Our Enemy the FDA (Protecting Us to Death) c Mark W. Mugler 1996 "Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety." (Benjamin Franklin) "We shall never prevent the abuse of power if we are not prepared to limit power in a way which occasionally may also prevent its use for desirable purposes." (Friedrich Hayek, The Road to Serfdom, 1994) Introduction In 1906, at the height of the Progressive Era, Congress passed the Pure Food and Drug Act to protect Americans from being poisoned by tainted or adulterated food. Following the Elixir Sulfanilamide tragedy, Congress enacted the Food, Drug, and Cosmetic Act of 1938, which created the FDA. Thereafter, in a process that Robert Higgs calls "punctuated politics" (Introduction, in Higgs, Hazardous to Our Health?), occasional public health tragedies prompted Congress to enact quantum enlargements of FDA's powers. The FDA has creatively interpreted its powers and aggressively enforced them, creating media controversies that prompted Congress to enact "clarifying" legislation that simply codified even broader powers. Like many other Progressive initiatives (such as the income tax) and the initiatives of the New Deal to follow, this initiative has gone badly awry. The Congress of 1938 would scarcely recognize the system of centralized health care decision making that the Nation experiences today. The principal mandate given the Department of Agriculture in the 1906 legislation was to protect the populace from unsafe food and drugs. Producers and distributors were required to "brand," or label, products (such as by identifying ingredients, recommended use and dosage, and necessary precautions) so that consumers could make informed choices about their use. The initial impetus may be seen as facilitating the operation of the market. After the 1938 Act, the FDA decided that consumers could not be trusted to make decisions on their own behalf, and it began its step-wise journey to the regulatory totalitarianism we see today. Use of a wide variety of drugs was prohibited except by prescription. Rigorous and costly testing and approval was required for each new drug or food additive before it could be marketed, and approval was limited only to uses for which the drug or additive was tested. Health claims for unapproved uses were banned, products being sold on the basis of such claims were seized without just compensation, and the distributors of the products faced fines and imprisonment. Toxic drugs were approved for use in part because information on safer alternatives was suppressed. Vitamins, minerals, amino acids, hormones, herbs, and other health products were seized as unapproved drugs whenever health claims were made for them. Importation of unapproved substances was limited to amounts needed for personal use or, in the case of possible prescription drugs, prohibited outright. The FDA surely has protected the American people from poisons, but in its zeal it has assumed command and control of human health and nutrition under an oppressive regulatory regime. It has betrayed the people it professes to protect. It has stifled life-saving information, it has deprived the people of life-saving health products that have reached the market too late or not at all, it has permitted them to die unnecessarily from toxic drugs, and it has deprived them of their livelihoods, property, and freedom of speech. Can the cure be called a success when the patient has died? "Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding." (Justice Louis Brandeis, 1928) Growth of the Political Market Regulatory and enforcement power, once granted, tends to continue to accrue to the regulatory agency. Furthermore, decisions made under a regulatory regime quite explicitly benefit certain segments of society at the expense of others. These closely related phenomena may be understood as the operation of a "political market." In these respects the FDA is typical. The principal reason that regulatory power, including FDA's power, enlarges over time is that the conferral of regulatory power converts private resources to common property, subjecting them to a political decision making apparatus. Resources allocated in the political market are "up for grabs," with the result that the number of political interests with a stake proliferates and the politically powerful prevail where the objectives of the different political interests are opposed. Government's two mighty weapons are taxation and regulation. Taxation under the threat of imprisonment shifts income from the control of the individual to the control of politicians and bureaucrats. Regulation redirects human action through coercion. Once the government has asserted its power in a manner that restricts free decision-making in the market (either by redistributing income or commandeering private activity), it displaces the market as the locus of decision-making, and a political market arises. In the political market, the relative political power of the affected interests, including the regulators, the regulated, the purported beneficiaries of regulation, the taxed, the recipients of subsidies and largesse, the media, "public interest"groups, and other affected interests, determines the outcomes of decisions. On a particular political decision or issue, an interest group whose vital interests are affected will organize and mobilize its resources to protect and enlarge those vital interests. Others whose interests are less affected will, by comparison, be less well organized, less mobilized, and less effective with respect to that decision. In sum, each special interest struggles to prevail, in the decisions it cares most about, against the remainder of society. As more people, groups, and interests discern that they are advantaged or disadvantaged by decisions in the political market compared to other groups, they are forced to organize and mobilize to protect their interests. Soon, everyone is represented by politically active interest groups and heavily invested in the outcome of political decisions. "The most cogent reason for restricting the interference of government is the great evil of adding unnecessarily to its power. Every function superadded to those already exercised by the government causes its influence over hopes and fears to be more widely diffused, and converts, more and more, the active and ambitious part of the public into hangers-on of the government, or of some party which aims at becoming the government." (John Stuart Mill, 1859) An almost irresistible impetus for the enlargement of taxation and regulation results from the pressure from all