More Recent Regulations That Have No Benefit

In my previous newsletter, I highlighted some examples of regulations that fit this bill – i.e., that don’t seem designed to solve actual problems. Those examples were pulled from a paper originally published in 2016. Some readers have asked me if I have more recent examples of regulations like this, so I’ll highlight a couple of those in this newsletter.

First, a basic recap of my previous post, icymi and for the tl;dr crowd (I get it!): Regulations should solve real-world problems. One way to help ensure that they do solve real-world problems is to look at data in a formal analysis. As I wrote a couple of weeks ago:

Formally identifying the problem that the regulation is intended to address and determining whether regulation is the appropriate solution goes a long way towards creating successful regulatory outcomes. 

If you can’t find some data supporting the notion that there’s a real-world problem, that might be a good indication that there’s not a real problem here. In that case, a regulation will only create costs, not benefits.

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While the examples I gave before were a few years old, the phenomenon is as timeless as politics. Regulations are often about politicians (and their appointees) being seen as “doing something” in response to a crisis, even if whatever that “something” is won’t address the underlying problem behind the crisis. Here are a couple of more recent examples, from my old stomping ground of the United States Department of Transportation

The first example comes from the Federal Aviation Administration. The FAA recently put out a request for comments on a rule it is considering that would change the number of flight hours required for pilots before they can qualify to fly public charter flights. While they come in many flavors, you can think of public charter flights as small passenger flights that can offer only up to 30 seats. Carriers such as Advanced Air, Contour Airlines, JSX, SkyWest, and several others offer operations that fall into this category. A recently published public interest comment from transportation economist Stephen Jonesyoung and air travel guru Gary Leff provides a more complete list of affected entities.

The FAA’s proposal would increase the minimum number of flight time hours required to qualify as a pilot for public charters from 1,200 hours to 1,500 hours. The bigger air carriers (i.e., those with flights with more than 30 seats) already have a 1,500 hour rule in place for their pilots. The FAA has looked into the efficacy of the 1,500 hour rule in the past, publicly finding no evidence that going to 1,500 hours would provide any increased safety. Summarizing the FAA’s own work on the topic, Jonesyoung and Leff write (emphasis added):

Unfortunately, there does not appear to be any evidence that the 1,500-hour rule increases safety or is cost effective. In its own rule implementing the 1,500-hour requirement the FAA stated, “We estimate the costs of the ATP certificate requirement to be $6.4 billion ($2.2 billion in present value), almost all of which stems from the 1,500-hour requirement. The FAA was unable to find a quantifiable relationship between the 1,500-hour requirement and airplane accidents and hence no benefit from the requirement. For most accidents reviewed by the FAA, both pilots had more than 1,500 hours of flight time and for those SICs that did not, there were other causal factors identified by the NTSB.” Similarly, the NTSB reported to Congress that “We’ve investigated accidents where we’ve seen very high-time pilots, and we’ve also investigated accidents where we’ve seen low-time pilots. We don’t have any recommendations about the appropriate number of hours….”

The FAA report that they cite can be found here, and the quote comes from pp. 3-4. The NTSB quote is here.

Jonesyoung and Leff go on to review other evidence about the potential for the 1,500-hour rule to increase safety:

In fact, the 1,500-hour requirements may actually decrease safety directly. The Pilot Source Studies (PSS) are independent, academic studies of a pilot’s training and qualification background relative to success in initial airline training. The first 2010 study was used to develop the 1,500-hour rule, and later studies examined the effects of the rule. Pilots with more hours of flight time after the 1,500-hour rule performed worse than those before the rule because the greater flight time not in service of commercial operations led to a gradual deterioration in knowledge.

[…]

Taken together, while the 1,500 hours of flight time is required for Part 121 pilots, a desire for increasing safety does not justify extending these requirements to others. First, the FAA at the rule’s publication, the NTSB, and the PSS all find no relationship between flight time and safety. Second, current public charter operations are operated safely. Third, European and other foreign air carriers operate inside the United States even though their nations’ flag requirements do not mandate 1,500 hours of flight time for all pilots. No safety issues have been cited with these foreign operations, and European safety performance rivals that of the United States.

That 2018 Pilot Source Study (PSS) can be found here.

Second, there’s the minimum crew size requirement for railroads that recently resurfaced as part of the Railway Safety Act of 2023. To be clear, this is not a regulation (yet), but if Congress were to pass this piece of legislation, then the Federal Railroad Administration (FRA) would have the statutory mandate to create a new regulation about minimum crew sizes for freight trains.

This was a bad idea when the FRA first proposed it in 2016, and when the FRA proposed it a second time in 2022. And that’s because the data do not make the case that one-person crews are any less safe than larger crews. I wrote about this extensively in 2016 and again in 2022. From my 2016 comment:

The FRA admits several times that it does not have evidence that one-person crews are inherently less safe than those with two or more crew members. For example, the preamble of the NPRM states that the FRA “does not currently collect sufficient data related to the size of a train crew nor do accident reports investigations generally address the size of a crew in order for [the] FRA or any entity to definitively compare one-person operations to multiple person operations.”

