 Once again, I've got this unenviable position of speaking right after lunch when everybody's sort of lulled asleep full stomach and and Yeah, we should go ahead. I we have a speaker coming in right after me. So I don't want to take their time. I Was going to speak today on this afternoon on consumer product regulation There's a little bit of overlap here with some things that Bob Higgs talked about earlier today But What I'd like to do is is show you how Austrians tend to think about product regulation I guess I could give you the nutshell version, which would be there shouldn't be any That's it. You can go home now But there's there's really a lot that we can say beyond that fundamental libertarian position on regulation about the consequences of efforts by the state to Make consumers safer Let me begin by mentioning Murray Rothbard's categorization of intervention by the government in Power and market think it may be mentioned elsewhere as well Says there's three types of intervention by the state autistic binary and triangular Autistic inner intervention you probably heard that word autistic in another context But autistic intervention intervention would be intervention by an aggressor For which the aggressor Gets nothing in exchange. So a homicide would be an example of an autistic intervention Governments, of course do this Binary intervention would be where the state is getting something in exchange Taxes or robbery or conscription would all be examples of a binary intervention And then what we're most concerned with this afternoon is Triangular intervention where the government's interfering with two other parties Who would like to make some sort of exchange and then the government steps in and says well You can't just make the exchange the way you agree you have to Adopt certain terms set by us It could be wages minimum wage law would be an example of this kind of thing labor conditions Osho regulations occupational safety and health administration regulations would fall into this category as well product quality regulations Which we'll talk about some today All fall into this category of triangular intervention Rothbard and power and market by the way, there's a fairly new version of Man economy and state which has power and market appended to it at the end as it was originally written and that's available through the Mises Institute Last year I got a copy for myself to replace my old yellow paperback that some of you might remember And power and market really is a great treatment of how government Intervenes in an economy to the detriment of people buyers and sellers But Rothbard and power and market says that one of the favorite arguments for Quality standards is that governments must protect consumers by ensuring that workers and businesses Sell goods and services of the highest quality The answer of course is that quality is a highly elastic and relative term and has decided by the consumers and their free actions in the marketplace so Quality is it is not as though we have products that are Bad quality and products that are good quality. It's a sliding scale There are trade-offs between quality and price and other other Characteristics of a good which are which are taken into consideration by a consumer So when I'm buying a car, I think about not only the the price and and but I also think about how long it will last and the expected repair bills and the fuel economy and the safety standards and the Capacity other other aspects of that car. There's a million of these characteristics that I take into consideration as a consumer And what the regulators do is typically pick out one of these characteristics and say well consumers could have a Safer car or they could have a more fuel efficient car Or they could have a cheaper car or they could have whatever the characteristic of the moment might be a Failing to recognize or at least ignoring the fact that there are trade-offs between these things And I mentioned in one of my talks earlier this week that the corporate average fuel economy regulation Which requires auto manufacturers to meet an average certain minimum average? miles per gallon for their cars and there's a separate standard for trucks and and this Causes auto manufacturers to compromise Safety and other characteristics. So we now have cars that are lighter than they would be otherwise because the corporate average fuel economy standard Induces firms to make cars that get better gas mileage So as I said earlier this week We might have cars with better gas mileage, but they're consuming more human beings per mile than they would otherwise On the subject of auto safety we have This character here Ralph Nader This is a much younger Ralph Nader than you would see today, but he made his name largely through his Attack on the American automobile industry through a 1965 book called unsafe at any speed well The book focused on the safety problems of a rear-engined compact car at the time called the Corvair He said that he said that it tended to roll too easily. It was unsafe It shouldn't be allowed on the road or at least the government should should make safety regulations on vehicles now in with regard to the Corvair particularly independent tests years Later showed that the Corvair Didn't behave any worse on the road than any other similar sized car wasn't all that unsafe in comparison with other cars that were being marketed but by that time the auto