Paul Romer delivered the 2011 Henry and Bryna David Lecture at the National Academy of Sciences. In it, he outlined a framework for thinking about the coevolution of technologies and rules and applied this framework to the question of how the United States will escape the Great Distress.
For decades the National Transportation Safety Board (NTSB) has investigated individual airplane crashes. The NTSB is not a regulator, its role is limited to finding the facts after major transportation accidents. NTSB investigations help the government to assess the effectiveness of regulatory agencies such as Federal Aviation Administration (FAA) but NTSB safety recommendations also help such agencies to take important corrective measures that prevent future accidents.
If the FAA guards air transport, the NTSB reports help to guard the guardians. It’s a model that Eric Fielding, Andrew Lo, and Jian Helen Yang (gated) suggest applying in the financial industry to help regulators better manage systemic risk. The idea is that an independent board that is responsible for establishing what happened in a financial crisis could help to improve the efficiency of both the public and private sector.
Surprisingly though, some in the NTSB have long felt hamstrung when it comes to identifying systemic risks in air transport. That’s because the NTSB’s access to information has been restricted to individual accidents—voluntary incident reports and routine flight data have been off-limits.
But as Andy Pasztor reports (gated) in The Wall Street Journal, a recent agreement between the FAA, the NTSB, and industry and labor groups will put more information in the hands of the safety board:
The arrangement, which had been expected, for the first time calls for the [FAA] to give the [NTSB] access to information distilled from a wide range of government and industry databases, including voluntary incident reports.
The move helps expand the NTSB’s role as an air-safety watchdog, with the FAA saying the goal is to allow the independent safety board to determine whether an accident “is a unique event or an indication of systemic risks.”
The agreement paves the way for better safety recommendations and airline accident rates that are even lower than current historic lows. Read additional coverage here.