It might be interesting to search through preambles to proposed rulemakings and the text of regulatory impact analyses to see if the text itself indicates what my former colleague Jerry Ellig used to called “faith-based regulation.” That’s what the FRA was doing in 2016, and what the Rail Safety Act would do now if it were to pass. I wrote this in my 2016 comment:

In some ways, the FRA is refreshingly forthright about its basis for action being its “belief” that the proposed rule would improve safety despite the lack of evidence. The NPRM and RIA indicated repeatedly that the FRA’s basis for proposing this rule is its “belief” that additional crew members will increase safety. Both the NPRM and the accompanying RIA frequently invoke the FRA’s beliefs as the basis for a decision. The phrase “FRA believes” occurs 40 times in the NPRM’s preamble. The RIA uses the phrase, “FRA believes,” or “FRA further believes” in 27 different instances. Regulating based on a belief, rather than evidence, not only risks adverse consequences, but it also violates several Executive Orders, OMB guidelines, and regulatory best practices.

So, if there’s no safety case for either of these rules, there will be no public benefits. There is no problem to solve in the first place. Which begs the question: if there’s no serious safety argument, why do variants of these rules—the minimum crew size for trains and the 1,500 hour air time requirement for pilots—keep coming up?

Although there wouldn’t be any public benefits (e.g., safety gains), we can identify some specific groups that would benefit in each of these proposals. In both cases, it is a mix of industry and organized labor (in fact, it is a classic bootleggers and Baptists coalition). For the FAA 1,500-hour rule, the major carriers (American Airlines, United, etc.) would benefit because the rule would essentially destroy the business model of upstart competitors like JSX.

Joe Lancaster wrote about this for Reason, indicating that the FAA’s action may have been a reaction to requests made by American Airlines and Southwest Airlines:

But not everybody is pleased [about JSX’s success]. In May, American Airlines asked the Department of Transportation (DOT) to "provide regulatory clarity," charging that JSX's business model "degrades our nation's aviation system and distorts competition." Southwest Airlines said that "there needs to be one level of safety for anyone flying on a scheduled passenger carrier." The Air Line Pilots Association, International (ALPA), the world's largest pilot union, accused JSX of "abusing a loophole that should be closed in the best interest of safety."

Safety is almost always the argument, even when there is none to be gained.

The other group that benefits from the FAA’s proposal (as implied by the quote from Reason) are members of the pilot union. There is already a documented pilot shortage, and increasing the flight time requirement for these public charter flights would serve to exacerbate the shortage. Reducing the supply of labor means that wages will go up for the labor that is supplied (or for unions, bargaining power increases and other nonpecuniary gains could be had, too).

For the rail minimum crew size rule, organized labor again would benefit. Their main concern is losing some jobs to automation, as autonomous vehicles (including trains) will surely someday become commercially viable. The minimum crew size would serve to lock-in an existing technology—human operation of trains—even when the technology to safely operate trains with one or even zero humans in the locomotive cab becomes feasible for a larger portion of routes and train types.

But unlike the FAA proposal, the minimum crew size rule for rail doesn’t pit major incumbents against up-and-comers in the same industry. Instead, the industry group that would benefit is those who haul freight by truck. Again, at some point autonomous vehicles will become more widely usable. That includes other modes of transportation besides rail—most notably, trucking.

These final points relate to the name of this newsletter, Third Order. A first order effect of a regulatory intervention is the direct, intended consequences. E.g., employment levels for train operators don’t fall as much as they would have even when autonomous trains become widespread in other countries (I’m assuming that’s the point of the regulation, since I’ve already pointed out that it’s not about safety).

Second order effects involve economic behavior – changes in the uses of substitutes and complements, for example. The degree to which that happens depends upon the changes in relative prices.  For the minimum crew size rule, relative prices would change across the modes, with other transportation modes becoming relatively less expensive. Autonomous trucking reduces shipping cost for that mode, while railroads get stuck with humans.

That’s a net loss on several fronts, and these are what I would call third order effects – the unintended consequences that are a bit harder to see because they depend upon the second order effects. For one, autonomous transportation will only be adopted once it is actually safer than human-assisted, so to stick with humans at that point is to stick with a more dangerous technology. Second, trucking (even autonomous trucking) is always going to have the higher accident rate. There are more opportunities for human error on the roads than on the rails, and the same complexity that causes a higher rate of human error on the roads would also seem likely to cause a higher accident rate in a post-automation world. Third, the energy used per ton-mile is much higher for trucking than for trains. Depending on the fuel(s) used, this has obvious environmental and economic implications.

If any readers know of other examples of rules that were made even when the regulator admitted having no evidence that there would be benefits from it, let me know.