Coyote Blog

We often talk about the direct costs of regulation, but in the long run perhaps the most worrying problem is a cost that is impossible to measure -- its effect on innovation.  From a labor regulation paper I am writing:

Labor regulations are written in consideration of existing, well established business models, and are not written for business models that might someday exist.  Often my employees ask me why labor law will not allow practices that would make a lot of sense in our business, both for employer and employee.  I tell them to imagine a worker in a Pittsburg factory, punching a timeclock from 9 to 5 Monday through Friday, working within sight of their supervisor, taking their breaks in the employee lunch room.  This is the labor model regulators and legislators had in mind when writing the bulk of labor law.  Any other labor model – seasonal work, part-time work, working out of the home, telecommuting, working away from a corporate office or one’s supervisor, the gig economy – become square pegs to be jammed in the round hole of labor law.

When someone does try to stick an innovative square peg in the round hole of existing regulation, there tend to be concerted efforts by regulators to kill the new model.  Just look at Uber and the efforts to force it out of its labor model and into a more traditional one.  Most of us see innovation as good and value-creating.  Regulators - by training, by their incentives, by the culture - see innovation as threatening.  They see innovations as viruses trying to bypass the immune systems they have spent years constructing.

Here is an example from pharmaceuticals that really struck me.  Alex Tabarrok is writing on promising anti-aging and cancer reduction drugs:

The assembled scientists and academics focused on one obstacle above all: the Food and Drug Administration. The agency does not recognize aging as a medical condition, meaning a drug cannot be approved to treat it. And even if the FDA were to acknowledge that aging is a condition worthy of targeting, there would still be the question of how to demonstrate that aging had, in fact, been slowed—a particularly difficult question considering that there are no universally agreed-on markers.

 

From CNN via Carpe Diem

A 24-year scandal was quietly acknowledged last week. On July 3 the U.S. Food and Drug Administration approved the first "rapid home" test for HIV—a test that people can take in the privacy of their own homes to determine whether they have the virus that causes AIDS.

The approval is an unambiguously good thing—or so you would think. The saliva test in question, made by OraSure Technologies and known as OraQuick, costs less than $60 and takes just 20 minutes to self-administer. According to statistics an FDA advisory committee presented at a hearing in May, it holds the potential to prevent the transmission of more than 4,000 new HIV infections in its first year of use alone. That would be about 8 percent of the roughly 50,000 new infections we currently see annually in the United States. (About 1.2 million people in the U.S. are now living with HIV, according to the Centers for Disease Control and Prevention, of whom about 20 percent don't realize they have it. Since the epidemic began in the early 1980s, about 1.1 million people have been diagnosed with AIDS, and more than 619,000 have died from it.)

The scandal is that the approval of a rapid home test for HIV did not occur until last week—about 24 years after the FDA received its first application seeking permission to market one.

Apparently, for years, even decades, only tests of clinical options were allowed to proceed, basically because the government considers Americans to be infants:

There was great concern that the patient receive proper counseling, both before and after the test. The patient needed to appreciate the possibility of false positives, so he wouldn't panic unnecessarily if he got one. He needed to appreciate the danger of false negatives, so he wouldn't become reckless, endangering sexual partners. And he needed to understand the options and support groups available in the event he received a true positive. (On top of all these concerns, many AIDS activists at the time were opposed to almost any form of HIV testing out of fear that results could be used to ostracize and persecute HIV-positive people—though one hopes that public health concerns were paramount to the FDA, rather than political pressure and hysteria.)