I am an economist, and, in my opinion, you summarized many of the non-pecuniary costs quite nicely.

I would bring up the bigger economic point, which is efficiency. What I really care about is 1) setting a goal of acceptable aviation safety, and b) achieving that goal with a minimum of cost. I think we have met goal 1 with the TSA, but the problem is that it comes at a huge cost --- both in terms of dollars spent, and in terms of non-monetary costs like those pointed out by InkUnderNails.

What most of us who dislike the TSA really worry about is that notion that we could achieve the same (perhaps better) security with a fraction of the cost. For example, loss of liberty is a huge cost.

As far as the OP's post goes, I think it may be a bit extreme, but in my opinion, begins to create the correct incentives. Spiff is also saying the same thing, as I read it: let's take away the lack of incentives for security and allow competition for the outcome. This would likely lower the cost and better the results.

In general, we want government intervention only in cases where there is a clear market failure, and laws and regulation would provide a solution to that market failure. I don't see an obvious failure in terms of private provision of security, but I could be wrong.