Critiques of Regulatory Policy
Part II
Should we do CBA at All?
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Why not prevent all possible risks?
 Precautionary principle
What are the trade offs?
How does the US concern with risks affect our cost of
business production?
When can preventing one risk cause another?
 Natural pesticides
 Smaller, lighter cars
 More expensive power?
What is the Cost of Unemployment caused
by Regulations?
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Economic costs to the individual
 Lost opportunities for your children
 Loss of assets, making recovery harder
Health costs
 Stress
 Reduced access to care
Self-esteem
Crime
FDA
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Drug lag?
What are the tradeoffs in FDA regulation?
 Safety
 Effectiveness
 Should cost be part of the equation?
Why are consumers in a poor position to judge drugs?
 Background Information?
 Timeframe of action?
 Comparison with other drugs?
Why not let the market sort it out?
How is Ethanol a Regulatory Problem?
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Would anyone burn ethanol as motor fuel without
government subsidizes?
What is the policy basis for pushing ethanol?
What are the political issues?
What are the downsides of ethanol?
Is this a wise regulatory choice?
Should We Control Personal Risk
Decisions?
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Should consumers have the right to buy much cheaper and better
mileage cars that are less safe?
Should consumers have the right to use unapproved drugs?
 What if they are dying?
What about not getting their kids vaccinated?
 Can their neighbors sue them for spreading disease?
Smoking?
 Smoking dope?
Being fat?
 Fat taxes?
Civic Republicanism
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How can agencies be better representatives for the whole
population than are the elected officials?
What are the pressures on elected officials?
How are these different for agencies?
 Independent agencies?
Should there be more public participation?
Should congress and the executive have to disclose all
contacts with the agency?
Regulatory Alternatives
Economic Incentives and Taxes for
Environmental Risks
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Tradeable permits for a fixed amount of pollution
 Looks at total pollution or greenhouse gas, not
process of control
 Lets industry see who can do it the most efficiently
What if you are downwind?
 Does an aggregate reduction, which benefits more
people, make you any happier?
Carbon Tax
 Goes to the heart of the CO2 program
 What are the downsides?
Non-Agency Regulation: Tort and
Compensation Law
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How is tort law a regulatory process?
Is it a democratic process?
 What is the public input?
 Who protects the public's interest in tort cases?
What are the standards for scientific decisionmaking?
 Breast implants?
 Erin Brockovich?
What are the standards for CBA?
What if later evidence shows that the verdict or
settlement was wrong?
What about Natural Monopolies?
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What are natural monopolies?
 Why not allow cable companies to compete for
business in a given community?
How can natural monopolies change with time?
 Telephones?
 IBM mainframe computers?
Can antitrust laws be an alternative?
CBA - Federal Flood Insurance
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Should the feds provide flood insurance?
Why does it not work in the private market?
Why are the political pressures on the feds?
 Do local communities really want accurate flood
maps?
 Do people really want accurate storm probability
predictions?
 Are the feds really going to charge accurate
premiums?
What are the perverse incentives of the program?
CBA: Should We Rebuild New Orleans?
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Would NO be in better or worse funding position if they had properly evacuated
the folks before Katrina?
 What is the CBA for real evacuations?
What is the CBA for rebuilding?
 What are the trade-offs?
Who should pay
 Should folks in low risk areas subsidize the Big Easy lifestyle?
 How about rebuilding rich folks houses on the Mississippi coast?
What about the responsibilities of the homeowners?
 Should we bail them out when they do not buy insurance?
 How much do you want to pay?
What about coastal erosion and subsidence?
 Should we rebuild homes before it is safe?
 If we do not rebuild, what happens to the CBA?