industry had the reputation of Sacrificing safety in order to make more money Many of the accusations that were leveled against the manufacturers of the time were not well-grounded Scientifically, but the book did have a lasting impact because it in part was the justification for the National Traffic Motor Vehicle Safety Act and subsequent changes to regulation of car safety and This set up a new agency. It's it required Manufacturers to include things in their cars that they had previously offered only as options I think that One of the one of the most common cases that you would read about in a Maybe a business ethics class would be the case of the Ford Pinto Most of you are too young to remember a lot of Pentos being on the road but the Ford Motor Company produced a lot of these things compact very cheap good gas mileage for the time and Your your typical business ethics class is going to look at this as an example of how terrible the automobile industry was by producing cars that weren't as safe as They could have been of course again. We understand you can raise safety You really can you could have made a safer car than the Pinto But of course you're going to have to sacrifice something else in the case of the Pinto The There was a well-known case involving A rear-end collision someone rear-ended a Ford Pinto on a Midwestern highway at night where the Pinto had been stopped in the road apparently and and Three young girls were killed as a result of that accident and the attorney general of the state decided to file lawsuit against Ford Motor Company for Failing to include some fuel system improvement that might have Prevented that the fire and the in the crash It was pointed out that the the Improvement would have cost some small amount of money per car something like $7 or $10 or something. I don't recall exactly what it was but it was a small amount of money and most of your your Ethics classes would look at this and say well weren't three girls lives worth spending an extra $12 per car Ford Motor Company had decided otherwise this is taken as evidence of the the the the unreliability of the market system in providing for consumer safety Well Ford had Had to make a choice a financial choice Safety is a scarce commodity So are the other things that people would like to have in their cars and Of course you could have made a marginal improvement of the fuel system And it might have cost $12 per car, but Ford was thinking well if we do this we're going to produce however many hundreds of thousands or millions of these cars and X number of dollars per car is going to translate into so many millions of dollars and They expected due to their calculations that this would this would mean Saving X number of lives and in preventing so many injuries as a result of this improvement well Then they looked at what seemed at the time to be a reasonable estimation of the value of a human life And they looked at the court cases where there was a wrongful death lawsuit or wrongful injury lawsuit and they looked at what the courts were awarding in payments to Families for wrongful death and they say well well we expect that if we don't do this improvement then we will end up having to pay out X number of dollars in in In lawsuits and If we do make the improvement we're going to have to pay X number of dollars in making this fuel system improvement Well the fuel system improvement turned out was a larger number than the The lawsuit total that they expected And so they decided not to make the improvement and a lot of people in Ethics classes will will say this was horrible. How can you put a value on a human life? Etc. Etc. Etc. Well, let's think about this a little more carefully first a Human life does not have infinite value Many of you traveled in a car or airplane to be here You incurred some risk of the loss of your life in doing so It might have been a small risk Maybe a one in a million chance that you would have lost your life and coming to this conference and sitting in these chairs But it was a risk Now if your life had infinite value and you took a one in a million chance of losing your life what? Financial expected cost would there be attached to your attendance at the conference? What's one over a million times infinity? infinity now I'd like to be flattered by your attendance here, but I really don't think that the value of attending this conference was infinite So your own behavior in showing up at this conference indicates that you didn't value your life at infinity Otherwise you wouldn't be here. You wouldn't have taken the risk. However valuable the conference may have been so Your own behavior in taking these chances with your life to gain something of finite value Indicates that your life According to your own estimation has finite value Why then do we blame Ford Motor Company for making the same kind of assumption that the consumers do every day? Now you don't have to buy a Ford Pinto if you if you value safety If you value your life more highly then you have the option to buy more expensive and safer car But what the automobile manufacturers had done is they had offered a variety of cars with varying Safety features and varying fuel economy and varying capacity and varying cost price And they offered the Ford Pinto and lots of people apparently said well, I would rather have a cheaper less safe car Than have a more expensive more safe car Another way I think I