groups in the political marketplace to enlarge their "take" and to "rig" the rules in their interest. In this manner, incredible power is ceded to the political market through the organization of interest groups, the building of coalitions, and the enactment of special-interest legislation. The political market grows as a cancer on the market economy, individual choice, and freedom. Congestion in the Political Market When decisions relating to the allocation of resources are centralized in the political market, what Frederic Bastiat calls "legal plunder" ensues. The resources fall under the control of the plunderers, who still face the task of dividing the plunder among themselves. Since rules of private property have been suspended in the act of plunder, what method remains to divide the spoils? To appease all plunderers, sometimes the most expedient action is to plunder still more. In economics terminology, the political market converts resources from private resources to "common property resources." A common property resource is a resource for which no one has an ownership interest that provides the ability to exclude other users, and as a consequence no user faces the full cost of his own use. Because the user does not bear the full cost of his own use, common property resources are chronically under-priced and over-used. This condition, called congestion, corresponds to the condition that faces plunderers when they face undivided spoils. Examples of congestion abound. On a public road, each additional user creates additional delay for everyone but only experiences his own delay. On the public common, grazing is free to the next sheep but all other sheep have less. In socialized health care (or socially insured health care, for that matter), third parties bear most of the cost of care selected by a practitioner for a patient. Soon, respectively, the road is crowded, the common is over-grazed, and demand for health care strains available resources. Without the pricing mechanism to ration use (divide the plunder), the two remaining responses are to ration use by a non-price mechanism and to increase supply (plunder). In the political market, each political interest group, like a sheep grazing on the common, seeks to maximize its share of the common property resource. Together, the proliferating groups exert pressure in the political market to over-regulate private activities to their own advantage and to over-tax in order to create expenditures to their own benefit. Despite the over-taxation and over-regulation, there still aren't enough goodies to go around because, of course, the goodies are simply the resources for which others have worked, and are virtually free to those who share in the plunder. The government must struggle to reconcile the competing demands placed upon it by the competing groups. The political process becomes overloaded. Jonathan Rausch has called congestion in the political market "demosclerosis." Abuse of Delegated Power Under the "rule of law," the government sets the ground rules for transactions among private parties and between private parties and the government. The ground rules are fixed, predictable, and known to all in advance, and they are applied to all persons equally. All persons who behave in a certain way are affected in the same way, and all persons have the certain knowledge of the standing of that behavior under the law. The purpose of these rules is not to displace private decision making, but to improve its efficiency by reducing sources of legal and political uncertainty. A simple example of how the rule of law might be applied to the safety of foods and pharmaceuticals is uniform labelling requirements intended to ensure the availability of information to the consumer. A second example, with admittedly wider applicability than to foods and pharmaceuticals, might be a set of laws governing product liability, including rules of evidence, the loser-pay principle, damage award limits, and protection for those who supply materials to manufacturers but who have nothing to do with actual decisions to market products (more later on this). Although congestion in the political marketplace is a symptom that too much power has been ceded to the government at the cost of liberty, statists see congestion as a problem and claim that delegating power from the legislative branch to the executive branch is necessary. In that case, the administrator is faced with making case-by-case decisions (dividing the plunder). Whether as a result of legislative intent that certain politically powerful interests benefit from these decisions, or as a result of the groups whose interests are affected strongly by these case-by-case decisions bringing their influence to bear on decision making, any concern for predictability and equality under the rule of law is pushed aside by the competition for plundered resources. Now the concern of the decision maker, and of affected interests, is the incidence of effects of the decision -- who benefits and who loses. Delegation results in the replacement of the rule of law by arbitrary rule. "There is no justification for the belief that, so long as power is conferred by democratic procedure, it cannot be arbitrary. If democracy resolves on a task which necessarily involves the use of power which cannot be guided by fixed rules, it must become arbitrary power...By giving the government unlimited powers, the most arbitrary rule can be made legal; and in this way a democracy may set up the most complete despotism imaginable." (Hayek) The Iron Septagon and Regulatory Capture Milton and Rose Friedman (Free to Choose, 1980) stated, "Force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests." Delegation and the creation of additional opportunities for plunder in a regime of arbitrary rule indeed bring this result. It is natural to assume that a regulatory agency will be captured by the regulated interests. However, in the political market, the participating groups are not limited to the regulated community. The regulated community, the fear-mongering public interest groups that "own" the relevant issues and need continuing contributions, the perpetual incumbent legislators and their grasping staff, the policy making elite that seeks to advance its ideological agenda and expand its perks, the bureaucratic legions funded by the legislators and seeking to protect their jobs, the morally bankrupt and sensationalist media, and the public that would trade its freedom for security all play a role. The public elects the legislators and contributes to the public interest groups. The