A few days back I wondered about the lessons of the American Airlines business disaster: what did it mean for Southwest Airlines, for example, and how could other airlines avoid similar costly problems. Could disaggregation play a role? For example, should American diversify its fleet and not rely so heavily on MD-80 jets?
But then I realized American Airlines' biggest problem: it isn't certified kosher.
Did you ever wonder how Jews find out what foods are kosher? (Or how Moslems find out what foods are compatible with Halal?) Different organizations across the country are hired by manufacturers to certify food as kosher; the manufacturer is then allowed to place the organization's logo on the packaging and those who are interested recognize the logos. Here in Chicago, for example, there's one large organization with almost national scope; a few smaller organizations of various sizes (and perceived reliability); and local representatives of the two national certification organizations. If I'm a manufacturer and I want my food certified for the kosher market, I have a choice of who will regulate me.
On the one hand, each organization must be strict — otherwise no one will trust their certifications and their endorsements become worthless; in other words, they compete on the basis of how well they can guarantee compliance with kosher standards. On the other hand, again because the organizations compete with each other, they cannot be wildly unreasonable towards the businesses they regulate (although that certainly happens, because once a business hires a kosher certifying organization, it's rather difficult to switch to another). And for the most part the certification business is congenial: organizations know about each others' inspections and how they interpret the rules about kosher foods, and "as long as everything is kosher" they'll accept each others' certifications.
The FAA ordered American Airlines to ground all its MD-80 airplanes because the ties on wire bundles are one and one-quarter inch apart instead of one inch apart, even though the FAA knows the problem is not urgent. Why can the FAA act so arrogantly and arbitarily? Because they're the government: they have monopoly power. Now imagine if an auditor you had hired did something wildly unreasonable that cost you tens of millions of dollars. Not only would you never hire them again, but everyone else in the industry would avoid them like the plague.
So the answer to the huge fines (Southwest Airlines) and huge business losses (American Airlines) of the past few weeks is not better enforcement; the answer is competition in the world of airline regulation. Let's adopt the kosher-certification model to lower costs and improve overall saftey.
Topics: · business · government
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