Topic: Regulatory Studies

Common Sense, Free Enterprise Values in Virginia

The Richmond Times-Dispatch issues a stirring editorial call today for free-enterprise insurance reform. It’s worth quoting in full:

In a state that ostensibly is a bastion of capitalism, government intervention in the marketplace turns up surprisingly often. Two parties who are negotiating a contract for a good or service often find a third party – the commonwealth – sticking its nose in where it doesn’t belong.

For decades, Virginia law prevented insurance companies and policyholders from deciding who could receive health coverage. Not until three years ago did the General Assembly pass legislation allowing group accident and sickness policies to cover any class of persons mutually agreed upon by the insurance company and the policyholder.

Before then, health-insurance coverage was limited to spouses and dependent children. If a worker wanted to include someone else in his or her coverage, the law said he couldn’t – even if the worker’s employer and the insurance company both were happy to fulfill the request.

This year Del. Adam Ebbin is sponsoring legislation (HB 865) that would open up life-insurance coverage in much the same way: It would allow insurance companies to offer group coverage to anyone policyholders wished to cover – brother or sister, elderly parent, life partner, or third cousin twice removed – not just spouses and children.

Note well what this bill is not: a mandate. Insurance companies would not be required to cover anybody they did not wish to. They would remain free to reject coverage they did not care to offer. They simply would not be prohibited from covering persons they are willing to cover.

In a free market, that is precisely how insurance ought to work: The buyer and the seller of the policy work out the terms between themselves. The state’s job is merely to enforce the contract – not to write it. Ebbin’s bill deserves a resounding and unanimous aye.

The Times-Dispatch is well known as a conservative editorial page, so it’s gratifying to see them endorsing this pro-free enterprise, pro-business bill – even though some conservatives might object to it on the grounds that it will allow, though not compel, businesses to offer group life insurance to employees with same-sex partners. The Times-Dispatch commendably wants such issues worked out within companies, not by a state legislative ban.

Emerging Technologies: A New Era of Regulation

The world is gearing up to regulate new technologies such as genetic engineering, artificial intelligence, robotics, and nanotechnology. While extensive regulation of all these areas is under consideration, the most pressing in policymakers’ minds seems to be nanotechnology. And no wonder – the industry is booming. Lux Research estimates that nanotechnology was incorporated into more than $50 billion worth of manufactured goods last year, and that by 2014 the nanotechnology market will grow to a $2.6 trillion industry.

On February 28-29, 2008, the Food and Drug Law Institute is sponsoring the First Annual Conference on Nanotechnology Law, Regulation and Policy in Washington, D.C. No where in the world does any nano-specific regulation exist. But it is on its way. At this conference government officials such as Norris Alderson, FDA Associate Commissioner for Science; Michael Taylor, author of an FDA report on nanotechnology and Sen. Ron Wyden, co-chair of the Congressional Nanotechnology Caucus will describe their vision for future nanotechnology regulation.

On January 22, science and technology advisors to European presidents, the EU, and various multinational organizations attended a meeting in London sponsored by the Center for Policy on Emerging Technologies to discuss the risks, policies, and ethics associated with emerging technologies. The meeting was confidential, and attendees agreed not to quote any of the participants, but I am allowed to share my prepared comments:

Presentation, as prepared, for the C-PET Meeting: “Risk, Policy and Ethics,” London, 22 January 2008

Nigel asked me to give you a sense of the American / libertarian approach to emerging technologies. Let me being by sharing with you some dialogue from a movie that I first learned about from students at a U.S. high school for children gifted in science and technology. The movie is called Serenity and it (as well as the T.V. show Firefly on which it was based) has almost a cult following among American students interested in science and technology.

Background: The Earth becomes too crowded and dozens of other planets are terraformed to support human life. The central planets form an Alliance rule by an interplanetary parliament. The narrator tells us at the beginning of the film that “the Alliance was a beacon of civilization. The savage outer planets were not so enlightened and refused Alliance control.” In a war to “ensure a safer universe” the Alliance defeated the Independents. “And, now everyone,” the narrator continues, “can enjoy the comfort and enlightenment of true civilization.”

First scene: A school classroom: a student asks “Why were the Independents even fighting us? Why wouldn’t they want to be more civilized?” The heroine answers out of turn, “We meddle. People don’t like to be meddled with. We tell them what to do, what to think. Don’t run, don’t walk. We’re in their homes and in their heads and we haven’t the right. We’re meddlesome.” The teacher responds, “We’re not telling people what to think … we’re just trying to show them how.”

Scene near the middle of the movie: The heroine and her friends find an outer-planet where everyone is dead. A beacon leads them to a laboratory where they find a recording left behind by an Alliance scientist.


