The Boeing 737 Max crisis illustrates the dangers inherent when government regulatory agencies delegate too much authority to companies to regulate themselves.
This problem isn’t confined to airplane regulation. Government regulators allow businesses and employees to self-regulate in areas as diverse as the enforcement of environmental rules, hog inspections and occupational safety, as the Brookings Institution outlined in a recent paper. In many cases, experts argue this kind of in-house inspection is warranted because workers in the industry have more expertise than regulators, and because businesses have economic incentives to get things right rather than suffer the consequences, and bad publicity, of a problem that affects consumers.
In general, that reasoning has worked. Air travel never has been safer. Accidents, once relatively frequent, are rare these days.
However, the argument fell apart in the Boeing case.
No publicity could be worse than that accompanying the deaths of 346 customers in two separate airplane crashes. A company such as Boeing surely would have understood the cost of failure in terms of lives, publicity and money. And yet, as the Brookings paper noted, competitive pressures from rival Airbus led the company to seek quick approvals. The defective part of the aircraft, the flight control system, came as the result of a workaround to avoid a more time-consuming fix.
Businesses nearly always deal with these sorts of pressures. The trick is to identify when such momentary concerns might overwhelm common sense.
In addition, the paper cites Boeing’s political power in Washington, and the incentives FAA officials have had through the years of accepting lucrative employment with Boeing — an incentive that might disappear if a regulator were seen as unwilling to approve the company’s wishes.
Because the 737 Max and its flight control system are complicated, FAA inspectors lacked the expertise necessary to competently sign off on the aircraft’s safety, raising another problem. A lack of expertise often is used as a reason for regulators to defer to business managers. Again, this case illustrates the limits of that argument.
As Brookings notes, many of these problems could be solved by giving regulators more resources, in money and employees. Better training and smaller caseloads would reduce the reliance on delegated regulatory authority.
The trend, unfortunately, has been in the opposite direction. Congress has expanded the ability to delegate regulations to companies. Brookings refers to a 2013 report that said more than 90% of airline certification was done by non-FAA employees.
Much of that problem may be ascribed to government over-regulation, which has placed unnecessary burdens on businesses and citizens. Government would do well to streamline the regulatory process to reduce costs.
The danger in the Boeing crisis is that government might overreact to a system that, generally, has worked well. But that good record shouldn’t erase the need for some changes, either.
The danger in the Boeing crisis is that government might overreact to a system that, generally, has worked well.
In some cases, delegated regulatory authority makes sense. Employees know best when practices are harmful or inconsistent with sound safety precautions. But regulatory agencies must at least have the expertise and the funding to review company reports and identify inconsistencies.
Government should find ways to better identify potential cracks in the system, either regarding immediate competitive pressures or the existence of excessive political clout. Then it should provide extra attention where due.
That will take a bit more money, but the expense would be worth it. A plane crash spreads tragedy far and wide, even as it hurts consumer confidence. Lapses in other consumer protections might result in tragedies that are not as stark and apparent.
The free market can do much on its own, although government clearly has a limited, but important, role to play. In all cases, public safety should be the top concern.