Vital physical assets must be protected. But against what risks? And how? And by whom? And at whose expense? After the terrorist attacks of 2001, these questions were propelled from back offices into boardrooms and cabinet meetings. The way American society resolves such questions will reshape broad swaths of the economy for the foreseeable future.

Security can be provided by the public sector, the private sector, or some blend of the two. The separability of financing and delivery further multiplies the options. For example, protection can be provided publicly but funded privately (through special tax levies on affected industries) or be provided privately but funded publicly (through tax subsidies or direct grants), or with various mixtures of public and private provision and funding.

This profusion of alternative delivery models is not hypothetical. Property owners defend against fire risks in part through private responses – alarms, extinguishers, sprinkler systems, fireproof materials – and in part through reliance on publicly provided fire fighters. Public police forces and private security services co-exist – although in the United States, the private force, in the aggregate, is larger (around a million private security guards, as of 2003, compared with about 600,000 police) – and dividing lines can blur, as when public police officers moonlight for private clients. Airline security arrangements have skittered between public and private realms in recent years – from for-profit contractors employed by airports and paid for by airlines (prior to 9/11) to a federal agency partly funded by special taxes, with some recent moves toward a mixed system involving both public and private players.