From: matus [matus@snet.net]
Sent: Wednesday, April 03, 2002 6:46 PM
To: matus@snet.net
Subject: MFD List - The Real Cost of Regulation - John Stossels

(This is an excellent article which is a condensed version of one of John
Stossels speeches.  The article comes from www.capitalistchicks.com A must
read... - Mike)

The Real Cost of Regulation

http://www.capitalistchicks.com/stossel.html

The following is a condensed version of Mr. Stossel's speech delivered on
February 20,2001, in Fort Myers, Florida, at a Hillsdale College Seminar.
Reprinted by permission from IMPRIMIS, the national speech digest of
Hillsdale College (www.Hillsdale.edu)


When I started 30 years ago as a consumer reporter, I took the approach that
most young reporters take today. My attitude was that capitalism is
essentially cruel and unfair, and that the job of government, with the help
of lawyers and the press, is to protect people from it. I and other consumer
activists said, "We've got to have regulation. We've got to police these
ads. We've got to have a Federal Trade Commission." And I'm embarrassed at
how long it took me to realize that these regulation make things worse, not
better, for ordinary people.

The damage done by regulation is so vast, it's often hard to see. The money
wasted consists not only of the taxes taken directly from us to pay for
bureaucrats, but also of the indirect cost of all the lost energy that goes
into filling out the forms. Listen to Jack Faris, president of the National
Federation of Independent Business: "If you're a small businessman, you have
to get involved in government or government will wreck your business." And
that's what happens. You have all this energy going into lobbying the
politicians, forming trade associations and PACs, and trying to manipulate
the leviathan that's grown up in Washington, D.C. and the state capitals.

One thing I noticed that started me toward seeing the folly of regulation
was that it didn't even punish the obvious crooks. The people selling the
breast-enlargers and the burn-fat-while-you-sleep pills got away with it.
The Attorney General would come at them after 5 years and they would hire
lawyers to gain another 5, and then they would just change the name of their
product or move to another state. But regulation did punish legitimate
businesses.

When I started reporting, all the aspirin companies were saying they were
the best, when in fact aspirin is simply aspirin. So the FTC sued and
demanded corrective advertising. Nine years of costly litigation finally led
to a consent order. The aspirin companies said "We don't admit to doing
anything wrong, but we won't do it again." So, who won? Unquestionably the
lawyers did. But did the public? Aspirin ads are honest now. They say things
like "Nothing works better than Bayer"- which if you think about it, simply
means, "We're all the same." But I realized that the same thing would have
happened without nearly a decade of litigation, because markets police
themselves. The more I watched the market, the more impressed I was by how
flexible and reasonable it is compared to government-imposed solutions.

Market forces protect us even where we tend most to think we need
government. Consider the companies that have employed me. CBS, NBC, and ABC
make their money from advertisers, and they've paid me for 20 years to bite
the hand that feeds them. Bristol-Myers sued CBS and me for $23 million when
I did the story on aspirin. You'd think CBS would have said "Stossel ain't
worth that." But they didn't. The reason is capitalism: more people will
watch stations that give honest information about their sponsor's products.
So although a station may lose some advertisers, it can charge the other's
more. Markets protect us in unexpected ways.

Alternatives to the Nanny State
People often say to me, "That's OK for advertising. But when it comes to
health and safety, we've got to have OSHA, the FDA, the CPSC" and the whole
alphabet soup of regulatory agencies that have been created over the past
several decades. At first glance this might seem to make sense. But by
interfering with free markets, regulations almost invariably have nasty side
effects. If you want to get a new drug approved today, it costs about $500
million and takes about ten years. This means that there are currently drugs
in existence that would improve or even save lives, but that are being
withheld from us because of a tiny chance they contain carcinogens. Some
years ago, the FDA held a press conference to announce its long-awaited
approval of a new beta-blocker, and predicted it would save 14,000 American
lives per year. Why didn't anybody stand up at that time and say "Excuse me,
doesn't that mean that you killed 14,000 people last year by not approving
it?" The answer is, reporters don't think that way.

Why, in a free society, do we allow government to perform this kind of
nanny-state function? A reasonable alternative would be for government to
serve as an information agency. Drug companies wanting to submit their
products to a 10 year process could do so. Those of us who choose to be
cautious could take only FDA-approved drugs. But others, including people
with terminal illnesses, could try non-approved drugs without sneaking off
to Mexico or breaking the law. I'd argue further that we don't need the FDA
to perform this research. As a rule, government agencies are inefficient. If
we abolished the FDA, private groups like the publisher of Consumer Reports
would step in and do the job better, cheaper, and faster. Wouldn't that be
more compatible with what America is about? Patrick Henry never said "Give
me absolute safety or give me death!"

