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Then the Gods of the Markets Tumbled
Early on in one of my harder math courses at the university, the professor stood up in front of the room, writing on a chalkboard. He proved that all possible problems of the class we were studying had a solution. He was quick to point out though, that no one was guaranteeing that you could find it. I spent the rest of that semester increasingly frantic as I couldn’t find those solutions.
All too often, when presented with a problem, conservatives will wave our hands and say “the market will provide a solution.” The certainty of our inevitable triumph absolves us of any need to bother with anything in the meantime. And make no mistake; I believe in the inevitable triumph of market forces as much as anyone. But we should spend a little time thinking about what all that implies.
The market is slow. Communism has been a failure wherever it’s been tried, but somehow we’ve had three generations of murderous scumbags ruling in North Korea. That regime can’t last forever but it has lasted for several decades. From the moment the Soviet Union was born out of revolution it was doomed. That didn’t prevent the Holodomor, or save uncounted multitudes from the gulag. Quite a lot of awful things can happen while we wait for the market to correct itself.
The market is unpredictable. The New York Times (a former newspaper) is still making money. Isn’t it obsolete? Shouldn’t a print medium have gone out of business by now? Maybe; word of them having layoffs always brings a smile to my face. Maybe the market is still correcting and we’re just waiting until they lay everyone off. Maybe there’s still enough value in what they create to pay to keep the doors open. It’s useless to wait for the market to solve that problem if the market is balanced already.
The market is chaotic. There’s still good money to be made in a dying industry if you play your cards right. And you can still end up bankrupt in an up-and-coming one even if you did everything right. The only way that the market rewards or punishes people is through money. There’s a lot of noise in that signal. One shouldn’t attribute too much virtue to someone who succeeds, or too little to someone who doesn’t.
The market is amoral. Not immoral, just completely indifferent. Someone was telling me about the difficulties in returning their rented cable box. The company makes money if they can charge you for it, and they’re already losing you as a customer. It’s in their economic best interest to abuse that process. Makes life worse for you the consumer, but there’s very little market incentive to change.
Some problems are resistant to market forces. Smoking weed is pretty much a dead end in terms of making money. People still do it though. Definitionaly market forces can’t demand every single person do one thing; the people have to be responding to their own incentives and making their own choices. People are chaotic; they won’t all choose the same things even given exactly the same circumstances.
Statistical effects don’t balance out in individual cases. If I lose my job maybe I don’t get another. Not because I’m not qualified or because I didn’t plan sufficiently. Statistically speaking, some people get the shaft. In a similar sense, you’ll find occasional people on this site who benefited from Obamacare. The thing is a train wreck and ruining the economy and all that, but they rolled the natural. Maybe I would have gotten another job, maybe Obamacare’s implosion would leave them worse than before. Maybe we die before that happens; there’s no karmic balance sheet that has to add up.
What does all that add up to? Before you tell me the market will solve a problem, stop and consider it. Will it solve the problem quickly, or slowly? What immediate problems is it generating while we’re waiting, and how serious are they? Is the market pointing towards the solution you want it to? If it’s not, what incentives do you have to adjust so it is?
And for heaven’s sake, show a little empathy when someone gets kicked in the teeth.
In “I imagine you already know this” news, the title is taken from the poem The Gods of the Copybook Headings by Rudyard Kipling.
Published in Economics
Heh. I remember reading a story where the government had a department that basically set up conspiracies in order to distract the public from protesting the actual work that was happening.
True, but I also hate it when I believe the government is being overprotective too. As I may have used as an example elsewhere, OSHA will apparently fine a company if they should happen to find any number of pallets stacked vertically. There’s possibly a balance to be struck, but I don’t know exactly where it would be.
I was a senior in Catholic high school in 1969, as the Moon landings approached. One of our teachers, knowing that the students were just about as conservative as the priests, brothers and nuns, asked a pointed question: would we feel as proud, as ($ literally) invested in it if the astronauts planted the flag of Chase Manhattan Bank, the Ford Motor Company or Anheiser-Busch? And we had to admit, the answer was “no”. The Great Invisible Guiding Hand of capitalism didn’t arouse the loyalty that “United States of America” does.
That’s why they invented the Darwin Awards.
Funny how you wrote that, and were then met with a barrage of “yes, we would like to abolish the FDA”.
Meanwhile, I get regularly accused of overexuberantly worshiping the free market on Ricochet. Yet I’m one of the few that has to work with the FDA on a daily basis, and I think they’re one of the better-run government agencies. Moreover, I don’t think our health care system would function anywhere near as well in the absence of their drug approval system. Go figure.
My point – if I have one – is that the right really doesn’t have a consistent, coherent view of free enterprise vs government regulation. Or perhaps better to say that our first principles and our actual nitty-gritty preferred policies don’t always mesh as nicely as we would hope.
