A couple of people have asked me to expand on what I said yesterday about the parallels between financial products and other sorts of new technologies.
America's regulatory structure is mostly the child of the Progressive Era, when well meaning, well educated protestants thought that they could save the world by putting bright technocrats from the right kind of families in charge of the messy, sprawling economy and make it clean and tidy and safe. That sounds sarcastic, but it wasn't entirely unreasonable. The first great victory of the Progressive Era, the major revolutions in public health, did just that: made life safer and nicer for everyone, with minimal inconvenience, by putting experts in charge of things like sanitation and quarantine and the water supply. Before Hayek, we didn't have all that much reason to think that this feat couldn't be repeated elsewhere.
But now we have had Hayek, and the failure of the Soviet Union, and a hundred other ways to learn that in any sizeable economy, the information problem is simply too big. Even leaving out the various incentive problems ably detailed by both Marxists and public choice economics, a well-intentioned bureaucrat cannot know enough about what's going on in the world to thoroughly manage even a static economy, much less one that has to cope with millions of constant changes, from hurricanes to new babies.
Yet our regulatory model still works on the assumption that the technocrats can figure out what is safe, and then let the public buy it, and nothing will ever go wrong. Oh, maybe it's not working that way right now . . . but that's because the other party is in charge. Or the regulators got corrupted. Or the Moon was in Taurus while Saturn was in Capricorn, a constellation that will not recur for another seven thousand years.
It's perhaps easiest to see when you look at the FDA rather than the SEC. The very early purpose of the FDA was to ensure that the label correctly described the contents of the package, a noble purpose entirely proper to any regulatory agency. Under FDR, it took on the job of ensuring the safety of products and prevent false therapeutic claims. Over time, this has grown into the agency we now know: the one that forces companies to go through three stages of trial for every drug. Stage I is small-scale and mostly ensures that the substance isn't horribly toxic; Stage II looks at safety and efficacy; and Stage III are large-scale trials comparing the drug to either placebo, or the standard treatment. After these three stages, the high priests of the FDA retreat into their sanctum and eventually emerge to give the thumbs up or thumbs down.
This is simultaneously too much and too little. The FDA is notoriously risk averse when it comes to new drugs, a legacy of events like the Thalidomide horrors, when pointless foot-dragging on the approval accidentally protected American mothers from limbless babies. So drugs that could help people don't reach the market, either because the testing is too expensive for small market drugs, or because the FDA erred on the side of caution. At the very least, it delays possibly life-saving advances.
But once a drug is approved, the FDA doesn't require follow-up studies. These are mostly done by the companies, which have incentive to bury the ones that show their product is horse puckey.
It seems to me that the FDA should put much less energy into preventing drugs from reaching the market, and vastly more energy into assessing them after they have. Moreover, though it may sound un-libertarian, I'm not clear why the companies are in charge of the drug testing. This seems like the sort of thing the government should do; the government is the one with the neutral incentives.
If we looked at the FDA more like a neutral broker, a source of authoritative and up-to-date information on the food and drugs out there, I think we'd be much better off. But instead, we've turned them into the Drug Nannies.
Similarly, the SEC, indeed the entire financial regulatory apparatus, revolves around writing rules, and then making sure that companies live up to them. Some of those rules, like financial statement filings, enhance transparency. But many others jealously guard the perogatives of the SEC and its minions--the safe harbor provisions for the three big regulatory agencies, for example, which lets the SEC control the definition of what a good, safe security is. From what I understand, one of the reasons that so many at the SEC opposed GLB was that merging investment banks with commercial banks meant handing over some of their regulatory power to the agencies that oversaw the commercial sector.
But among America's artificially fragmented grab-bag of agencies, a leftover from the 30's notion that bank panics would be prevented if we just kept the banks small and manageable, no one had both the authority and the apparatus to oversee systemic risk. The Fed has stepped into this vacuum with Treasury close behind, and in my opinion they're doing a pretty good job on the fly. But this isn't the sort of thing that should be done on the fly.
I would much rather see America's regulators do what government is really good at: transparency and coordination. Providing as much detailed information about firms, securities, and markets as they can, particularly in assessing systemic risks. Serving as a locus, with muscle if necessary, to help multifold private actors create institutions that reduce risk. Delineating and carrying through the procedures for dealing with the inevitable failures.