would I would ask you to look at this is is to think about the many many improvements that you could make to a car To improve the safety certainly the fuel system integrity Was not the only margin on which the Ford Pinto could have been improved To maybe strengthen the steel in the frame increase the thickness of the steel by a couple of millimeters at a cost of maybe $25 maybe they could have Put in a slightly stronger Powerful brakes at a cost of another $18. Maybe they could have put in a Crumple zone or something in the front for another $17 Added a little padding in the dashboard for another $5 Made the Another backup system for the for the brakes or something else that it would improve your safety Beef up the suspension a little bit a little bit to make the handling better another $14 But where do you stop with these marginal improvements? I mean every you can take any product and marginally improve it for a slight increase in the price You keep doing this and you say well, they should never stop They should never they should never hesitate to spend another $14 to achieve some improvement in safety Okay, well you keep doing this and you're gonna wind up with an arm and a personnel carrier instead of a Pinto You can drive down the road and be impervious, right? But people don't do this they don't want to drive around an arm and personnel carriers because they like to have something that Gets better than two miles per gallon So people will make these trade-offs voluntarily between safety and price and other features to the product Typically firms have an interest in getting that balance right Bad business to kill your customers Bad business to gain a reputation of producing a product. There's less safe than people expected it to be Now in retrospect you can look at the Ford Pinto case and you say well if Ford had known that they would have been Suited and they would receive this bad reputation as a result of the Pinto. They probably would have Done something different They did the best they could With the information they had at the time now I Spent some time talking about the FDA in my talk this morning on health care and I believe also we have a local resident authority here on the on the FDA and Bob Higgs and He's done some excellent work in this area. I can't come close to what he can tell you about the FDA But I'll just briefly mention this Agency which is supposed to increase your safety with regard to consuming food foods and and drugs Bill Anderson Up at Frostburg State University hasn't has an article that you can find online at the Mises dot org website in the in the February 1998 free market on on Teddy Roosevelt's creation of the FDA and and Bill points out that after winning the election in 1904 Roosevelt launched into this progressive regulatory agenda trying to Target various industries that in the public's eye had a reputation of Doing something terrible to consumers one of his first targets was the meatpacking industry at the turn of the century refrigeration was rare and the even though the industry had Developed some ice chilled containers for transporting meats and ships to allow companies to transport Dressed meats over long distances You had to keep this stuff on ice or it would spoil as we know in Preservation techniques were not as advanced as they are today Well during the Spanish-American War where Roosevelt got his reputation Meatpackers would ship these dressed meats to Cuba for distribution to the troops And they'd tell the quarter masters in the army will look you need to keep this on ice You can't just dump it on a wagon and and and haul it inland or it'll spoil in the way And of course the quarter masters did not listen by the time the meat reached the troops It was spoiled meat companies were then accused of profiteering by selling rotten meat to the troops and Then of course Roosevelt Gets this boost to this agenda in 1906 when Upton Sinclair publishes the jungle Which you might have read in one of your classes. That's a favorite I think even today one of these muck raking kind of novels where meat companies were accused of Doing all kinds of terrible things to their employees and customers and this novel along with Roosevelt's inclination to regulate brought about the Food and Drug Act in 1906 Which created the FDA? if if you refer back to some of the things I said this morning and And some of Bob Higgs work on this you find that the FDA actually creates barriers to entry it is detrimental to consumers it creates delays and expense in the process of Getting a new drug approved or even getting an existing drug approved for a new purpose and by doing so it will Prevent innovation from occurring in the pharmaceutical industry now if you're an existing pharmaceutical firm And you don't want new upstart innovative competitors then the FDA is a great thing But it's not such a great thing if you have a disease that could be Addressed successfully by some drug that's in the pipeline that might eight or ten years later make it through the approval process so the FDA delays introduction of new beneficial drugs and Captures or it has been captured by the regulated industry to to serve as a competition suppressant Again, you can look at Bob Higgs book hazardous to our health You can look at some articles like this one by Patrick Weiner in all the dangers of food safety I ran across though an issue a An article in the fall 2010 issue of independent