I’ll go ahead and say it: “better-run government agencies” is like rating “favorite Communist dictatorships”.
Seriously though: how would you rate the FDA either in its own right or against non-government entities?
Also: just because an agency is run well doesn’t mean it needs to exist.
That’s setting the bar pretty low.
And I’ll say it again: I constantly get accused on Ricochet of being too libertarian. And with a wife who grew up under communist East Germany, I’ve learned a thing or two about the oppression of communist dictatorships. So let’s dispense with the cute catch phrases.
Of course the FDA is constrained by the same limitations as any government entity.
While my comment didn’t specify it, I was referring to the function of the FDA I am most familiar with professionally: drug approval. From a scientific perspective, the FDA is quite permissive when it comes to letting new drugs on the market. And it’s not surprising. This branch of the FDA is funded by the pharmaceutical companies, so it’s not surprising that it has much less of a hostile attitude toward the industry than John Stossel might have you believe.
But there’s another phenomenon at work. The primary role of the FDA as gatekeeper is to require most drugs to go through a phase III clinical trial process. Phase III clinical trials are the level where pharmaceutical companies shell out the real big bucks: they’re huge, multinational, require a ton of compliance measures, and take a long time. As a result, any pharmaceutical company with the disposable income to conduct a clinical trial will be risk-averse enough to kill any non-stellar drug development project well before it gets to that phase. Accordingly, most drugs sail through the actual approval process, since the real culling has already taken place at the phase I/II stage.
In other words, there’s a chicken-and-egg process with the FDA: simply by requiring phase III trials, the FDA goes a long way toward ensuring that any drug submitted for approval will be a good one. So the FDA’s main contribution to public health can be seen as passively filtering out bad drugs while requiring large-scale safety/efficacy data on “good” drugs to be made public. Put simply: one of the FDA’s main contributions is providing safety/efficacy information to the public (and more importantly, the medical field) that helps assess the value of a new drug.
So if the biggest contribution of the FDA is simply forcing information to be gathered and disclosed, the obvious question is: wouldn’t market forces do the same? Nobody knows, but the most likely answer is no. Again, phase III clinical trials cost billions. There’s also a real risk that the outcome of the trial will be mediocre – not negative for the drug, just not positive enough to convince doctors to prescribe the new drug at a volume good enough to recoup that investment. So the claim that “some pharmaceutical UL would simply pop up” is very likely illusory. If the choice was between spending over a billion dollars to get “PUL” certified, or spending $50 million dollars on a snappy marketing campaign, the choice is clear.
So, no, a private sector alternative to the FDA is very unlikely. However, in reality, we could abolish the FDA and still reap the benefits because its European counterpart (the EMA) would still exist and require phase III trials. But on the philosophical level of this thread, it’s a cop-out to say “let’s abolish the FDA and live parasitically off the European big state!”.
Sorry for the rambling. It’s 1 AM on a Saturday where I live, and I’ve been imbibing accordingly.
You say that as if you think it’s a good thing.
Another point I missed in my disjointed rambling:
There’s a very valid justification for the FDA to serve as gatekeeper to ensure that the drugs on our market are not only safe but efficacious.
To wit: any government-sponsored healthcare system needs an authority to choose which drugs may be bought with taxpayer money and which ones are lemons. In a market system, this decision would be aided by the hive mind wisdom of the market; but governments are notoriously deaf to market signals and wisdom, so a more official, authoritative decision-making body is needed.
The truth we constantly try to deny on the right is: in the US, about half of healthcare spending comes from the US government. We already have a single-payer system that’s bigger than most of the European single-payer systems we poo-poo. But as long as Medicare, Medicaid, et al are shelling out nearly 8% of our GDP, we need to put some constraints on what they may pay for. After all, we don’t let food stamp recipients buy alcohol on the taxpayer dime (directly at least).
So the best justification for the FDA is: Medicare. Don’t like the FDA? No problem, just eliminate Medicare and let’s talk.
It’s value neutral.
What I can say from my experience is this: the information gleaned from a clinical trial probably cannot be obtained for much cheaper.
And any system which does attempt to do so will almost certainly entail a degree of risk (both medically and financially) that is much larger than the American public has proven willing to accept.
Eh, it was the first thing that came to mind. I could have gone with “best light beers” or “favorite invasive species” with a little more time to think about it.
I looked up UL earlier and learned that they do have food and beverage safety inspection services. I looked more just now and found out that they also have pharmaceutical services. It’s true the standards were established by or with the FDA, but there already would be a framework in place if the FDA were gone.
Sure, but it could be said that it’d be an equitable trade considering they’re living off our defense spending.
How can you say that? They already accept it in the cost of the trials.
The issue is that even when they (we) do all of their homework, phase III clinical trials are still a huge risk to a pharmaceutical company. The human body remains a mystery in many ways, and drugs which were stellar in preclinical/early phase development often turn out to be lackluster at best when they hit the real world.