That last is really, really important. Most people don't seem to have noticed that commercial banks have been failing too. They haven't noticed because the FDIC does an outstanding job of overseeing the disposition of insolvent banks. They have a process, everyone knows what it is, and they are swift and efficient at carrying it out. But we can't build that kind of process unless we're willing to admit that despite our best efforts, failures will happen.
Copyright © 2010 by The Atlantic Monthly Group. All rights reserved.
Megan,
Since the candidates both gave speeches today detailing their plans for Wall Street, what do you think of them?
The FDIC has a much easier job because so far the banks that have failed have been much smaller than the firms the SEC and FED are dealing with. The FDIC's job is almost like life insurance.
"Serving as a locus, with muscle if necessary, to help multifold private actors create institutions that reduce risk. Delineating and carrying through the procedures for dealing with the inevitable failures."
How about a non profit communally owned (by the government and fincial industry or something, kinda like the fed) OTC derivative clearing bank? I know, I know that's really complicated. Maybe impossible. But if such a thing could be created wouldn't it take hundreds of trillions in risk off the table?
"I would much rather see America's regulators do what government is really good at: transparency and coordination."
Which government would that be? Can I have?
Government is good at slowing things down, which can be useful when the systemic risk created by exotic financial instruments outweighs their economic usefulness. Pity they weren't regulated better, eh?
In what strange fantasy world do people want the FDA to act all like CNN(?): "Drug companies say their drugs are safe; opponents say they cause liver cancer. We won't say which is true because we're not biased." People rely on agencies like the FDA to keep them from having to become experts on chemistry before popping an aspirin.
Only in your libertarian fantasy world does the let the market decide stuff work in something as important as drug safety or deep finance.
On a lighter note, when wingnuttz go all "let's step back and look at how this is not conservatives' fault" it mean SAD ELEPHANT.
But we can't build that kind of process unless we're willing to admit that despite our best efforts, failures will happen.
This is the key point: failures will happen. My biggest gripe is the insistence that somewhere there exists the perfect solution (usually with the corollary that the other, evil party is keeping us from achieving it).
For complex systems, there is no optimal answer. Or rather, there are multiple answers depending on what you choose to optimize for. Too many people appear to believe that there are no trade offs to be made.
In this particular case, I still don't understand why the credit rating agencies aren't held more accountable. I don't know if it's a regulation issue per se, but is there a mechanism for holding them liable for the quality of their ratings?
Megan didn't spell it out, but a friend of mine who develops cancer drugs did. What does it cost to develop a cancer drug, and how long does it take? Answer: Around $800 million, and around 15 years. I nearly fell off my chair. How many people with cancer are dying because of this level of life-saving control?
Good grief, talk about over thinking the issue.
I've been reading for the past 4 years (at least) that there is a housing bubble. What is happening now isn't a surprise.
Why couldn't they have simply passed a law that made certain types of predatory lending illegal? Other types of predatory lending is already illegal, so it wouldn't have been that big of a departure from previous legislation.
It could have nipped the problem in the bud. And, that would have left the entire issue of morgage-based securities (which are a very new complex thing) out of the equation.
I always thought the optimal replacement for the FDA would be something like an Underwriters Laboratories for drugs. The actual neutral third party is the insurance underwriters who have to pay out for drugs that fail and pay for the drugs when people get sick.
Eric,
Who knew it was so easy? Thanks.
Oh by the way, would you mind listing the lending practices that should be illegal that aren't?
RobB
Megan didn't spell it out, but a friend of mine who develops cancer drugs did. What does it cost to develop a cancer drug, and how long does it take? Answer: Around $800 million, and around 15 years. I nearly fell off my chair. How many people with cancer are dying because of this level of life-saving control?
And how many die from crappy drugs that should never have been given to the public in the first place?
ummm, no-doc, no down payment loans?
Oh, wait...I think Hayek conclusively proved in the 1940s that regulating these would lead to fascism and/or social collapse. Sorry.
I think Eric has a point, though I'm not sure what the cons would be.