review by Yasuda and I this is one of the best treatments of Food safety regulation I've seen of course every so often you'll have a an episode of some outbreak of E. Coli or something and You will have various scholars Say we'll see this just proves that the FDA didn't have enough budget Money to fight this stuff. And so we still have these outbreaks and that that's an indication that The regulation is not strong enough or we're not doing inspections with enough vigor. And so we need to have Stronger FDA well Yasuda does some really good things to try to poke holes in this and I would Recommend that to you if you have a chance in fact I believe that issue of the independent review is available out here in the bookstore someplace in the Institute for you to pick up Unpasteurized milk this has gotten some attention lately because there are some people not very many But a few people who would say well, I don't want to drink pasteurized milk. I want my milk unpasteurized or raw I don't want it to be Subjected to this treatment now I'm not real familiar with all the reasons for rejecting pasteurized milk, but There's a handful of people who think that this is a wise thing to do that is better for you or something and so As it turns out the FDA's Long-standing ban on non-pasteurized or not the FDA's but the various states long-standing ban against Non-pasteurized milk does not seem to have had a beneficial effect Now the data on this are somewhat sketchy because we we don't have the ability to measure Illegal consumption of raw milk very well like a lot of illegal activities. It's difficult to figure out how much people are engaged in But if you look at the unpasteurized milk related cases of food poisoning There were 245 cases in the non-prohibition states with about 64 percent of the population So approximately two-thirds of the population 245 cases In cases in states where you can legally consume the raw milk in States with about a third of the population 36 percent of the population There were 248 cases So it does not appear that banning Unpasteurized milk at least based on this limited information does not appear that this has any Decisive impact on food poisoning cases related to raw milk Now you could say well isn't pasteurization going to remove certain bacteria from milk and so forth and make people better off and that's the FDA has and and the various state regulatory authorities have not Established this beyond doubt Yasuda also points out that there's no correlation between the budget for food safety going to the FDA and disease statistics Get it give the FDA a bigger budget and your disease statistics do not improve There over a number of years was a dramatic decline in the FDA's border inspection rate for imported foods But the foodborne disease statistics did not drop or rise rather did not rise along with that decline in the border inspection rates so It it doesn't seem that the FDA is is doing anything beneficial If if it cannot affect disease statistics by their border inspections Also studies fail to show that restaurants with low inspection scores cause more food poisoning complaints What good is the food and a lot of these inspections may inspect things that don't have a Real close connection to food safety now I Really would like to beat up on the FDA some more, but I maybe I've done enough of that today. Well, probably not but In any case when we're looking at Regulatory efforts to reduce risk we have to keep in mind that we cannot do just one thing Everything you do is going to have an impact and sometimes it's as you're a backing away from one Perceived problem as a regular as a regulator. You're going to back into some other problem that might be more severe One example of this would be the methyl mercury regulations these are regulations primarily to to Reduce the exposure to mercury methyl mercury in seafood The argument is that if pregnant women consume Mercury-laden seafood and this can cause damage to their to their children and yet when The regulation says we're going to try to reduce Mercury or at least warn people about mercury in seafood People not just pregnant women, but all kinds of people reduce their consumption of seafood well Turns out seafood is actually good for you in some quantities and this means that in addition to Backing away from the risk of the mercury in the seafood you're backing into the risk that you're not getting enough of the nutrients that seafood provides Which may increase heart attack risk and other things? So yes, maybe we're Reducing injury and death in one sense, but we might be increasing injury and death by backing into this other problem Regulators are typically not good at Making these kinds of balances we talked this morning and my other talk about type one type two errors and How regulators just cannot seem to To make these even if they were properly motivated to do so, which I don't think they are Even if they were properly motivated, they don't make these balances these trade-offs very well If you lower someone's income you're going to cause lost life one approach According to Kip Viscuzzi is is to look at the expense of government regulation and They're widely varying estimates of what the price of the government regulation is but anytime you decrease income by 10 to 15 million dollars you're going to lose a life according to one Study by a random letter and John Morrill Another approach says well