An Economic Yokel

by Don Boudreaux on August 26, 2010

in FDA, Food and Drink, Regulation, Risk and Safety, Seen and Unseen

Here’s a letter to the Washington Post:

Harold Meyerson can learn a valuable lesson from you.  Yesterday you published an editorial opposing Virginia Attorney General Ken Cuccinelli’s effort to regulate abortion clinics more strictly (“The case against stronger abortion regulations in Virginia“).  You pointed out that, because there’s no strong evidence that these clinics pose undue dangers to women, it’s bad policy to strengthen regulations that nevertheless will likely cause some clinics to close.

Unlike you, Mr. Meyerson doesn’t understand the necessity of weighing the benefits of regulation against its costs.  For Mr. Meyerson, the recent egg recall is evidence enough that government must regulate egg producers more strictly (“The many sins of deregulation,” August 26).  Never mind that only a half-billion of the nearly 78 billion eggs annually produced in America are suspected of possibly being tainted with salmonella.  That is, the percentage of annual U.S. egg output now thought to be tainted is 0.6 – less than one percent.  I wonder how this percentage compares to the safety record of Virginia abortion clinics.

The puny percentage of recalled eggs is hardly sufficient evidence to support the conclusion that American egg producers are such a danger to the public health that greater regulation is necessary.

Sincerely,
Donald J. Boudreaux

UPDATE: My friend Dave Rose, at U. Missouri – St. Louis, sent the following insightful e-mail to me in response to Meyerson’s column.  I reprint this e-mail in full with Dave’s kind permission:

Let’s turn this argument around. If X% of private market outcomes being problematic is sufficient to warrant government oversight, then what does Y% > X% of government outcomes being problematic warrant? This is not a small point. In my view Y is on the order of 75%, which is much, much greater than 0.6 of one percent.

The obvious retort is that there is no additional layer of oversight (and if you agree with Caplan’s thesis, I think this is a fair argument, for relying on democracy to provide it is foolish). So let’s just accept that premise.

But having accepted that premise, does it not follow, then, that the absence of any oversight mechanism for government makes the spontaneously emergent oversight afforded by market competition look pretty good?

Separately, is it not the case that there is a percentage of failures for government outcomes beyond which the absence of any oversight whatsoever means we’d be better off having government stay out so market competition can have its effect? Surely even the most liberal person on earth would agree that if government does something and the outcome is seriously problematic 100% of the time, it might be time to get government out of that business. Is a 99% failure rate high enough to reach that conclusion?

The question for Myerson, then, is what is his cross-over percent? I suspect it is pretty high, much higher than .6 of one percent. Why the higher standard for the private sector? Should not the sector that limits freedom be subject to the higher standard and not the other way around?

More to the point, does he believe the government failure rate is lower than .6 of one percent? Has he ever looked at a Social Security or Medicare balance sheet? I didn’t think so.

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