I also think Megan's constructing a nice straw man argument here. Those who want more government regulation don't want it because it will eliminate all risk and ensure that nothing-bad-will-ever happen-no-way. Everyone is interested in minimizing risk - just in different ways and to different extents...it's not all or nothing.
RobB and MQ - I think those rules would have been politically feasable back in 2005/2006.
Picture it Congress 2006... You are proposing rules to limit no-doc, no downpayment loans, we have thousands of people who have been able to make good money calling and writing their congressmen. We have testimonials from some serviceman or nurse who ran into some hard times but is now back on track and thanks to easy credit terms was able to buy their dream house.
Oh and Nurse Nora and Serviceman Bob have also made some good money on those houses. Do you Congressmen RobB or MQ really want to take away the only method that Joe and Jane America have of getting ahead?
"But we can't build that kind of process unless we're willing to admit that despite our best efforts, failures will happen."
============
Not all failures are created equally.
A company goes out of business because a product becomes obsolete or because process innovation elsewhere renders them cost-uncompetitive.
Lehman goes under because ... a few people at the top took too much risk (for too long?).
It's not the same, is it? (especially for the rank-and-file employee)
"Smart regulation", arguably, needs to understand "failure" and respond accordingly.
Also, if you believe that there is a level of stupidity that has knock-on effects for everyone that ought to be controlled, mitigated, or reduced, you can see your way clear to allowing "regulators" to do more than just add transparency, to help with the information problem. They also have say, "this much is stupid, and this much is safe and sound".
I cannot see why three stages of testing for the FDA is onerous. Wouldn't you want anyone selling drugs to go through this minimal process, without even asking? Is it costly? Yeah, but what are the costs of 'getting it wrong'? We know. Ask Merck, they'll give you a number, even ...
I guess I wasn't being transparently sarcastic enough. Predatory lending - typically defined as using deception to talk borrowers to agree to abusive loan terms - is pretty much already illegal.
I don't think that predatory lending had much to do with the housing bubble bursting or the sub-prime crisis. I think most borrowers had at least a vague idea of of their loan terms.
No documentation/No down payment loans are hardly predatory lending. Unless the prey are the suckers buying the mortgages - and jmo has a good point... legislators were unlikely to pass rules making it harder to get a mortgage.
In fairness to the FDA, they got in the "proving drugs were safe" business back in the 1930s, when somebody released a sulfa drug preparation mixed with wood alcohol. It killed a bunch of people and created a national panic. See Thomas Hager's book "The Demon Under the Microscope" for the ins and outs.
I'm not criticizing the idea of testing things for safety. Rather, I'm criticizing this binary idea of safe/not-safe or effective/ineffective. If, for example, Vioxx patients want to take the risk, I think they should be able to, provided that they're well informed. I think the FDA should work harder on gathering and disseminating information on safety, and less on deciding what risks people are allowed to take.
The first part of this post is just a rehearsal of the oldest, dumbest right-wing strawman there is: liberalism=communism=SOVIET UNION!?@! There are plenty of examples of successful regulation within the U.S. capitalist system.
The final part is just incoherent: limit yourself to transparency? Transparency in this case would have been the government calling the crap securities crap and effectively putting the rating agencies out of business by providing an unbiased source of information. That would have been some strong, left-wing, radical regulatory intervention right there (and a good thing too). Since Megan is hardly left-wing, I suspect she's using transparency as a synonym for "nothing" here.
jmo: sure, sure, but just because something is difficult doesn't mean it can't be done. This is exactly why Congress delegates regulatory authority to expert agencies. The initial delegation is hard but after that the agency can often do unpopular things. The Fed could certainly have required more paperwork on mortgage loans. (Although an earlier commenters point that the Fed itself was coopted by the whole easy-money conspiracy applies here).
What does it cost to develop a cancer drug, and how long does it take? Answer: Around $800 million, and around 15 years. I nearly fell off my chair
Because the entire product development cycle is dependent on jumping through FDA hoops. They spend zero time figuring out which chemical is a likely candidate, how to formulate it, how to deliver it, how to prevent the liver from destroying it.