it takes 50 million dollars of lost income before you lose a life somewhere in the economy There is a very high cost in some cases with some regulations in terms of the the expense of the regulation and the lives that are lost as a consequence according to one study the high cost per life saved of the OSHA asbestos regulation Leads to the loss of one and a half lives For every life saved by the reduction in the exposure to asbestos Okay, I don't know if you know you caught the math on that but save a life. You lost one and a half lives That's not a net improvement From aldehyde standards by OSHA are even worse According to this study they cost 25 lives for every expected death averted by the regulation Now of course lives lost is not the only thing that you can measure. There are other things in life that are valuable Besides extending your life. We all make trade-offs between life expectancy and other things as we saw earlier but According to Viscuzzi about 4% of every dollar of production and industry is associated with health and safety costs So when you impose a regulation on a consumer product and this causes the manufacturer to engage in some additional effort productive effort That's going to by itself increase hazard Somewhere in the economy If you you have a regulation for example on superfund sites toxic waste sites and you you have People driving around in heavy machinery hauling dirt around to try to reduce the risk sometimes a miniscule risk Associated with a toxic waste site. Well, you know people operating heavy machinery sometimes get hurt and killed so you might be reducing some risk by reducing the toxic waste but by Encouraging this productive activity with the regulation or requiring the productive activity with regulation. You're also incurring other costs in human life and and human health This is called risk risk analysis you're trading one risk against another Now there is a an argument for regulation That is Based on the idea that the consumer of the product does not have the same information about the safety of the product as the manufacturer Asymmetric information I I as the manufacturer I might know something about the safety of the product that you don't know If you're looking to buy it because I'm a professional at producing this product and you're not All right. Well Again, I'll refer you to the Yasuda article which treats this and in in passing Yasuda points out that if you look at Fish and shellfish caught by the consumer like a recreational fisherman If you cat if you look at the the food poisoning rates Associated with people catching and eating their own fish and self shellfish Those food poisoning rates are greater than the food poisoning rates associated with commercial fishing You would think well if I'm at a restaurant someplace and I'm eating shellfish I don't necessarily know where the fish came from or how much mercury is in it or what other toxins might be in the fish And I I have no idea who the Who the fishermen was or what waters or what the water conditions were like where they went fishing or how long this Stayed out in the open before it was refrigerated or anything. I don't have no idea. There's asymmetric information But does it actually lead to? human harm It looks like the market pressures on commercial fishermen are sufficient That they don't sell spoiled fish to their customers And handling the catch commercial fishers pay greater attention to sanitation than recreational fishers do so if anything commercial fishers are Producing super optimal levels of safety Compared to people who catch and eat their own fish. It's difficult to argue that Asymmetric information is leading people to to get less safety than they would procure procure for themselves And this idea of super optimal safety might bear a little explanation economists will argue that and I think rightly That perfection in safety is not ideal You don't want absolute safety because it would be extremely expensive to get that absolute safety You would have to give up too much else to get it if you look at the federal arsenic standard Marginal cost per life saved increased dramatically as you increase the safety standard as you Effectively reduce the quantity of arsenic allowable You cut the standard in half you're going to increase the marginal cost per life saved by about ten times You cut it to one tenth of the current standard you're going to increase the marginal cost per life by another six or seven times so The the marginal cost have to be taken into consideration and yet regulators are very bad at this For example One study. This is an older study, but it shows that a a regulation by the FAA federal aviation administration Could add an extra year of life for $23,000 In occupational safety and health administration regulation could add a year of life for $88,000 An EPA regulation will cost you approximately according to the study about seven point six million dollars per year of life saved So I'm not arguing for FAA or OSHA regulation But I am saying that the the marginal cost of regulation can quickly get to very high levels If the if the government's not paying any attention to the trade-offs that are appropriate And in fact as Mises would point out as early as 1920. There's no way for governments to know the appropriate Trade-offs this is the socialist calculation problem with the absence of prices with the absence of voluntary interaction between