The FDA: A case study for Paternalism
Apothecary Workbench
Should the government protect us?
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In a comment to the last post Dapper Dan raised the question of whether private enterprise could be an adequate substitute for America’s Food and Drug Administration. He presented an argument that threw doubt on the possibility that American citizens would produce demand for a company whose purpose is to review and report on the safety of foods and drugs. I would like to talk about this topic in a little more depth because I think it is an important case study in the analysis of libertarian poltical theory.
First let’s get a little background from Wikipedia’s article on the FDA.
“Up until the 20th century, there were few federal laws regulating the contents and sale of domestically produced food and pharmaceuticals, with one exception being the short-lived Vaccine Act of 1813. A patchwork of state laws provided varying degrees of protection against unethical sales practices, such as misrepresenting the ingredients of food products or therapeutic substances.” [Wikipedia – FDA]
So far so good. It is definitely consistent with my interpretation of libertarianism to make it illegal for companies to lie to their customers on objectively defined issues such as the ingredient list of a food product. Now let’s get back to the question of whether consumers will generate demand for food and drug screening. Apparently demand was not present in the 19th century because no effective business was screening and filtering food and drug products. But notice that when the demand was not there, the government wasn’t doing anything either. Before the mid 19th century, food was not as processed and prepared as today. There was a lot less chemistry going on with foods and drugs back then, probably most of the food people ate would qualify as organic. People generally knew what to expect when they bought food. But that started changing in the late 19th century when canning and processing came about. Some early canning factories used lead solder to seal the cans, which of course is toxic. And there were many other ways that processed food could be manipulated that may or may not be good for the consumer. But it takes time for people to realize these issues, and until that point neither the private sector nor the government could do much about it. One might ask: what if the government had the power to regulate these things to begin with? That could have saved many lives, but if people had the foresight to be willing to pay the taxes for a government agency to begin with, then they would have also had the demand for a private sector solution.
“[The push for federal regulation] came at a time when the public had become aroused to hazards in the marketplace by muckraking journalists like Upton Sinclair, and became part of a general trend for increased federal regulations in matters pertinent to public safety during the Progressive Era. The 1902 Biologics Control Act was put in place after tetanus antitoxin was collected from a horse named Jim who also had diphtheria, resulting in several deaths.” [Wikipedia – FDA]
Basically it takes deaths before people will start to realize the importance of the issue. When there are deaths, people start saying “We have to do something!”. Due to the philosophy of the time, people turned to government. Perhaps this was because of the resentment towards the wealthy business owners due to an exaggerated wealth gap resulting from a lack of geolibertarian policies. So of course no entrepreneurs tried to move in on the opportunity because the market is destroyed when the government jumps in with tax-financed services.
“By the 1930s, muckraking journalists, consumer protection organizations, and federal regulators began mounting a campaign for stronger regulatory authority by publicizing a list of injurious products which had been ruled permissible under the 1906 law, including radioactive beverages, cosmetics which caused blindness, and worthless “cures” for diabetes and tuberculosis. The resulting proposed law was unable to get through the Congress of the United States for five years, but was rapidly enacted into law following the public outcry over the 1937 Elixir Sulfanilamide tragedy, in which over 100 people died after using a drug formulated with a toxic, untested solvent.” [Wikipedia – FDA]
So the critical number of deaths came and the government stepped in when fears reached the necessary level. But what would have happened if the government was based on a strict constitution that forbade government from creating such an agency? The people would still be saying “We have to do something!”, but they wouldn’t be turning to the government because they would already know that wouldn’t go through. For a time, drug companies would start losing money because many people would be too afraid to buy drugs. So drug companies would start pushing for a private certification agency to test their products and reassure their customers that the drugs are safe. Furthermore, the people would still have needs for drugs, but they would be too scared of taking any random drug, so they would be willing to pay more to have independently tested drugs.
The only reason why it is hard to see this effect occurring today is that the fear only lasts while there is no system present. Because we have the FDA, we no longer need to have a general fear of all drugs. Similarly, once a private system is established, fears would subside even in the absence of government intervention.
We can speculate as to what the system would eventually look life. The private certification agencies would be paid by either the drug companies or the pharmacies. It is hard to say which would end up paying as it seems like an arbitrary choice, just like how it is arbitrary whether your employer pays for your health care or you pay for it yourself. Regardless of which side pays for the service, these certification agencies would test the products and give safety ratings. The pharmacies would then stock only products that received adequate ratings. These ratings might also be displayed as color-coded green, yellow, and red bands on pill bottles. People would only want to buy drugs with good ratings by most of the agencies. We take it for granted today that we can trust the FDA to do all this filtering for us, so consumers don’t have to bear this burden of checking the ratings. But really it is an extremely small burden compared to the benefits of keeping a small government and not impinging on individual rights.
If a rogue pharmacy misrepresented a rating, the certification agency could press legal charges based on the fact that their companies trademark was being used in an unauthorized manner.