Even after that, drug companies should perform clinical trials even in the absence of the FDA. They shouldn't create a drug that works only in theory and not check the toxicity or efficacy. The only way to do that is to give it to people and see if it works or kills them. I'm not sure how getting rid of the FDA truly lowers the barriers of entry, unless the idea is to let companies bring the product to market without a clinical trial.
Megan - you really need to read the book. Part of the problem in the 1930s was that people were self-diagnosing and taking the wrong drugs and in improper doses.
In the military R&D system (admittedly, not the ideal example of a streamlined process) there are three stages of testing when you are about to release a product to production:
1. Contractor (in-house) testing, where the developer tries to ensure that he is delivering a product that meets the requirements;
2. Developmental (semi-independent) testing, where Government representatives take prototypes and run them through a set of tests to make sure the product meets requirements. Typically this phase is done to a "script" that is negotiated between the Government and the developer, and the developer is hovering over the shoulder of the Government guys to make sure everything is OK;
3. (Perhaps the most important phase) Operational (independent) testing, where the Government turns over the prototypes to a testing activity *unconnected to the program's management* (IOW who have no "bias for success") and they run it through a test program that they devise in the absence of others--as they would say, to "push the envelope".
ISTM it's this form of testing that would be the most critical for the pharma industry, and perhaps the FA could play a better role in supervising and managing it.
I'm with SG in wanting to see the credit rating agencies bear a lot more direct pain for all this given the fact that a sizeable portion of the responsibility can be laid at their door for signing off on these bundles of crap sub-prime loans.
The NY Times mag. had a great article looking at the rating process that was applied to these bundles during the past few years. It was shocking. These people should be hauled before congress and humiliated at the very least, they should be out of a job at the worst.
And perhaps having the government or someone who isn't also running a profit-making business selling ratings handle the rating side of things might be a good regulatory change to consider.
(Of course, I might just be bitter since my company is teetering now becasue of a rating downgrade. Why were we downgraded? Because our huge portfolios of CDOs is toxic. Why would we buy a huge portfolio of toxic subprime CDOs? At least partially because these same rating agencies that now wield the dagger of death over us rated them as fine. There's something wrong there. No points for guessing my company.)
And how many die from crappy drugs that should never have been given to the public in the first place?
Do you realize that if the FDA had operated as it does now back when penicillin was introduced, it wouldn't have received approval. All those people who are allergic would have freaked them out. And then where would we be? Many of us probably wouldn't "be" at all.
Length in a post does not in and of itself protect against abject glibness. If Megan has all of these answers and they are so obvious to her, she is doing her country a disservice not working in government.
Somehow as a citizen I don't feel terribly ill served with her sequestered over here at the Atlantic, however.
"Because the entire product development cycle is dependent on jumping through FDA hoops. They spend zero time figuring out which chemical is a likely candidate, how to formulate it, how to deliver it, how to prevent the liver from destroying it."
Wow. Just wow. We are all now just a bit dumber for having read that.
Yup. Say it and it's true. Say it with righteous conviction and it's extra-double-true.
I'm not criticizing the idea of testing things for safety. Rather, I'm criticizing this binary idea of safe/not-safe or effective/ineffective. If, for example, Vioxx patients want to take the risk, I think they should be able to, provided that they're well informed. I think the FDA should work harder on gathering and disseminating information on safety, and less on deciding what risks people are allowed to take.
That's a fantastic idea! Let's require a masters degree in pharmacology for everyone that needs medication. It'd be a libertarian paradise!
And for those who say, "Well, dummy, the doctors are responsible for writing the prescriptions," take a look at the statistics on what happens when patients request a medication by name. Those pharmaceutical ads during football games aren't for doctors.
All those people who are allergic would have freaked them out. And then where would we be? Many of us probably wouldn't "be" at all.
It would certainly be approved in today's environment. They would look at the potential harm, and then look at the potential upside (huge in those days) and have approved it. At that time most people believed penicillin spelled the end of infectious diseases.
Yup. Say it and it's true. Say it with righteous conviction and it's extra-double-true.
So you're saying that pharmaceuticals spend zero dollars and zero time on basic drug development? I'm confused at to what your point is. The other point is what exactly does big pharma do now, that they wouldn't have to do if we got rid of the final FDA step of giving a thumbs up? How much time and money would it really save?