Lawyers and Liability
Trial lawyers in theory should deter bad behavior. But because of how our
laws have evolved, this process has gone horribly wrong. It takes years for
victims to get their money, and most of it goes to lawyers. Additionally,
the wrong people get sued. Trial lawyers sued over the
Diptheria-Pertussis-Tetanus Vaccine, claiming that it wasn't as safe as it
might have been. Although I suspect this case rested on junk science, I
don't know what the truth is. But assuming these lawyers were right, and
that they've made the DPT vaccine a little safer, are we safer? When they
sued, there were 20 companies in America researching and making vaccines.
Now there are 4. Many got out of the business because the said, "We don't
make that much on vaccines. Who needs this huge liability?" Is America
better off with 4 vaccine makers instead of 20? No way!

These lawsuits also disrupt the flow of information that helps free people
protect themselves. For example, we ought to read labels. But who reads
labels anymore? I sure don't. There are 21 warnings on stepladders - "Don't
dance on stepladders wearing wet shoes" etc. - because of the threat of
liability. Drug labels are even crazier. Government and lawyers don't make
us safer. Freedom makes us safer. It allows us to protect ourselves. Some
say "That's fine for us. We're educated. But the poor and ignorant need
government regulations to protect them." Not so. I sure don't know what
makes one car run better or safer than another. Few of us are automotive
engineers. But it's really hard to get totally ripped off buying a car in
America. The worst car you can find here is safer than the best cars
produced in planned economies. In a free society, not everyone has to be an
expert in order for markets to protect us. In the case of cars, we just need
a few car buffs who read car magazines. Information gets around through word
of mouth. Good companies thrive and bad ones atrophy. Freedom protects the
ignorant too.

President Clinton set a record as he left office, adding 500,000 new pages
to the Federal Register - a whole new spiderweb of little rules for us to
obey. How big should government be? For most of America's history, when we
grew the fastest, government accounted for 5% or less of GDP. The figure is
now 40% !!! This is still less than Europe. But shouldn't we at least have
an intelligent debate about how much government should do? The problem is
that to have such a debate, we need an informed public. And here I am
embarrassed, because people in my business are not helping that cause.

Fear-Mongering: A Risky Business
A turning point in my career came when a producer came into my office
excited because he had been given a story by a trial lawyer about Bic
lighters spontaneously catching fire in people's pockets. These lighters had
killed four Americans in four years. By this time I'd done some homework. I
said "Fine, I'll do the exploding lighter story after I do stories on
plastic bags, which kill 40 Americans every four years, and 5 gallon
buckets, which kill 200 Americans every four years." This is a big country,
with 280 million people. Bad things happen to some of them. But if we
frighten all the rest about ant sized dangers, they won't be prepared when
an elephant comes along. When ABC gave me three 1-hour long specials a year
in order to keep me, I insisted the first one be called, "Are We Scaring
Ourselves to Death?".

Risk specialists compare risks not according to how many people they kill,
but according to how many days they reduce the average life. Airplane
crashes have caused fewer than 200 deaths per year over the past 20 years.
That's less than one day off the average life. House fires account for about
4,500 American deaths per year - 18 days off the average life. But to bring
these into proper perspective, we need to compare them to far greater risks
like driving, which knocks 182 days off the average life. I am often asked
to do scare stories about flying - "The Ten Most Dangerous Airports" or "The
Three Most Dangerous Airlines" - and I refuse because it is morally
irresponsible. When we scare people about flying, more people drive to
Grandma's house and more are killed as a result. This is statistical murder,
perpetuated by regulators and the media.

Bangladesh has floods that kill 100,000 people. America has comparable
floods and no one dies. The difference is wealth. Here we have TV's and
radios to hear about floods, and cars to drive off in. Wealthier is
healthier, and regulations make the country poorer. Maybe the motto of OSHA
should be: "To save four, kill ten."

Due to the prevalence of misleading scare stories in the press, we see an
increasing fear of innovation in society. Natural gas kills 200 Americans a
year but we accept it because it's old. It happened before we got crazy. We
accept coal but we're terrified of nuclear power which is probably cleaner
and safer. Swimming pools kill over 1,000 Americans every year, and I think
it's safe to say that the government wouldn't allow them today if they
didn't already exist. Cars, I fear, would never make it off the drawing
board in 2001.

What's happened to America? Why do we allow government to make decisions for
us as if we were children? In a free society we should be allowed to take
risks, and to learn from them. The press carps and whines about our exposure
to dangerous new things - invisible chemicals, food additives, radiation,
etc. But what's the result? We're living longer than ever. A century ago,
most people my age were already dead. If we were better informed, we'd
realize that what's behind this longevity is the spirit of enterprise and
that what gives us this spirit - what makes America thrive - isn't
regulation. It's FREEDOM.

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