buyer and seller We don't know what the right level of safety might be According to the Office of Management and Budget This again is older data, but it's still illustrative. I think An auto fuel system integrity standard costs about four hundred thousand dollars per premature death averted You want to use that as a standard a trenching and excavating standard which requires People who dig trenches to put certain Safety equipment in place to prevent the trench from caving in 15 sorry 1.5 million dollars per premature life averted The asbestos band about a hundred and eleven million dollars per premature life or death averted a Hazardous waste disposal band about four point two billion dollars per premature death averted And I'm I will readily admit my life is not worth four point two billion dollars Atrazine There's a standard for atrazine in water The maximum allowable amount of atrazine and drinking water is three parts per billion This is you would say that that number is astronomical But I think now we have to say this is on the level of federal finance Astronomical is now at smaller numbers than federal debt deficits But to give you an idea of what three parts per billion would be Imagine one of these 16,000 gallon railroad tank cars that you see the big round things on the railroad and Stand on top of those one of those cars with an aspirin Break it in half Crumble it up and drop it in that water and that's three parts per billion of aspirin all right Now Imagine the cost of Reducing atrazine and water When you're having to achieve that level of purity the cost per premature death averted for atrazine the atrazine standard is 92 billion dollars This is a lot of money to the extent That we're taking money from some other purpose and devoting it to reducing the level of atrazine and water or reducing from aldehyde or Asbestos or some other toxin We are reducing human well-being if those funds could have been used for some other purpose that would make people better off Regulators have little incentive to consider these things And in fact They don't have enough information to make these decisions in the first place There are private sector alternatives there's private certification You will find if you go to the grocery store, you'll see things on food items that say gluten-free or Peanut-free or they'll tell you if it was you know manufactured in a manufacturing process that included some allergen peanuts or something Not all of these are required by regulation some of these bits of information and especially if you consider the information that is incorporated into a brand or Incorporated into some sort of Proprietary symbol on the product that tells you this is certified by some organization to be Free of this Particular ingredient That information that's privately provided is Serving a useful purpose in the marketplace So we have recourse other than federal agencies trying to tell us How much information should be provided and what ingredients can be included and so forth There's underwriters laboratories mark Thornton has an article. It's some years old now But you can take a look on mesas.org and I think the name of the article is what keeps us safe Take a look at that underwriters laboratories is a private organization that You produce a product you take it underwriters laboratories and they'll investigate it for you do some various lab tests to it and find out it whether it's going to be safe or not and Put their little stamp of approval on it look at the back of an electronic device and it's likely to have a variety of these Stamps and certifications and so forth to tell you whether it's going to Set your house on fire or something I Was writing up Some years ago and had occasion to look at this certification issue and turns out that in the in the old Soviet Union There was some small number of people who were killed by their television sets exploding We don't even think about that in the United States About what's the risk that my TV is gonna now of course flat screens different technology I can't imagine one of those things exploding, but the old you know cathode ray-tube giant things that were this thick and Those things in if you live to the Soviet Union you sit there watching TV and it might blow up on you Now this is a of course a very heavily regulated production process in the Soviet Union the government supposed to ensure the safety of consumers And of course they they cannot and they don't good housekeeping seals of approval brand names that I've mentioned before brand names are a More important form of certification of safety then I think people recognize What happened when years and years ago Jack in the box Was sued because of I think four children dying of food poisoning after consuming some of their hamburgers at E. Coli I think in them What happened after that Jack in the box was disciplined by the market and when you have a Standalone restaurant with no significant brand name a mom and pop type restaurant People especially people who are who are from out of town may not know too much about the quality of that restaurant but if you have a brand name for a franchise that may cover thousands of restaurants over a Wide geographical area What that's telling you is you can retaliate you and everybody else can retaliate against the entire corporate enterprise If they do you wrong So if you visit some particular town and you go into a Taco Bell or