So what if a certification agency took bribe money from a drug company to get a better rating? This is definitely an issue, but no more so than for the FDA. I would never put complete faith in a certification agency, nor would I put complete faith in the government. No certification agency would want to risk having a bribe exposed to the public because if word got out, nobody would trust their ratings anymore and they would go out of business. Non-profit organizations would monitor the certification agencies by looking into possible bribe situations, such as if two agencies gave a red light while one gave a green light.
Of course a pharmacy could open that completely disregarded the safety ratings of the certification agencies. Such a pharmacy could even make their own certification agency that gave all drugs a good rating and place a green band on every bottle, as long as they didn’t use the trademarks of the real agencies. Would people go to this pharmacy? Yes, the same people who currently buy drugs on the black market that were illegally imported from Mexico. Some people do crazy things, but there is no way you can stop them – the current system doesn’t stop them either.
Now that the feasibility of the private solution has been established, there is one last argument that can be made in favor of paternalism and the FDA: If we force people, then fewer people will buy uncertified products (just like the seatbelt laws that definitely do decrease automobile mortality rates). Sure, you can probably reduce the number of risk-takers somewhat by making risky behavior illegal, but is that really an admirable thing? Let’s take a step back and examine the philosophy of this idea. In the movie “I, Robot”, a super-intelligent computer decides that the best way to fulfill its objective of protecting human lives is to deploy an army of robots to physically force people to stay in their homes. It reasoned that there are too many dangers outdoors and people keep on getting into war. The computer said “My logic is undeniable.” I pretty much agree; if your only mission is to save lives, then you should do all sorts of immoral things to accomplish that goal. The problem is that the goal is wrong. Our society has an over-emphasis on preserving life. I’m not saying its bad to save lives, I’m just saying that there are other things that matter. Another way in which our society is over-emphasizing the preservation of life is with Medicare and Medicaid. If we exaggerate a bit to illuminate the point, these programs effectively enslave the working classes for the sake of artificially extending the lives of the elderly. It all comes back to the spicy lifestyle philosophy: the fundamental metric is not life, but life-quality. If you have to ruin the life quality of 10 people for a year to extend the life of one person by one year, then I think you’ve lost overall. When you see things from this point of view, it is more clear that paternalism is just a reflection of the use of an improper metric for social value.
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If individuals or pharmacies are paying for the knowledge gained by reviews of products, it will be tough to maintain profitability because just a few individuals will have to buy the knowledge, then it will be shared and become public knowledge. Information is expensive to create, but cheap to share.
If corporations are paying for the knowledge gained, you will have conflicts of interest. Companies that do the studies will be more profitable if they give better reviews, because more companies will want to get reviews from them. To counteract that, you could have meta-review journals to decide what are the best sources of studies. Look at video game reviews online for example. Or reviews for movies. Many times reviews aren’t very accurate.
Even with the government doing checks for safety, things slip by. Look at the recent peanut butter incident. I feel there is virtually no way that a profit driven corporation, constantly trying to cut costs, would do as throrough of a job.
Another option that might fit into your ideas of government would be insurance companies paying for the research. They also would want to know the cheapest and most effective methods of treating people. Keeping people healthy in the long run saves them money. This again suffer from the problem of information being cheap to share, but expensive to create.
Govements don’t exist merely to protect individuals. They also exists to perform services that aren’t beneficial to everyone, but not economically feasible. This seems to be one of those.
Great post! This posts offers a great alternative to government intervention where no ones rights are harmed, and the desired outcome can still be achieved. These same types of arguments certainly apply to many areas where the government intervenes.
Part I
You state that laws against selling dangerous products is in line with your libertarian thinking, so it would stand to reason that you would agree there needs to be a fair way of upholding that law: this is what this argument is essentially about.
The FDA is put in place to keep people from breaking those laws—to safe guard them from dangerous products. However, in making the assertion that there exists no private sector solution to this problem because the government ‘destroyed the market’, you are ignoring the reason why the FDA came into existence: the free market has created a reality where uninformed consumers are being exploited and put in danger and no one has done been doing anything about it to keep it from coming to that point.
You are also ignoring, or possibly overlook, how representative democracies work: the people who you say “turned to government”, are political activists, who have more influence in elections than the average citizen who is also affected by a lack of enforcement of food safety laws. (The average person, by the way, is, and was, certainly not a political activist. Just pull up any statistic on voter turnout, then imagine how many of those voters are actually activists involved in pushing for issues to be placed on the agenda.)
So even if we accept the notion that the FDA is bringing in a stifling competitive force in the food-certification sector, how is this force any different than another competitor that a private-sector company would have to face? Easy: the FDA, regardless of its less-than-stellar job is too competitive for any private-sector competitor to find it profitable to compete with. And the fact that the FDA is less-than-ideal (just read the news) means one thing: people are too apathetic to demand much, if anything, unless it has affected them directly. (When’s the last time you participated in a class action law-suit against a company who didn’t harm you?)
And, to be sure, if what you are saying is true—that it takes a critical point of outrage for people to demand a solution—then, especially in this day in age, those people making the ruckus are either too small to call for the creation of a viable private sector solution or the solution will only cater to their needs and ignore the masses (i.e. Whole Foods caters to the few rich who want organic vs Ralphs which caters to the indiscriminate average Joe).
