Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“"All, too, will bear in mind this sacred principle, that though the will of the majority is in all cases to prevail, that will to be rightful must be reasonable; that the minority possess their equal rights, which equal law must protect, and to violate would be oppression.”     Thomas Jefferson,    First Inaugural Address, 4 March 1801

May 15, 2009

Regulation Is About Competition, Not Safety

by Brad Warbiany

Just a little Friday afternoon food for thought, c/o the Mises Institute. One would initially think that FAA rules mandating the retirement of pilots at age 65 (age 60 as recently as 2007) would be based upon the safety of passengers — but one would be wrong:

Flashback to 1959. The airline industry is on the cusp of its fifth decade, but there is a problem facing younger pilots who want to enter it. The old-timers just won’t retire, and this frustrates potential entrants with much flying experience and training, thanks to military service in World War II, Korea, and elsewhere. The result is a sort of malinvestment in human capital, with many men trained to be pilots without private-sector jobs to justify the training.

What is a young, aspiring pilot to do? Well, he and his peers could make their presence and skills known to the airlines, signaling that the labor market had changed and that it would be possible to hire new pilots at lower wages. Not only would some airlines opt for the lower-priced laborers, thus lowering the airlines’ reservation price required to provide flights to consumers, some owners of capital might invest in new airlines, thus increasing consumer choice, industry output, and create a downward pressure on prices.

Such would be the market solution, coordinated by changes in relative prices, and it would be peaceful, characterized by voluntary interaction and compromise by the parties involved. Unfortunately, there was another option, requiring the pilot to join a pilots union to lobby the federal government to enact rules forcing existing pilots to retire at age 60. All the union needed was a lobbying presence and some sympathetic regulators at the FAA.

Guess which option was chosen? It seems that in 1959, the aspiring pilots found a sympathetic ear in C.R. Smith, the then-president of American Airlines who also wanted to ground his older pilots. The industry was switching to jet engines, and Smith wanted to freeload off of the tax-supported training with those engines many of the younger pilots received in the military. So Smith instructed his lobbyists in Washington to rewrite FAA rules to force retirement at 60, and in December of 1959, an FAA administrator named Elwood R. Quesada simply authorized them. In January of 1961, Quesada retired from the FAA and immediately joined the board of directors of American Airlines. The retirement age rule has been in effect for almost 50 years.

Now, I’m not going to claim that the retirement rule is a bad rule, nor am I going to claim that it has made passengers any more or less safe. I simply don’t have any real data to back up such a claim. But I find it more than a little bit upsetting — if not surprising — that such a rule would be made purely on the basis of interest group politics, and not primarily for safety.

Hat Tip: Coyote Blog

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