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How Immoral are Laissez Faire Ideologues? Ask about Drones.

Summary:
William K. Black December 17, 2018     Bloomington, MN In 1983, Federal Home Loan Bank Board Chairman Richard (Dick) Pratt published his Agenda for Reform about how to deal with the savings and loan debacle.  He had just made that debacle inevitable by deregulating and desupervising the industry.  In his Agenda, he called for some protective steps (none of which he took or even proposed as rules), but overwhelmingly called for more deregulation and desupervision while promising that the raging fraud epidemic he had super-charged could not occur. Pratt put three quotations on the front and back covers of his Agenda.  Two of the passages admitted his knowledge that deregulating and desupervising the industry at a time when it was endemically insolvent could greatly increase losses.

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William K. Black
December 17, 2018     Bloomington, MN

In 1983, Federal Home Loan Bank Board Chairman Richard (Dick) Pratt published his Agenda for Reform about how to deal with the savings and loan debacle.  He had just made that debacle inevitable by deregulating and desupervising the industry.  In his Agenda, he called for some protective steps (none of which he took or even proposed as rules), but overwhelmingly called for more deregulation and desupervision while promising that the raging fraud epidemic he had super-charged could not occur.

Pratt put three quotations on the front and back covers of his Agenda.  Two of the passages admitted his knowledge that deregulating and desupervising the industry at a time when it was endemically insolvent could greatly increase losses.  Both of those quotations went on to explain Pratt’s real concern about those increased losses to the public – they might discredit deregulation.  The greatly increased losses to the public did not horrify him.  The fact that that deregulation would trigger those losses did not horrify him.  The thing that horrified him was that the public might realize that deregulation and desupervision caused widespread fraud and losses and this could lead the public to block, or even roll back, dangerous deregulation and desupervision.

Pratt’s real concern for the vulnerability of laissez faire policies if the public learned that they were harmful, combined with his real unconcern for the damages he knew they could produce outraged me.  I saw how crippling laissez faire ideology was not simply to sound public policy, but also to its adherents’ morality.

Yesterday, I read a WSJ article on drones that demonstrated both points in a setting anyone can understand without knowledge of economics.  The title is “Possible Drone Collision Renews focus on Safety Systems.”  A passenger jetliner suffered damage that a drone strike – or a bird strike – might have caused.  No one was injured.  The damage to the jetliner was material but did not produce any known flight risk.  Tests are being done that may be able to determine the cause of the damage to the aircraft.  Whether or not a drone strike caused the damage is not the issue I am discussing.  I write to discuss the industry reaction to the possible strike.

Drone use is expanding rapidly.  There is virtually no effective regulation of drone usage.

The article reported:

If the culprit was a drone, it would mark the first documented collision in North America between an unmanned aircraft and a large passenger jet. A military helicopter and regional turboprop previously have been involved in drone-related accidents in the region, and there have been dozens of close calls. There also are a number of unverified reports of collisions between drones and small planes in other countries, according to air-safety experts.

The FAA receives more than 1,000 reports annually of drone sightings close to aircraft. An agency-sponsored study last year concluded that, under worst-case scenarios, collisions between airliners and drones weighing between 4 pounds and 8 pounds could result in significant damage to manned aircraft.

The obvious point is that the status quo is insane.  We have no effective protection against something that can cause mass deaths even when used accidentally, and ISIS has shown that minimal tech is required to weaponize drones.  Planes are most vulnerable to fatal damage at low altitudes and lower speeds when landing or taking off, which is the most common altitude for drone operation.

Worse, there is no imminent fix scheduled for adoption and no adequate sense of urgency to devise and implement a fix against accidental and deliberate drone collisions.  (Drones can also collide accidentally or deliberately with vehicles, structures, and pedestrians.)

More work needs to be done before there is an industry consensus, and the Federal Aviation Administration is years from finalizing regulations spelling out performance requirements.

The only question is when our luck will run out and drones will cause mass deaths.  So what do private sector manufacturers fear?

But already, there is widespread industry agreement that a fatal airliner-drone collision could instantly set back the fast-growing industry—and likely prompt knee-jerk reactions from regulators and lawmakers. “That’s always been the big fear,” according to Kenji Sugahara, a consultant and drone pilot. “If something like that happens, it’s a disaster for all of us.”

Note that the ‘disaster’ of killing several hundred people is not the drone industry’s “big fear.”  In the phrase “disaster for all of us,” the word “us” refers to the industry and drone users – not the hundreds of dead people and their thousands of loved ones.  The industry’s “big fear” is that the mass deaths would discredit laissez faire ideologies and policies.  The public would demand to know why the industry and anti-regulators stood by for over a decade while thousands of near misses occurred and never developed a sense of urgency to prevent the inevitable tragedy.  The “disaster” the industry fears is that the public will demand action – and Congress will respond with safety legislation.  The “disaster” is lost profits, not lost lives or lost loved ones.

Note that the industry derides any urgent action by Congress or regulators to prevent future mass deaths as “knee-jerk.”  The article does not condemn and directs no derisory rhetoric about the drone industry’s successful campaign to prevent the effective regulatory action that could prevent or reduce the otherwise inevitable fatal drone strikes.  Industry’s opposition to safety regulation is “knee-jerk.”  They increasingly oppose safety and environmental regulation even when it would help the industry.

Laissez faire ideology produces lethal policies and ethics.

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