McDonald's or a Burger King or something And and you get food poisoning because of your experience there It doesn't matter if you don't go back to that one particular restaurant anymore As soon as the word gets out that this particular restaurant was associated with this Food poisoning case the entire chain will suffer This is the form of market discipline. It's giving the customer the chance to To essentially retaliate against someone who Produced a product. It was less safe than they had anticipated You might have read about the well-known lulling effect. This is a Misperception on the part of consumers of the efficacy of some safety device Which leads people to then reduce their own personal safety precautions one of the best examples of this was the requirement that Medical medicine bottles have a child safety cap on them well If you look at the poisoning rates from Analgesic products like Tylenol or or other other such products The poisoning rate went up After the regulation appeared requiring child safety caps It went from one point one per thousand in 1971 to one point five per thousand in 1980 If you take into account the increase in the sales of Tylenol over that period of time and the Increase in the sales of related products that only accounts for about half of that increase 1.1 to 1.5 So the overall implication of the analysis was that there was about 3,500 additional poisonings every year of children under five resulting from the adoption of safety caps Now you don't this this is to indicate you don't do away with the asymmetric information problem just because you required some safety feature You still don't know How safe this device is and as a result you may Like likely to Assume that the safety is greater than it than in fact is afforded by this device Empirical evidence also suggests that the The safety mechanism required on these butane cigarette lighters also produce produces similar results that Parents don't take as much care about where they keep these lighters Same thing was happening apparently with the Tylenol bottles the You know if I have no no safety cap on the bottle of medicine I'll keep it in a medicine cabinet out of reach maybe a locked medicine cabinet I'll take more care to watch where my children are and make sure that they don't get into the medicine But if I think well, there's a safety cap on it. They can't get into it Anyway, I'm just gonna put it wherever I want and it might be down below the sink or something where they can get into it I may not put on the little child safety latch On the cabinets. There's other things that I may not do in the assumption that the child safety cap is sufficient to accomplish the safety degree of safety that I want so We can again we can we can inadvertently back into a safety problem as a result of the regulation gun safe storage laws There's a review from 2004 in the quarterly Journal of Austrian Economics of John Lott's book called the bias against guns why almost everything you've heard about gun control is wrong review by Dale Steinrich and Apparently according to a general accounting office study Gun locks which were required some years ago Were only reliable and thwarting children under the age of seven George Bush W. Bush supported a program in Texas while he was governor there that made these Made some requirement that these be provided at no additional cost To gun owners, but Lott was arguing in his book that they were dangerous Because they can limit your quick Access to guns when they're needed for self-defense, especially locks that prevent the guns from being stored loaded There's trigger locks and there's other kind of locks and I'm not familiar with all of them, but basically Lott's reasoning Is that that not only did the locks restrict access to the firearm, but they carried a stigma With them that you're communicating to the buyer of the gun This is an incredibly dangerous thing and of course they can be dangerous and yet it may have Increased the perception of the danger higher than it would have been otherwise so that There may have been a reduction in firearms ownership and then that reduction in ownership makes people more vulnerable to predation so Empirically Lott found that you know A lot of the regulation is based on empirics So I would argue that the regulation is invalid on other grounds But you know if you're going to base the regulation on empirics. I have no trouble fighting fire with fire on this If if you look at the empirics on this lot finds that the safe storage laws had no effect on accidental gun deaths or Aggregate suicide rates There was a slight slight evidence of a reduction in juvenile suicides But the only consistent effect of the laws according to Lott was to increase rapes robberies and burglaries The 15 states that enacted these safe storage laws had an increase of a total of about 3700 rapes 21,000 robberies and about almost 50,000 burglaries I'm during the five years after passage of those laws those 15 states saw a yearly Average rise of 309 murders and over 25,000 aggravated assaults and that makes those safe storage laws pretty dangerous So when you're looking at regulation and consumer product safety regulation, I'd like for you to think about several things Just to kind of sum up here Think about the inadvertent effects of that regulation Think about what's going to happen as you incur costs Because that money could have been used elsewhere. Think