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Politicians responded to the crisis with their standard pandemic playbook. They claimed decades of laissez-faire economics—free trade, deregulation, etc.—had left the U.S. formula market vulnerable to a major shock. Thus, the politicians argued, new government industrial policies and more regulatory enforcement were needed to resolve the current crisis and protect against future ones.
These refrains ignored the reality of the U.S. formula market and related federal policies, as well as the government’s own actions to restock American store shelves. The market was hardly free or overly dependent on imports, as some claimed during the crisis. In fact, the federal government imposed two different barriers to imported formula from almost every country in the world.
First, high and complicated “tariff rate quotas” dating back decades subjected most infant-formula imports to an effective tax of more than 25%; even most “free-trade agreement” partners, such as Canada and Australia, faced these or similar restrictions. Second, FDA regulations—governing everything from formula recipes to labels and scoop size and subjecting foreign producers to registration and inspection—further discouraged imports and authorized government officials to seize noncompliant shipments at the border.
As a result, the U.S. market was closed to large, popular and safe formula brands from Europe, the U.K., New Zealand and elsewhere. It was so closed, in fact, that American manufacturers accounted for more than 98% of U.S. formula consumption in 2021. And when the Abbott facility’s closing poked a giant hole in the American formula market, U.S. trade policies prevented imports from easily filling the gap.
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The combination of high trade barriers, onerous domestic regulations and restrictive government contracts has created a concentrated and sclerotic U.S. formula market that collapsed when a single factory shut down and still hasn’t fully recovered. Tellingly, the federal government’s emergency actions to alleviate the formula crisis targeted these very policies. Congress suspended baby-formula tariffs through the end of 2022. The FDA exercised its “enforcement discretion” to approve eight new foreign manufacturers to sell formula until 2025 without meeting all U.S. regulations. The Agriculture Department allowed WIC recipients to use their benefits to buy noncontract formula brands, including imports, until mid-2023. And President Biden’s Operation Fly Formula commissioned military aircraft to deliver formula from abroad.
In all cases, the federal government implicitly recognized how freer markets can boost economic resilience and how protectionism and excessive regulation undermine it. Yet Congress and the executive branch haven’t made these reforms permanent. Tariffs are now back in force, even as discrete shortages persist.
My emeritus Nobel-laureate colleague, Vernon Smith, writes at National Review about Adam Smith [3]. A slice:
Adam Smith observed that none of us can know what another feels except by entering into his or her situation using our imagination and remembering what we felt in similar circumstances. Our first judgments of others initiate our socialization, a process that doesn’t end so long as we live in interaction with others. If my kitten scratches a friend’s finger, it hurts, for I have been there and felt that. Or if my friend bumps her knee on the door jamb, I can almost feel it. We immediately “know” (subject to error) what must be in the mind and body of that other person. This human capacity for shared sentiment underlies the fellow-feeling that so powerfully, yet often unknowingly, fuels our learning, knowledge, and understanding in society and economy.
Here’s Antony Davies on the media, and on us [4]. A slice:
The media only has a profit incentive to deliver truth if the people want truth. And here something interesting and unfortunate happens, because people do want to hear the truth, but they also want to be entertained. This gives the media a profit incentive not to lie, but not to tell the whole truth either. The media’s incentive is to tell us the portion of the truth that is entertaining. And what we have demonstrated by our behavior is that bad news entertains us.
People complain about the media’s fixation on bad news, yet research [5] shows that the problem isn’t the media, but us. Plenty of legitimate news sites show only good news: Good News Network [6] (10,194th most popular site in the US), Good Good Good [7] (45,996th most popular), Optimist Daily [8] (189,415th most popular), and Positive News [9] (111,881st most popular). Yet, by the numbers, we spend our time not there, but on the sites that bring us the bad news about which we complain, like CNN [10] (33rd most popular site in the US) and ABC News [11] (165th most popular). Our behavior encourages the media not to lie, but not to tell the entire truth either. The industry tells us the portion of the news that we have demonstrated that we want to hear.
The result is that many of us have developed a warped sense of the world around us. We believe that the world is going to hell when, in fact, life is improving for almost everyone almost everywhere. A good example played out in January with the unusual round of tech layoffs [12]. Throughout the month, the media trumpeted layoffs at all the well-known tech companies: 18,000 layoffs at Amazon, 12,000 at Alphabet (Google), 11,000 at Meta (Facebook), 10,000 at Microsoft, 7,500 at Twitter, 6,600 at Dell, 3,900 at IBM, 2,000 at Paypal. The media was happy to continue its litany of the dead until some even worse or scarier news came along (the Chinese spy balloon appears to have fit the bill).
Another Mercatus Center colleague, Liya Palagashvili, decries the Biden administration’s assault on independent contractors [14]. A slice:
For example, while gig platforms like Uber, Lyft, and DoorDash are ubiquitous in our everyday lives, workers at those types of online labor platforms amount to only 8.6 percent [15] of the overall independent contractor work force. At the same time, the exponential growth of online labor platforms is driven almost entirely by individuals whose primary incomes come from traditional jobs and who supplement those incomes with platform work. This should alleviate some concerns about most of the gig work force lacking access to common workplace benefits such as health insurance.
Furthermore, according to tax data [16], the industries with the greatest share of independent contractors are “professional, scientific, and technical services,” followed by “other services” and “health care.” This is a far different picture than the one we’re sold about the conquest of the American work force by app-based ride-sharing and delivery-driving jobs.
David Henderson imagines a conversation in 2023 with his brother Paul, who died in 1970 [18]. A slice:
David (changing the subject): I remember that one of your favorite singers in the 1960s was Donovan. Do you want to listen to some Donovan?
Paul: Sure. Where’s your stereo?
David: It’s in the attic. I haven’t used it in about twenty years. My music is now on this iPhone.
Paul: How is that possible?
David: I don’t know. It’s something that neither of us had heard of in 1970: software. That, combined with another thing we hadn’t heard of: Moore’s Law [19]. Anyway, some really smart people who work at a company called Apple figured out how to put thousands of songs in this little phone. They aren’t even actually in the phone. They’re in something called “the cloud.” It’s not a real cloud, but I can link to it as if it’s a cloud floating overhead. And you can access the songs quickly by touching a few things (we call it “clicking”) and finding the songs you want. Or you can ask a fictional person named “Siri” who has “learned” to recognize your voice.
Julie Burchill warns that “[t]he eco-elites are determined to stop us from travelling and earning.” [20]
Kevin Bass tweets [21]: (HT Jay Bhattacharya [22])
Benefit outweighing risk of harm is not a sufficient to justify an intervention. For an intervention applied to a large population, benefit must overwhelmingly outweigh risk, and an intervention must be very safe.
This is because people harmed do not see things in terms of a benefit:risk ratio. They only see the harm that was done to them. And a number of these people will turn against medicine forever, causing much more harm than captured in the formal original benefit:harm calculation.
At minimum, the risks of an intervention should not be downplayed. Otherwise, again, people will feel that they were not adequately warned and they lose trust in medicine and the intervention will cause much more harm in the long term than was captured in the formal benefit:risk calculation.