legislators appease the public and ensure contributions from the interest groups by empowering the elites, who in turn collaborate with the media to trump up problems and call for more regulatory power. The bureaucrats step out smartly to do the elites' bidding and win promotions and job security. The regulated community finances elections and influences the appointment of elites and the promulgation of the bureaucrats' regulations. It's true that the regulatory agency is captured, but by whom depends on who can cobble together a legislative and regulatory majority to tyrannize the minority. Delegation, arbitrary rule, and the inevitable regulatory capture results in what James Bovard (Lost Rights, 1994) calls a "proliferation of petty dictatorships." In these legislative/ regulatory dictatorships, centralization, coercion, and cartelization go hand in hand. Centralization and Coercion "The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with the most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it." (Adam Smith, The Wealth of Nations) "As the coercive power of the State will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power...The democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans...If the State is precisely to foresee the incidence of its actions, it means that it must leave those affected no choice...It is impossible for any man to survey more than a limited field...It is inevitable that [the experts] should impose their scale of preferences on the community for which they plan." (Hayek) "The upshot [with respect to food and drugs]...is a diminished scope of discretionary individual action: what one previously could choose to do, one no longer can do; what one previously did not have to do, one now must do; and everyone must act in the same way...The main reason why FDA regulation must fail is that the people subject to it have preferences, social circumstances, and physiological attributes that vary tremendously among persons and over time and that no central planner can possibly know or deal with rationally. For the FDA, one ruling applies to all cases. Products are declared 'safe and effective' or not. A product is permitted to be sold to everybody or to nobody. These dichotomies mock the heterogeneity of actual life. In reality, a product that is too risky for one person is acceptable to another; only the users can say...The FDA deserves a failing grade, because it presumes to exercise control over people's lives that cannot possibly be justified unless one views people as having no more rights than the sheep in a flock...The enabling statutes rest on a paternalistic foundation that is inconsistent with the maximization of consumer welfare and the preservation of a free society...There is absolutely no justification for forcing people at gunpoint to do 'what's best for them'...Citizens who value liberty should have no trouble rejecting a system that simultaneously harms the public health and deprives the citizens of their ability to make vital choices about their own health." (Robert Higgs, Introduction, in Higgs, ed., Hazardous to Our Health?, 1995) Cartelization The original rationale for federal regulation has differed among industries. Avowed purposes have varied: to preemptively control price collusion by oligopolies (say, in transportation); to protect financial institutions from collapse (say, in banking and securities); to ensure "fair" access to outputs (say, in electric power or broadcasting). With respect to food, drugs, and medical devices, the rationale since 1938 has been to protect public safety. In 1962, a second rationale -- to protect the public from the ineffective products of "snake oil salesmen" -- was added. Yet across the board, the petty legislative/regulatory dictatorships have come to function in a way that maximizes plunder. Each petty dictatorship comes to resemble a cartel that controls entry, output, price, use, or a combination for the benefit of the few. "The source of this power over all consumption which in a planned society the authority would possess would be its control over production...If we face a monopolist we are at his mercy" (Hayek). This is true, for instance, of railroad regulation, airline regulation, and food and drug regulation. "Very persuasive evidence exists that railroad regulation in the late nineteenth century, the nation's first regulatory effort, did not come about simply because of public outrage at the robber barons, as is commonly supposed. It turns out that most railroads supported regulation in 1887 when Congress created the Interstate Commerce Commission. They believed the ICC would help them impose an industry-wide cartel, something they had not been able to accomplish by themselves." (Bernard Siegan, Economic Liberties and the Constitution, 1980) "The basis of airline regulation is price, entry, and output control...Three studies assert that regulation substantially elevates prices and distorts competition and efficiency by causing airlines to compete on the basis of service rather than price...The most significant accomplishment [of airline regulation] is the raising of airline fares." (Siegan) "The 1962 Kefauver-Harris amendments to the food and drug laws that required the Food and Drug Administration to regulate efficacy of pharmaceuticals...have increased the cost of entering the drug market, prolonged testing, and resulted in less output and higher prices...The post-1962 flow of new drugs was less than one-half of the pre-1962 flow, without corresponding benefit in the efficacy of the drugs produced." (Siegan) "Federal regulation has probably doubled the cost of introducing a new pharmaceutical...Regulation stemming from the 1962 amendments was the leading (but not the sole) cause of a sharp decline of new drug introductions into the United States during contemporary years. [This conclusion also is] based on comparing output of pharmaceuticals in the United States with that of Great Britain between 1962 and 1971." (Siegan) "The result is impressive: expensive drugs, lack of innovation, no improvement in drug safety." (C. Frederick Beckner, 1993, The FDA's War on Drugs, in Georgetown Law Journal 82) Socialism doesn't work. References. Bovard, James, Lost Rights: The Destruction of American Liberty, St. Martin's Press, New York, 1994. Hayek, Friedrich A., The Road to Serfdom, University of Chicago Press, Chicago, 1994. Higgs, Robert, Editor, Hazardous to Our Health?, The Independent Institute, Oakland, California, 1995. Siegan, Bernard H., Economic Liberties and the Constitution, University of Chicago Press, Chicago, 1980.