Monday, February 20, 2012

The Success of the NHTSA


The National Highway and Traffic Safety Administration (NHTSA) was created by the National Traffic and Motor Vehicle Safety Act of 1966. It mandated "(1) seat belts for all occupants, (2) energy-absorbing steering column, (3) penetration-resistant windshield, (4) dual braking system, and (5) padded instrument panel." (Source, "The Effects of Automobile Safety Regulation" by Sam Peltzman. You'd hate it, he's from Chicago. Taught micro economics to me). Peltzman's article points out there is a tendency for the estimates of deaths to be overstated since people respond to the increased safety feature by driving more recklessly and although passenger deaths decline, other deaths increase, like pedestrians.

Peltzman looked at the effects of regulation on overall safety, but we should also look at what the market was doing without safety regulations. From Wikimedia.

It seems to me a reasonable question to ask if car safety was improving before regulations, what did problem did regulation solve.  I suspect the same can be said of food product safety and "The Jungle." 

Two more things on "The Jungle" and the FDA. I regard "The Jungle" as evidence the market works. Transactions were taking place with asymmetric information on the cattle processors part, and when that information became known, the market reacted to punish those with lax safety and hygiene standards. The FDA was a way for lawmakers to feel better. McDonald's doesn't spend millions on product safety because of the FDA, they do it because dying and sick customers are bad for business. Look at the lengths Johnson & Johnson went to to alleviate the concerns of customers after the Tylenol scare. They didn't need the FDA to mandate different kinds of bottle caps and consumers didn't need to be reminded.

But let's say I'm wrong. Let say we do need an FDA. And let's say the FDA stops all sorts of bad food and drugs from entering the American bloodstream. What about the drugs and food it has stopped entering that has no harm on the American consumer? What is the cost of that denial? The FDA is very good at stopping drugs and food that can harm you but no one measures the costs, in shorter and less healthy lives, that the FDA has imposed on us by denying life-saving and life-improving food and drugs.


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