LIBERTARIANISM AND THE FDA
Chetan alerted me to this video of Milton Friedman where the stalwart economist introduces libertarian ideas and basically counters every matter advocating government intervention that the questioner puts in front of him.
At one point, the questioner asks him if having the FDA around does not prevent tragedies like the Thalidomide tragedy, where it was the FDA that kept a drug with devastating effects away from the US market on the grounds of insufficient testing. Friedman's answer is not surprising to those who are familiar with libertarianism; he says that it is in the interests of the FDA to delay the approval of drugs for fear of backlash from ill-approved drugs. The solution? Again predictable; let the companies themselves do the testing. They won't dare to get a drug with harmful side-effects into the market because then their share-holders will be displeased and they might even go bankrupt from all that class action legislation.
Does this actually work? When I told this second argument to a veteran in the drug industry who has many years of experience with both the business and science of making drugs, without batting an eyelid he answered, "That simply does not happen. For companies, most out-of-court settlements constitute a fraction of the profit they make from drugs. For a company, bringing a product with a side-effect on the market does not carry a very great risk, because any cost they may have to pay in the form of fines or court settlements usually is much lesser than the profit which they make". Plus, exactly why are shareholders going to bring down the company? Surely not because of morality. Did shareholders stop buying Union Carbide products because of Bhopal? They only care what the shares look like. For a giant drug company, a temporary setback does not affect the long-term value of their shares. Even if such a company loses a few customers temporarily, it can gain many more customers in the future.
So Friedman's contention that customers will regulate the company (or rather, that the free market will regulate itself) may work in principle, but it is hard to imagine it working in practice. And there are examples in the real world where it has not worked. And not just with drug companies. Let's take companies which have extensively polluted the environment. Have these companies stopped their practices because of litigation? No, in most cases they have simply paid the fine and moved on with the same practices. That's the point; for companies, everything is a business decision, and many times paying punitive damages is much less expensive than changing manufacturing practices or testing drugs extensively.
This is the problem I have with some of these libertarian ideas; while I agree on many points with libertarians, to me their solutions often sound theoretical and many times generalised, with real-life examples providing plenty of counterexamples. Now when you point out these counterexamples, they will say "Yes, but you wouldn't have had these counterexamples in a perfect, libertarian world" But that's the point; the world is not perfect, even if we should continue to strive to make it so. In the real world, not everyone has property rights to shield themselves from corporate malpractices. Many people simply don't have the financial and political muscle to go to court against corporations. I always cite the example of Pacific Islanders facing sea-level rise from climate change. How many oil companies will they sue and how? And will the oil companies change their practices even then? The problem I have with some libertarian views is that they are extreme; they assume that government in any and every form is evil in any and every time, and that it is anethema to even think of any degree of government regulation. With governments of the kind that we have in India, I can sympathize with their viewpoint. But isn't there a second perspective here? Until their perfect libertarian world materialises, sometimes to me government regulation seems like the only option, even if it may be a necessary evil. We should certainly strive to give everyone property rights, but until that can happen we need to have some way of preventing catastrophe and disasters. Moreover, there are bad government agencies and good government agencies. Wouldn't a moderate standpoint be to advocate increasing the efficiency of some government agencies rather than simply doing away with them? Why doesn's anyone talk about improving systems rather than advocating getting rid of them by default?
I feel sad because libertarians often take an extreme stance and espouse a catch-all viewpoint. There is one fundamental rule of debate or analysis; don't adopt an extreme viewpoint, because then you automatically open yourself up to criticism. But in this case, I would go a step further and say that with their extreme viewpoints, libertarians force others who agree with much of what they say to become their critics.
P.S. The really galling question is, what do you do if government itself is more evil than anyone else? That's a tough nut to crack. Who do the people turn to then?