reduction expenditure is deemed to have failed a cost-benefit analysis and so is not cost-effective. In such cases it is more rational to divert the expenditure to reduce the risks for other hazards where the benefits (lives saved) will be higher.

Security weakness or people's weakness? Maybe the best effect of 9/11 attacks (this is my comment, not author's)

One reason for the extent of the losses of 9/11 was the reluctance of crew and passengers to confront and resist the hijackers. This is perfectly understandable as most previous hijackings ended peacefully or with minimal loss of life as the main response to a hijacking was to “get
the plane on the ground so negotiations can begin”. Indeed, only a few months earlier three terrorists, in this case Chechens, had commandeered a Russian airliner, demanding that it be flown to Saudi Arabia at which point they were overcome by local security forces with almost
no loss of life. The 9/11 suicide attacks on the World Trade Center and Pentagon changed this perception.
Hence, on hearing of these attacks, the crew and passengers on the fourth plane, United Airlines Flight 93, overpowered the hijackers before the aircraft could reach its intended target.
Passengers will now fight back if there is any indication that the terrorists’ intent is to enter the cockpit or that they are suicidal in any way.
As pilot Patrick Smith puts it forcefully:

“We first need to revisit the morning of September 11th, and grasp exactly what it was the 19 hijackers so easily took advantage of. Conventional wisdom says the terrorists exploited a weakness in airport security by smuggling aboard box-cutters. What they actually exploited was a weakness in our mindset - a set of presumptions based on the decades-long track record of hijackings. In years past, a takeover meant hostage negotiations and standoffs; crews were trained in the concept of "passive resistance." All of that changed forever the instant American Airlines Flight 11 collided with the north tower. What weapons the 19 men possessed mattered little; the success of their plan relied fundamentally on the
element of surprise. And in this respect, their scheme was all but guaranteed not to fail. For several reasons - particularly the awareness of passengers and crew - just the opposite is true today. Any hijacker would face a planeload of angry and frightened people ready to fight back. Say what you want of terrorists, they cannot afford to waste time and resources on schemes with a high probability of failure. And thus the September 11th template is all but useless to potential hijackers"

Could be better to...

Risk reduction measures that cost tens or hundreds of millions of dollars per life saved cannot be justified on rational life-safety grounds—or, essentially, on moral ones. If some of the additional federal government and private sector spending on aviation security were invested
in other hazard or risk reduction programs, many more lives would have been saved. For example, Ahrens estimates that 890 lives could be saved annually if all homes had a working smoke alarm and Tengs and Graham estimate that an investment of $200,000 per year in smoke alarms will save one life. From this it can be inferred that an expenditure of only $5 million per year will save approximately 25-30 lives per year. Similar examples can be found for other risk reduction measures or regulations. While these numbers are approximate, they do illustrate the enormous opportunity costs of the Federal Air Marshal Service. In a multi-hazard environment, such expenditure should be invested in a wide range of more cost-effective risk reduction programs such as flood protection; vaccination, screening and other health programs; vehicle and road safety; occupational health and safety.

UPDATE

After dasnake's comment who asks why the assign a success rate of 50% to pre-boarding measures, here is the reason, directly from the paper:

The extra and more vigilant intelligence, immigration and passport control, airport screening, and other pre-boarding security measures implemented since 9/11 as arrayed in the TSA’s 14 layers of security should result in an increased likelihood of detection and apprehension of terrorists. Increased public awareness is also of significant benefit to aviation security. Added to this are the much enhanced preventative policing and investigatory efforts that have caught potential terrorists including, in the U.K. in 2006, some planning to blow up airliners.

Combined, we suggest, these measure by themselves reduce the risk of a replication of 9/11 by at least 50%, and this is likely to be a lower bound value. There has been no successful hijacking anywhere in the world since 9/11 and very few attempts at blowing up airliners - and none of these in the United States. In consequence, we suspect, R(pre-boarding security)
is likely to be much greater than 50%. Nonetheless, for the present analysis assume R(preboarding security)=50%.