As someone wrote just recently: Twaddle. Supertwaddle.
I'm the son of a guy who knows a ton about commercial banking regulation and I know a fair bit about the regulation of water.
It's true that deregulation started with Carter, and is likely going to end with Obama. But there's only one party whose slogan is "the government is the problem".
Pretty much every banking regulation in existence was written in response to corrupt conduct on the part of bankers. But there's essentially two ways to write regulations: (a) you are hereby prohibited from doing bad stuff, and staff has discretion to determine what's bad; or (b) 185 pages of 6-point type in the Federal Register. Given the screams of outrage that come from the regulated community every time a regulator exercises her discretion, it's no surprise that the feds take option (b).
Sure, both parties are to blame for the mortgage meltdown. But there were plenty of smart people (like my father) in around 2000 or so noting that the IBs were taking over the mortgage business without the same level of oversight as the CBs, at the same time that some very exotic derivatives were springing into existence.
And type (a) regulation wouldn't have been that hard. Keep adequate capital reserves; don't over-leverage. Live up to your fiduciary obligation as trustee of the trusts that the mortgages were put in, like doing adequate due diligence. Insurance-type products (like credit default swaps) can only be held by insurer-type entities. Maintain arms-length relationships with rating agencies.
There. That wasn't so hard, was it? But the problem was that the party of grumpy old guys whose job it was to pull away the punchbowl just when the party got good (pre-Reagan Republicans) decided to become the party of kiting checks(what's the non-SS debt these days?) and trickle-down economics. Meanwhile, the democrats were desperate for Wall Street money. So no regs of any kind got written.
Well, we've had a 25-year party and here comes the hangover. It's going to be a doozy.
ps: Rumor has it that the Chinese central bank pressed the Treasury into taking over Fannie/Freddie and backing their debts. Note also that F/F's preferred shares are apparently going to be wiped out, and these shares are largely held by american banking institutions. If the Treasury had to wipe out F/F's preferred shares in order to keep the Chinese happy, and thereby massively impair the american banking system, that's a real loss of sovereignity, and a demonstration of the kind of pain we can expect to suffer in our hangover.
A couple of comments on predatory lending.
1) although there is general acceptance, it is not true that all predatory lending is illegal. payday loans, which often charge 100's of % interest are often legal.
2) some of this comes down to how you define predatory, of course. Sometimes people will borrow money knowing they can't pay it back, and sometimes people will lend money fully knowing this as well. As long as they know they can sell the loan to someone else later, they might not care. But, by a lot of people's definitions, that isn't predatory because both parties fully understand what is going on. Perhaps I should have used a different word or phrase, such as "really really high risk loans that will cause problems for lots of people not involved in the original loan"
3) My overall point was really this: yes, a lot of the new financial instruments are very hard to understand, and thus, very hard to regulate. But, often upstream from the new, very hard to understand instrument, there is a simpler, very easy to understand issue. For example, lots of really high risk loans is easy to understand. Regulate the easy-to-understand part.
That's a fantastic idea! Let's require a masters degree in pharmacology for everyone that needs medication. It'd be a libertarian paradise!
We already require two licensed gatekeepers (doctor and pharmacist) between the consumer and a pharmaceutical. It seems that they should be able to advise the consumer of the possible risks and benefits of a given drug.
Oh wait, no I'm not. People have always done that and continue to do so today, only now they have to buy their drugs on the black market or trick a doctor into writing them a script. Making it illegal is a silly way of dismissing the problem.
Insurance-type products (like credit default swaps) can only be held by insurer-type entities.
This is an important point. Traditional insurance (life, property/casualty, etc.) is heavily regulated, particularly with respect to maintenance of capital reserves to cover anticipated obligations. A major cause of the investment banks' problem is massive investment in credit default swaps, where one party issues insurance against the default of certain referenced instruments (primarily CDO's). Usually, the party buying the insurance doesn't have any interest in the referenced CDO and the value of the insurance is many multiples of the value of the CDO. This is how you get billions of dollars in losses that dwarf the value of the original mortgage loans on which they are based. And all of these credit insurance obligations are unfunded and off balance sheet. This has disaster written all over it. Nobody would ever do these deals if you had to allocate capital to cover them the way an insurance company is required to post reserves.