Interestingly, you have presented a very important point in the case against private-sector solutions to food-safety oversight: outraged people see politics as a viable way to implement food-safety oversight measures, since a small amount of politically active individuals can influence representatives of the masses better than they can influence the creation of a private-sector solution that serves everyone.
bspice: You bring up some good questions about funding, but I don’t think that your conclusions are necessarily true. Your claim that the drug certification results would be distributed free of charge if pharmacies were paying the certification agencies. But it would be illegal to distribute these results just as it is illegal to distribute other intellectual property like software. Any well-intentioned pharmacy would pay for the data because if they got caught using pirated data, they could be sued. And if a pharmacy decided not to use the data at all, it would be obvious to the customer because all the bottles would be missing the brightly colored safety labels with the logos of the popular certification agencies. Walking into a pharmacy like this would be like walking into a bookstore where all the covers are ripped off the books. So not only would customers be weary of shopping there, but insurance companies probably wouldn’t pay for drugs bought from there because if you get more sick it could increase their costs. So what about if customers find the safety ratings themselves and then go to a pharmacy without labels? Well, first of all that is only going to save them maybe a dollar a bottle, and there is still going to be the risk of drug interactions. The certification agency would also provide detailed information about contraindications that would be hard to understand if you aren’t a pharmacist, so it will still be a better deal to go to the pharmacy that pays for the ratings.
If drug companies pay for reviews, there are indeed incentives for corruption, but it is plausible that companies that are significantly more corrupt than the FDA would be discovered and lose their credibility.
And the fact that private companies are always trying to cut costs is probably more of an argument for private companies than against them. Would you rather have your tax money spent inefficiently? The certification agencies can only cut costs so far before their services lose credibility.
Dapper Dan: You’re case is a little unclear because there is a bit too much going on here. I think it would be helpful to strip down to the fundamentals, but I will comment on the issues that I see.
First of all, be careful, I didn’t say “selling dangerous products”. I said it should be illegal to deceive consumers, and this is because deception is a form of initiation of victimization as discussed earlier. Selling dangerous products is not, otherwise it would be illegal to sell cars.
As for the rest of your post, one central theme that I extract is that private enterprise hasn’t demonstrated an ability to serve in the place of the FDA. In my post I explain this point by saying that a tax-funded service destroys the market. What I mean by this is that the FDA satiates the demand for drug certification and it does so at a price point that no private competitor could possibly compete with – it’s free. So of course there is not going to be a ruckus – the demand has been satisfied. And of course it is “too competitive”, but only because it is funded through violence.
I think my argument is clear, you may need to read it more carefully. However, to make it even more clear, I will summarize the main points of the argument. To find justification for those points, you can read what I posted.
But before I state them, I will clarify one thing about the confusion about ‘selling dangerous things’ and ‘informing people about things’: The issue of deceiving customers is only important insofar as it effects them–I don’t intend to argue ideologically, I’m only arguing under a socially pragmatic assumption that protecting people from harm is better than making it easy to hurt themselves, accidentally or not.
So, we can confine it, for the sake of avoiding ideological argument, to the argument that we need something like the FDA to avoid unintended consequences of consuming dangerous things; in other words, give people more information.
So, to summarize my main points into bite-sized form:
1. Taking a political route to create an institution like the FDA was not caused simply by there being a culture that supports that type of route, thereby undercutting any possible creation of a private sector solution. Rather, people chose politics as an avenue for its creation because you need a smaller critical mass to create this institution (a bunch of activists), than what you need to engender a private-sector solution that serves almost everyone (you need demand from the majority of people).
2. Even if we did do away with the FDA to make way for a private sector solution, there wouldn’t be enough demand to create a solution that benefits everyone–or most people who could benefit–because it wouldn’t be profitable; rather, it would cater to those who are the more-demanding consumers only (I gave the example of people who want organic food have fewer options because most people don’t care–even with the knowledge that pesticides cause cancer).
3. Lastly, I argue that before I could be convinced that what I said above isn’t likely, I would have to see competitors of the FDA, given the lack-luster job that it is already doing. (for example, look at this article I read a minute ago: http://www.nytimes.com/2009/03/04/business/04diet.html?ref=health). You say that nothing else exists because the FDA meets the demand, which only serves to suggest I’m right: the demand isn’t high, so why expect anything nearly as all-encompassing from the private sector. Like I said, we’d only get something that caters to the biggest demander-group (which is small), otherwise it wouldn’t be profitable.
To respond to your point that it can’t compete because the FDA is free, that is actually besides the point, because I argue that even if made way for free enterprise, it wouldn’t benefit everyone anyway. Right now, the FDA is fulfilling a demand that isn’t even there–an all-encompassing system to test food and drugs. If you look at my first response, you would see my argument about that, too. (People don’t demand because they are shortsighted. Given your understanding of human psychology and the myth of the purely rational consumer, I don’t see how you can argue that point.)
I’m beginning to think that we are arguing on different platforms entirely, which can’t be resolved since they are not about the same thing: I speak in terms of social pragmatism, to account for people’s shortsightedness. It seems like you are speaking in terms of ideology, about initiation of force, rather than benefit to most people.