Buyer Beware When Climbing Everest

Everest's peak is always black because high winds remove the snow. The September issue of Outside Magazine covers climbing deaths on Mount Everest. The focus of the story by Ed Douglas is on the guides, and whether or not, poor guiding is a cause in the increased number of deaths on Everest. It is not clear that there really is an increasing risk, because more and more people are attempting the summit, so it could be natural that more people are dying. The article, however, raises some interesting questions: (1) Should just anyone be allowed to climb Everest, (2) Who is responsible for the safety of the climbers, and (3) Should the guide services be regulated? All of these questions are essentially about regulation of public safety, and economics has something to say about that.

The traditional market story would be that the mountain should not be restricted, people are responsible for themselves, and that the market for guides will ensure that the proper balance between safety and price will be struck. To some degree this is what is happening. A summit attepmt from a reputable guide service with top-notch safety equipment and a full staff can cost upwards of $60,000. On the other hand, a bargain company can take you to the top for about $10,000–but with much greater danger. In essence, the market is functioning, and price determines the quality of journey that you get.

There are some problems with the traditional market story, however. Remember that markets rely on symmetric information between the buyer and the seller. When there is informational asymmetry, markets can function improperly. Often government must step in to make sure that proper information is available in order to make markets work. In the case of Everest, how do we know whether a guide is a good guide or not? Few records are kept, and asking around for the information often leads you to a biased competitor as a source. Furthermore, does the buyer even know enough to ask the right questions? According to the article, the right question is not ‘how many times have you reached the summit’, but rather, the right question is ‘how many times have you saved someone who could not summit.’ On Everest, the guide has all the information, and the climber increasingly has less and less. This asymmetry can quickly become deadly and points squarely at a need for regulation.

There is a problem with regulation, however. The regulation theory assumes that a body exists that can regulate the mountain and can prevent guides who do not keep proper public records from taking people up the mountain. With Everest, though, there are two approaches, the easier southern approach and the relatively more difficult northern approach. Most of the deaths occur on the north side. The issues is that the southern side falls within Nepal, while the northern side falls in China (Tibet). Each country derives a significant amount of income from the climbing economy, and thus, is in direct competition with each other to get the most climbers. A permit from Nepalese for the south side costs $10,000 while on the Chinese side, $10,000 can easily pay for the whole trip. The result is that budget climbers and those turned down by a south side guides will go to the more difficult and less regulated Chinese side and attempt from there. Nine of the 11 deaths in 2006 occurred from the north side.

There is a market solution to the information problem. The solution falls under the signals and warranties umbrella. A third-party such as the International Federation of Mountain Guides Associations can certify that a guide meets their quality. If people trust the third-party, guides can use this as a signal that they are competent and can charge accordingly. In the case of the IFMGA, guides must train for several years and be proficient in all sorts of mountain safety standards. The key to such certifications is that the certifying authority must be trusted. Unfortunately, too many of the authorities are of low standards, and should not be trusted. Also, many certifying organizations seek, not to promote safety, but rather, to provide barriers to entry to competition for their existing members. The result is that they keep prices up by restricting the supply, but they sacrifice safety by keeping out potential competitors.

The example of Everest provides a bevy of interesting policy problems, all of which I cannot write about. For example, by restricting access, perhaps it is possible to increase safety by forcing all guides to meet certain standards and keeping prices high enough that they can afford to do so. In general, such methods make things worse off for the general public. Everest, however, is not a place you can talk about ‘in general.’ In the end, though, it is still the highest mountain in the world, has extreme weather, and almost no oxygen, so people will continue to die. Caveat emptor.