Another way to put it is that you get "bubbles" in the insurance industry all the time -- a hard market and/or high investment returns inevitably result in poor underwriting and excessive risk taking as insurers get greedy for cash to invest. But when the "bubble" pops and all these bad risks result in insurance claims, the insurers don't go bankrupt because they are required to maintain reserves and/or buy reinsurance (with reinsurers also required to maintain reserves). Here, the greedy traders looking to maximize their bonuses in a rising market took excessive risks and when the bubble popped and the capital calls from counterparties came in, there wasn't enough capital to cover them.
RobB, there was certainly predatory lending going on. There is evidence that classes of people (the elderly, with home equity) were targeted by some mortgage lending companies.
Perhaps it isn't widely know because of the conservative media (especially the conservative financial media)...
Based on one set of statistics, 50-60% of people put into hopped-up mortgage loans could have gotten done at better, conventional rates. That just smells predatory, even if you argue it wasn't ...
As for Vioxx being a viable drug for 'those who know the risks', it's certainly a coherent viewpoint, but I'd be more impressed if I knew who those people were, where the "need is".
I ask because, almost everytime you dig a little deeper, it seems to be the companies that are frustrated they aren't getting their drugs to market, rather than consumers who feel they have been denied important opportunities. In fact, most consumers continue to rate their health care in America highly...
"I'm not clear why the companies are in charge of the drug testing. This seems like the sort of thing the government should do; the government is the one with the neutral incentives..."
Speaking as one who works for a core lab that oversees clinical trials... it makes little practical difference whether the government or the companies are nominally "in charge of" drug testing. Since neither the FDA nor the drug companies maintain laboratories of human guinea pigs, nearly all trials (especially phase 3 trials) are farmed out to specialized contractors who sign up the medical providers and patients, collect the data under rigorously double-blind conditions, and submit the data to an FDA warehouse without the drug companies ever having access to a live database.
The double-edged sword of making the drug companies responsible for FUNDING the trials is that it pushes the cost directly onto the people who buy the drugs, rather than onto taxpayers. This is bad, in the sense that it's partially responsible for skyrocketing drug costs and inequality in health care benefits. On the other hand, given that our country is usually run by people like Megan, who believe Hayek proved that any tax increase for any purpose leads directly to toilet paper shortages and gulags, it's likely that the FDA would cut far more corners and/or bring far fewer drugs to market if they were actually responsible for the trials.
I do agree that it would be wiser to allow certain drugs to reach the market, in a restricted fashion, prior to the completion of phase 3 trials... and to require occasional follow-up testing. It's also true that the FDA has come up with some fairly ridiculous regulations over the years. But the system works far better than the pharma lobbyists would have you believe.
Q: How many flipper babies are there in the libertarian paradise?
A: A whole lot more than there are successful banks.
"The FDA is notoriously risk-averse ..."
Uh, maybe on YOUR planet, but maybe you recall a funny little pill called Cipro? Premature deaths at least in the tens of thousands - & the FDA was quite RECALL-averse, even in the face of mounting evidence of its lethal folly. That's one case - & if I thought you were capable of actually absorbing the implications & altering your viewpoint accordingly, I could readily dig up ten more (not including the nightmare of Thalidomide which you so glibly tossed off), including a few far worse.
We know your "Libertarianism Uber Alles" blinders give you the super-power to see regulation for the Antichrist it is (to you), but some of us don't consider toxic sludge to be a vitamin, nor seat-belts to be bio-kinetic fascism.
Those poisonous Chinese toys would never have gone to market & harmed American children, but for years of deregulation - & that's one horror-story among many spawned by the mindless worship of a mythical creature called the Free Market. It's a magical thing - at least in theory. Ask the traders on Wall Street if they'd like to try it out right now ... that is, if you long to be laughed at.
Yes, regulations ARE bad for profits - as was the abolition of slavery. The benefit vastly outweighs the harm done, as any thinking adult knows full well. Once again, you've kept yourself safe from the perils of joining that club, in the service of a political philosophy that was on a par with phrenology before I was even born.