about what other things you're doing that could create Risk as a result of the regulation. I asked students sometimes on their tests in my regulation class to say well let's suppose we had some sort of Fireplace Safety Act which requires people to get an inspection of their chimneys for soot build-up and Prevent chimney fires and we require people to do this every year. So would this be a good idea? I mean considering that there are a certain number of chimney fires every year and people are Sometimes killed and fires resulting from chimney Chimney fires with this help Well, it's you may in fact reduce deaths resulting from chimney fires But the regulation is going to have another effect Which would be you're going to now have a whole lot of chimney sweeps climbing up on ladders trying to get on your roof to Sweep out your chimney People climbing on ladders occasionally fall and they fall they usually injure themselves or even die So you could be trading off a Small reduction in the number of chimney fire deaths for a larger number of deaths of chimney sweeps in Saying all of this. I don't want you to lose one of the lose sight of one of the most important arguments against against regulation, which is that when two people want to trade I Think you can make a strong ethical case For saying that they ought to be left alone to trade under whatever conditions they prefer Which means that regulation per se? would be out of bounds for a consistent libertarian and I've not concentrated on that argument here today I've been looking mostly at the the actual effects of regulation which I've argued have been bad But there's an ethical argument to which I think is important and perhaps definitive on this issue With that said, I'm almost out of time. I've got about five minutes for questions. If you have any I can take one or two and and then we'll be done Yes, I Would recommend that you look and it's in the first Two or three chapters of Tom Woods book meltdown He deals with that little issue of the rating agencies and he says look rating agencies were basically being pressured strongly pressured by the By the government to rate Mortgage loans favorably the securitized Loans they would rate them triple a when they really shouldn't have been We understand that now in retrospect But what people lose sight of is the fact that they were under intense pressure to go along with the political tide and Favor this kind of broad home home ownership Agenda that that the government had been pushing for at least 15 or 20 years and probably much longer than that So I don't think you can take the rating agencies and say well these this is an example of the private sector failing Because it wasn't truly private. There was already that intervention there that was that was influencing those decisions In the back. Yes, right wrong. I think it's um, I see your point. It's And yet people do assign some weight to a government's decisions on things and they don't pay very close attention They gathering information is costly. This is why we Economists say that voters are rationally ignorant and When it comes to regulation people are rationally ignorant all they may see is a headline FDA or EPA makes a regulation to reduce mercury and fish and They may not think well this only applies really to this group and the cost to me would be less than the benefits of eating more seafood another example of this kind of thing would be regulations to try to Reduce Chemicals to to kill fungus and disease and insects and so forth on vegetables fruits and vegetables and and and people look at this and say well, yeah, I Don't want to eat fruits and vegetables to have pesticides and so forth on them But if they back away from that they're going to incur the other disadvantages that come from not even eating enough fruits and vegetables I I do think that people Tend to make Better decisions for themselves than a regulator would make for them But the regulators that that little bit of information that the that people assigned to the regulation itself can skew the market By causing people to think differently about the risk the relative risk than then otherwise. There's a as a chapter in Harold Winters little book called trade-offs Which I sometimes use where he says that people may actually not smoke enough cigarettes Because all of this propaganda that you get about how terrible cigarettes are now We've got the new little regulation about the you know the pictures like I've had in Europe for some time Fault in England you fold out the little thing on the pack of cigarettes and got somebody's lung on there And you look at this and oh, this is horrible. I cigarette should be banned completely and and yet There is a cost-benefit Assessment that goes along with smoking Apparently smoking I don't smoke but apparently smoking does create some benefits. Otherwise people wouldn't do it But if governments increase the the apparent cost and Do and we so we perceive those more readily than we perceive the benefits And we may not actually engage in the activity enough kind of like if people think that Flying in an aircraft is more dangerous than it really is they'll end up in their cars And they'll end up dying in their cars on the highways because highway deaths per mile are much higher than air Travel deaths per mile. That's a long answer to a short question But I think I'm out of time I could take any other questions over here