The big story in the news lately is the TSA's increasingly invasive search procedures. My friend Art Carden has called for abolishing the TSA. This article points out that the TSA doesn't seem to actually catch any terrorists, and it's not clear why the mere existence of the TSA would deter terrorists more than the private contractors that provided security before the creation of the TSA.
Here's what I really don't understand: Why does it make sense to have a government agency providing security? As Art points out, airlines have an incentive to provide security, if only because they don't want to lose planes and pilots to terrorists. If you think that's not enough incentive, then make airlines legally liable for damage caused by their planes and for the deaths of passengers on their planes. Then step back and let the airlines provide security. They will search for and find the right balance between annoyance and safety--that is, they will provide safety up to the point where the marginal cost to passengers, in terms of annoying safety procedures, is equal to the marginal benefit to society (in risk of death and financial loss).
Contrast this with the TSA: What incentive do they have to worry about passenger convenience? They only face weak pressure filtered through the political process. Suppose something slips through, and someone gets hurt; the agency is not going to lose money as a result. It will face political pressure to do a better job, but it would likely get more funding as a result. The TSA faces perverse incentives.
This reminds me of Mixon's Law (named after Wilson Mixon): Government agencies can always justify funding increases. There are two reasons to increase funding for a government agency.
1) The agency is doing really well, and should be rewarded with more funding. That way it can do more great stuff.
2) The agency is doing a terrible job, and should be given more money so that it can do a better job.