These are just a few of the images we’ve recorded. And you can see…it isn’t what we thought. There’s been no war here…and no terraforming event. The environment is stable. It’s the Pax. The G-[exclamation] Paxilon Hydroclorate that we added to the air processors. It was supposed to calm the population, weed out aggression. Well, it works. The people here stopped fighting. And then they stopped everything else. They stopped going to work…they stopped breeding, talking, eating. There’s a million people here, and they all just let themselves die.

[Crashing] [Gasps] I have to be quick. About a tenth of a percent of…the population had the opposite reaction to the Pax. Their aggressor response increased beyond madness. They have become… [crashing] Well, they’ve killed most of us. And not just killed…they’ve done things.

Reavers [monsters that have been attacking settlers] They made them.

I won’t live to report this, but people have to know. We meant it for the best… to make people safer. [Reavers growling] God! [Woman screaming][Reaver growling]

This movie, so loved by science oriented teenagers all over the U.S., doesn’t reflect a new mistrust in government. One of America’s founding principles is a mistrust of government. Our constitution contains numerous safeguards to protect individuals against tyranny of the majority and the abuse of power by government officials.

For all of us, emerging technologies conjure up images of both a new enlightenment and the possible destruction of what is most valuable in human nature. Of course, there are also a range of possibilities in between. Talking and thinking about the necessary and sufficient conditions for what it means to be human, as we have done here today, is important, and we should share our insights with the public.

The role governments should play in the development of emerging technology is to protect academic freedom, encourage the sharing of information, and enforce informed consent for research subjects. Governments should not try to assess what types of research are most beneficial to society. There is no shared conception of humanity and not even the wisest men and women could possibly judge for anyone other than themselves whether the use of a particular technology would constitute an affront to their humanity.

The Nobel economist F. A. Hayek in his last book The Fatal Conceit argued that human beings are daunted by unintended consequences and that governments that try to regulate human interaction based on broad-scale economic and social predictions are destined to make large mistakes. Applying Hayek’s reasoning to emerging technologies means that the best way to ensure caution is to keep government out of the pursuit of scientific knowledge. When governments, which are run by individuals no less fallible than the rest of humanity, make mistakes, those mistakes loom larger than life, affecting not only the lives of the individuals who willingly participated in private experiments, but the lives of whole populations.

I have time for only one example, but it is a poignant one. At the beginning of the 20th century, eugenics was touted as the answer to all of humanity’s problems. Great scientists such as Alexander Graham Bell and Carl Campbell Brigham (inventor of the SAT test used to test American students for university admissions) at first supported eugenics, as did numerous Nobel Laureates, most European governments, and every U.S. president between 1901 and 1933. (See below.) Many people all over the world worked hard both in their private lives and through government policy to implement the principles of eugenics.

Both individuals and governments had their own ideas about how to improve the human gene pool. Individuals tried marrying only people they considered superior specimens of humanity. Governments, on the other hand, imposed laws against interracial marriage, sterilized those they believed to be of low intelligence or mentally ill, and even exterminated whole groups of people who because of their race, sexual orientation or religion were thought inferior specimens of humanity. If the eugenics movement had remained in the private sphere, resulting in nothing more than discriminatory marriage practices by some private individuals, the word “eugenics” would be remembered as little more than a silly fad. Instead, governments got involved and now the word “eugenics” is almost synonymous with mass sterilizations and genocide.

Emerging technologies such as genetic engineering, nanotechnology, mechanical implants, artificial intelligence, and all the others we’ve discussed today may be the answer to many of humanity’s problems. Or, they may be the next eugenics. Government intervention turns potential mishaps into disastrous tragedies. Let’s keep government out of science and let the advances and mistakes take place in the private sector where humanity can learn from scientific successes and failures on a manageable scale.


• Theodor Roosevelt (1906 – Peace prize. U.S. President 1901-1908)
• Elihu Root (1912 – U.S. Secretary of State under Teddy Roosevelt )
• Alexis Carrel (1912 –Experimented with tissue and organ transplantation)
• Woodrow Wilson (1919 – Peace prize – U.S. President 1912-1919)
• George Bernard Shaw (1925 – Literature)
• Thomas Hunt Morgan (1933 – Role of chromosomes in heredity)
• Jane Addams (1933 – Peace prize for her social work)
• H.J. Muller (1946 – Discovered that x-rays cause mutations)
• Winston Churchill (1953 – Prize in literature. Prime Minister of England 1940-45)
• Linus Pauling (1954 – Nature of certain chemical bonds)
• William Shockley (1956 – Semiconductor research)
• Joshua Lederberg (1958 – Recombination of genetic material in bacteria)
• Francis Crick (1962 – Discovery of the structure of DNA)
• Konrad Lorenz (1973 - Organization elicitation of individual and social behavior patterns)
• Gunnar Myrdal (1974 – Interdependence of economic, social and institutional phenomena)