Odd how quickly libertarians always "convert" as soon as an illness or disaster strikes, isn't it?
Pobody's nerfect: I said Cipro when I meant to say Vioxx.
Smeg smeg smeg.
I only wish I could say I was on Ambien when I posted.
I would much rather see America's regulators do what government is really good at: transparency and coordination.
...
I think the FDA should work harder on gathering and disseminating information on safety, and less on deciding what risks people are allowed to take.
Regulators are supposed to regulate. That's their function. People want government to set up regulators because people can't possibly be experts in everything and monitor what all companies across the nation and around the world are doing. Yes, it's about protection, and if you think most people are going to accept a standard of "well, it's impossible to provide perfect protection therefore why even try" you're mistaken. The standard is 100% protection, and properly so. That's the whole point.
Megan, let's consider this. Say your local utility company wanted to build a nuclear power plant in your backyard. The NRC, its mission now changed to merely providing information, "makes available" everything you possibly needed to know about nuclear power plants. It turns out that it's a pile of literature and textbooks on steam power and nuclear physics as tall as the Washington Monument. Are you sure you'll be able to make an informed decision about whether that plant is going to be safe? By the way, the plant is breaking ground next Monday (the NRC no longer has to hold hearing and grant permits, since it is no longer a regulatory agency- the utility company can follow whatever schedule it deems best). Better start reading.
We want the FDA to be the Drug Nannies and the NRC to be the Nuke Nannies because we're not competent to do that job ourselves. And saying the equivalent of "well, we should just take the initiative to become competent" is why you get called "glibertarian."
The Fed has stepped into this vacuum with Treasury close behind, and in my opinion they're doing a pretty good job on the fly. But this isn't the sort of thing that should be done on the fly.
I totally agree. Wouldn't it have been nice to have some regulation and rigorous oversight in place many years ago? I wonder why that didn't happen.
In any event, now we have a crisis and there is no choice but to deal with it on the fly. I sure hope we don't make any mistakes in our haste to make an ad hoc response to a problem that we knew about for years.
Amicus: As for Vioxx being a viable drug for 'those who know the risks', it's certainly a coherent viewpoint, but I'd be more impressed if I knew who those people were, where the "need is".
Both US and Canadian authorities requested that Vioxx be returned to the market for exactly that reason a few years ago.
If it's annecdote you want to know who those people were, I know several who took Vioxx because other drugs were ineffective, mainly for arthritis. When it got pulled, one became bed-ridden with joint pain, lost his job. Some people were taking Vioxx as an expensive replacement for Advil, but a lot weren't, and some elevated risk of cardiac damage may be a minor concern compared to complete disability. Particularly given that more recent studies indicate that other types of pain reliever may have similar cardiac risks, including over the counter products like ibuprofen.
More on topic, while I generally don't pay much attention to opinions based on expertise gained from "my daddy/friend/second cousin" having a job in a relevant industry once, Francis gives the best short summary of how the mortgage crisis developed I've heard to date: "the IBs were taking over the mortgage business without the same level of oversight as the CBs". Generally one thinks of IB customers as being sophisticated enough to look out for themselves, but apparently not.
The FDA is notoriously risk averse when it comes to new drugs, a legacy of events like the Thalidomide horrors, when pointless foot-dragging on the approval accidentally protected American mothers from limbless babies. So drugs that could help people don't reach the market, either because the testing is too expensive for small market drugs, or because the FDA erred on the side of caution. At the very least, it delays possibly life-saving advances.
:facepalm:
Yes, possibly life-saving, limb-removing remedies like Thalidomide are needlessly being kept from the American public by the FDA's objectionable risk aversity and pointless foot-dragging.
It seems to me that the FDA should put much less energy into preventing drugs from reaching the market, and vastly more energy into assessing them after they have
Jumping Jesus on a pogo stick, Megan, are you that committed to your smartest-eighth-grader ideology or did you suffer a massive head wound? If, two years from now, you've dyed yourself gray with colloidal silver or some crap, I wouldn't be happy but I would definitely not be surprised.
Clinical trials are expensive but really very few potential drugs get to that stage -- because they're shown to be (a) useless or (b) harmful, sometimes both, and it's not really that costly to find that out.