Given that risk and the cost of clinical trials – combined with the fact that most doctors and the general public understand statistics much worse than they think – the temptation for pharmaceutical companies to skip phase III in the absence of government mandates would be huge for many drugs.
Addendum: one piece of extra context: laymen typically conceive of drugs as “they work” or “they don’t work”. The reality is often much more of a gray area. Many new (and expensive!) drugs turn out to be only marginally effective or marginally better than the ones already on the market (themselves often only mediocre at best).
As a statistical matter, small differences need large sample sizes in order to be demonstrated with statistical significance. This means that if the pharmaceutical company wants “solid” evidence of the superiority of their new drug, they need to conduct a clinical trial with potentially thousands or tens of thousands of participants. Again, those numbers are costly.
But in the absence of that trial, a “Underwriter Labs” is going to have a very hard time discerning whether the new drug is worthwhile. So the pharmaceutical company would have the choice of shelling out billions for the statistical power of a statistically solid but potentially lackluster clinical trial, having “UL” rank their new medication as a “meh”, or simply using a snappy presentation at the Bellagio to convince doctors to prescribe their medication based on handwaving alone. Guess which one of those seems most appealing.
From a free market perspective, we might say it’s a good thing if pharmaceutical companies would stop pushing mediocre new drugs. But as a consuming and voting public, our clear demand signal is: moar.
Indeed it would. That’s why I specified “philosophical” in my comments. We’d be free of the FDA, but the free marketeers still couldn’t claim a moral victory.
Also, if you think the FDA is oppressive….
In my field (construction), when you’re excavating, you can excavate either classified or unclassified soils. Classified means that, if you run into rock or unsuitable soils, you get paid for its removal or replacement. If a job is considered unclassified, it doesn’t matter what you run in to when you’re excavating, it’s your baby, and you bear all the costs. Well, the contractor didn’t buy the lot, and any costs for rock or unsuitable soils removal should be borne by the owner. We won’t bid on unclassified jobs.
Here’s the deal. If the job is unclassified, that means the owner is paying for rock removal whether there is rock or not. It sounds to me like your Phase III trials are bidding a job unclassified, except with costs in the billions, rather than the hundreds of thousands.
I’m not exactly sure how well that analogy fits, because there can also be considerable upside to a clinical trial.
In some sense, drugs are like Hollywood films: you put a lot of money and effort into producing one, but you don’t know how well it will do until it’s too late to change it. A few will lose lots of money, most will hover somewhere around the breakeven point, but a precious few will be blockbusters that provide your cash flow for the next decade.
The difference is this: when it comes to drugs, a blockbuster may well be so good that it makes itself apparent even without a clinical trial. So the big wins are sometimes less of a risk. But those blockbusters are few and far between, and it’s the bread-and-butter romcom and comic book movie-type drugs where a halfway decent clinical trial can provide good fodder to get the drug widely prescribed (and grind out a decent return on investment), but a slightly disappointing trial can doom the drug into getting a bad reputation from the starting weekend.
So there’s definitely the risk involved, but the reward structure is all over the map.
I think the issue here is that I was/am arguing against the “F” in FDA and you’re arguing for “D”. And it seems to me that about every other week there’s a story about how some restaurant was serving tainted meat or there was a recall of improperly frozen vegetables. On the other hand, food sellers are constantly going on about how they’re sourcing only the most ethically grown products and what not (although ethics doesn’t necessarily translate into safest).
So I’ll offer the compromise: cut the food part out, and just call it the DA. Or the Federal Drug Administration, to keep continuity in the acronym and not confuse it with District Attorneys.
Sounds good. As I said, I don’t have much experience with the other responsibilities of the FDA, so as far as I’m concerned they may well be dispensible.
I’ll defend my passionate (read: intoxicated) rantings with the observation that there are many others on the right who repeatedly attack the FDA for being overly oppressive at its drug approval function, often while revealing their ignorance of how the FDA’s drug approval function works. Those previous experiences were probably what triggered me. That, and your blatant lack of a trigger warning of course.
Finally, I wouldn’t be completely opposed to eliminating the drug approval process if we didn’t have so much state-sponsored health care. But it’s important to recognize that the public information provided by that process – which we tend to take for granted – probably wouldn’t be available without it.
I’m not a libertarian for this reason. Completely lassaiz faire still results in abuse. Conservatism and primary Libertarianism aren’t about no government, but about as little government as we can get while maintaining the order necessary to keep our freedoms.
Chaos demands more and tighter control, so taking our fingers out of something needs to be something that doesn’t result in chaos.
As a result, we aren’t going to come across as consistent as we argue and debate what roles government should take and what they shouldn’t. Some will err on Freedom, others on Order.
We get to debate about it, though, right? Without being statists, without being hypocrites, without being ridiculed because we come across as inconsistent.