• All U.S. Presidents between 1900 and 1933. In addition to Roosevelt and Wilson, there were Taft, Harding, Coolidge and Hoover.
• Helen Keller – “some ‘defective’ children should not be saved from a premature death because of their propensity to criminality.”
• Alexander Graham Bell - Wanted to discourage deaf people from marrying each other.
• William Welch – the first dean of the School of Medicine at Johns Hopkins University. (Father of American Medicine)
• Margaret Sanger – Founder of American Birth Control League which later became Planned Parenthood of American
• Oliver Wendell Holmes Jr. – Civil War hero and Justice on the U.S. Supreme Court from 1902-1932. Considered one of the most influential justices in U.S. history.

Gimme that Ol’ Time Science…

Just had a nice chat with Brandon Weim, who’s writing a story on the evolution / creationism school wars for Wired magazine. It seems that eight Florida school districts (and in Florida, each district comprises an entire county) have passed resolutions calling for alternatives to evolutionary theory to be taught in biology classes. Brandon fears that:

If Florida opts for evolution-unfriendly textbooks and is followed by neighboring Texas – also undergoing its own curriculum revision – then other states, looking for less-expensive texts, may buy those same books. Much of an entire generation could be raised to think of evolution as a theory with no more grounding in reality than intelligent design.

The thing is… that’s already true. As a Gallup poll reported in 2004, only a third of Americans think that evolution is a theory well-supported by scientific evidence (Frank Newport, “Third of Americans Say Evidence has Supported Darwin’s Evolution Theory,” Gallup Poll News Service, 19 November, 2004).

And this is true, remember, generations after the scientific explanation of the origin of species became the only one legally permitted in public school biology classes around the country. As I’ve said before, we’ve already tried the “You evolved, Dammit!” approach for a protracted period of time, and it has failed.

Scientists pride themselves on being driven by the evidence rather than personal dogma. Well, here’s your chance, guys: Dump the failed government-mandated-curriculum approach and start campaigning for unfettered parental choice and a competitive education marketplace. Free schools to teach science properly if they so desire, and quit fooling yourselves into imagining that you can force the rest of the public to understand science by having government ram it down their throats. Make science humble, exciting, and welcoming again, in the vein of Carl Sagan and Jacob Bronowski, instead of calling our religious fellow citizens rubes or worse, and treating them like recalcitrant children.

And as for the fear that educational freedom would lead old time religion to eclipse science, consider that the Netherlands has had universal public and private school choice for a century, including religious schools, and has become one of the most secular nations in the world. Another datum for the science crowd to stick in their thinking caps….

The Supreme Court Helps Out the Economy

Today the Supreme Court, in one of the most important securities law rulings in years, Stoneridge Investment Partners v. Scientific-Atlanta, decided that fraud claims are not allowed against third parties who did not directly mislead investors but were business partners with those who did. Investors, the Court said in a narrow 5-3 ruling (Justice Breyer took no part in the case), may only sue those who issued statements or otherwise took direct action that the investors had relied upon in buying or selling stock – whether that involved public statements, omissions of key facts, manipulative trading, or other deceptive conduct. One impact of the decision is likely to be the end of a $40 billion lawsuit against financial institutions growing out of the Enron scandal.

Although this was the result expected by Court-watches, the split decision – along the usual “liberal/conservative” lines, with Justice Kennedy writing the opinion as he has tended to in such situations – was a bit of a surprise. The opposite result would have been disastrous for Wall Street, with massive ramifications on the economy as a whole. It would also have greatly expanded the court-created private right of action that is not expressly spelled out in the relevant securities laws. Ultimately, the Court’s ruling in Stoneridge wisely prevents an implied cause of action against the whole marketplace in which those who do directly mislead investors do business.

Tag-Team Battle: Rats and Bureaucrats vs. Cats and Entrepreneurs

Tens of millions of Americans have cats in their homes, notwithstanding the possibility that some cat hair may get in their food. Bureaucrats in New York City, however, want to save consumers from this horrifying possiblity, so they fine store owners who keep cats on their premises. But the Grinches at the Health Department fail to realize that the cats are the most effective way of controlling rodents. This creates a no-win situation for entrepreneurs. They can keep a cat in the store and risk getting fined, or they can go without a cat and get fined for rodent infestation. The New York Times reports:

Amid the goods found in the stores, there is one thing that many owners and employees say they cannot do without: their cats. And it goes beyond cuddly companionship. These cats are workers, tireless and enthusiastic hunters of unwanted vermin, and they typically do a far better job than exterminators and poisons. When a bodega cat is on the prowl, workers say, rats and mice vanish. … But as efficient as the cats may be, their presence in stores can lead to legal trouble. The city’s health code and state law forbid animals in places where food or beverages are sold for human consumption. Fines range from $300 for a first offense to $2,000 or higher for subsequent offenses. … Still, many store owners keep cats despite the law, mainly because other options have failed and the fine for rodent feces is also $300. “It’s hard for bodega owners because they’re not supposed to have a cat, but they’re also not supposed to have rats,” said José Fernández, the president of the Bodega Association of the United States.

To understand what this really means, the article tells the story of Mr. Martinez, who is trying to earn a living while dealing with the mindless bureaucracy:

…last winter, a friend brought Mr. Martinez a marmalade kitten in need of a home. Mr. Martinez, who was skeptical of how one slinky kitten could fend off an army of hungry rats, set up a litter box in the back of the store, put down an old fleece jacket and named the kitten Junior. Within two weeks, Mr. Martinez said, “a miracle.” “Before you’d see giant rats running in off the streets into the store, but since Junior, no more,” he said. Junior sometimes brings Mr. Martinez mouse carcasses as gifts, which he said bothers him less than the smell that permeates his store when the exterminator’s victims die and rot under a freezer. In October, a health inspector fined Mr. Martinez $300 and warned him that if Junior was still there by the time of the next inspection he would be fined $2,000. “He wants me to get rid of the cat, but the rats will take over if I do,” Mr. Martinez said. “I need the cat, and the cat needs a home.” Because stores do not get advance notification of an inspection, Mr. Martinez is trying to keep Junior in his office as much as possible. Many bodega owners reason that a cat is less of a health threat than an army of nibbling rats. “If cats live in homes and apartments where people have food, a cat shouldn’t be a threat in a store if it’s well maintained,” Mr. Fernández said.

I don’t have much opportunity to patronize New York City bodegas, but I prefer cats over rats. Too bad the city’s bureaucracy doesn’t let the market decide which animal should take precedence.

Medical Guild Busts Doc for Attempted Quality Competition

According to The Austin-American Statesman:

[A]n Austin doctor [is] among the 64 doctors the Texas Medical Board recently disciplined….

Dr. Marci Roy, an Austin neurologist, must pay a $1,000 fine because of Web site advertising that suggests she has a superior ability to treat carpal tunnel syndrome at her clinic than other doctors who provide similar services, according to the board.

When confronted about the wording, Roy said that it was not a violation of the board’s advertising rules but that she changed the language after a complaint was filed, the order says.

Roy said Friday that the problem was “a typographical error that was corrected immediately.”

“It was certainly inadvertent on my part,” she said.

And we wonder why patients can’t judge physician quality.

Hat tip: MKS.

Media Bias

There’s an interesting new blog called The Monkey Cage written by three political scientists at the George Washington University.  Any blog that takes its motto from H.L. Mencken deserves a look from libertarians, even if the authors are not libertarians (I have no idea whether they are or not).

The blog has only been up for a few days, but it already has some interesting posts on voter ID, campaign finance, and negative advertising in campaigns. The authors don’t follow the conventional wisdom on those issues. For example, they praise the work of Cato visiting research fellow John Mueller on the bias in threat assessments of terrorism. (You can find the short version of Mueller’s work here).

One of the group, John Sides, has a concise and interesting post on media bias.

His claim that newspapers are in the business of confirming the prior beliefs of their readers seems accurate, and yet it confirms the original concern (or, at least, a legitimate concern) about liberal bias: responding to readers or viewers leads to a biased or distorted account of reality.

Is there a market for unbiased reporting? You would think so, but perhaps not. Maybe it doesn’t matter. We may just dump media messages, bias and all, into the marketplace of ideas and trust that something like an unbiased political result will come out the other end.

Reading Sides, some might wonder: Why not relieve the media of market pressure as a way of dealing with bias? That prompts another question: Are NPR and the CPB free of political bias in their reporting and analysis?

The post also prompted the following thought: I have worked on the campaign finance issue for many years now and I have never talked to a reporter from major media who doubted any part, much less the whole, of the reform case. Political scientists have not found that campaign contributions have much effect on members of Congress (see the earlier link). But that has not affected the prior beliefs of reporters . One raw assertion of corruption by Fred Wertheimer outweighes a hundred careful studies of the influence of money on politics. That might suggest that how monolithic liberalism is in the media depends on the issue. But still, do reporters favor reform because they are liberal or because they get to write “Look, corruption!” a couple times a week? Or do they favor reform because it tends to suppress accounts of reality and messages that compete with the product offered by their employers? In other words, do they support regulations that confer directly nonproductive deadweight rents on their employers?

Finally, Sides does not discuss the Milyo-Groseclose study of media bias. Maybe he will in future posts.