When More Means Worse
 

Ever-increasing governmental regulation is in vogue on both sides of the Atlantic these days. Both European and American politicians seem to be embracing the false notions that more regulation is synonymous with greater safety - and that if a programme or agency is failing, what we need is more of it.

In Europe, the so-called "precautionary principle ", which guides the EU's approach to consumer and environmental protection, holds that while the evidence about a product, technology or activity is any way incomplete, it should be prohibited, or at least heavily regulated. This notion is based on the false assumption that little real harm comes from delaying the introduction of new products and technologies. It exaggerates the potential drawbacks of a new product and underestimates its benefits.

In the US, Congress has been pushing federal agencies directly or indirectly to pile new regulatory requirements onto myriad consumer products and activities.

But regulation has costs - both monetary and through the inhibition of innovation - which must be weighed against its benefits. The direct and indirect expenses related to government programmes - for purposes good, bad, or indifferent - exert an "income effect " that reflects the correlation between wealth and health. The accumulation of wealth by societies is necessary to fund medical research, build schools, support infrastructure and sanitation, and even to improve environmental amenities. It is no coincidence that richer societies have lower mortality rates and cleaner environments than poorer ones. So to deprive communities, or individuals, of wealth is to increase their health risks. Wealthier people are able to purchase better health care, enjoy more nutritious diets and lead generally less stressful lives. Conversely, the deprivation of income itself has adverse health effects, including an increased incidence of stress-related problems including ulcers, hypertension, heart attacks, depression and suicide.

It is difficult to quantify the relationship between the deprivation of income and mortality, but academic studies suggest that every $5m to $10m of extra regulatory costs will induce one additional fatality through this "income effect."

Some regulation is cost-effective, to be sure. According to data from the US Office of Management and Budget, required food labeling that conveys information about health claims, ingredients and nutrients imposes costs of $1.85bn annually, with benefits of $15.5bn.

But poorly-conceived, net-negative requirements are not uncommon. In his book, Breaking the Vicious Circle, Supreme Court justice (then a federal appeals court judge) Steven Breyer cited an Environmental Protection Agency (EPA) ban on asbestos pipe, shingles, coating and paper, which according to the most optimistic estimates would prevent seven or eight premature deaths over thirteen years - at a cost of approximately $250m. Breyer noted that such a vast expenditure can be expected to cause more deaths simply by reducing the resources available for other public amenities than it would prevent from the asbestos exposure - in effect, a social manifestation pf the "income effect". (And, perversely, the very act of removing asbestos from existing structures poses greater risk to human health than simply leaving it where it is: during removal, long-dormant asbestos fibres are disturbed and spread into the air, where they expose workers and bystanders to harm.) At the time EPA banned asbestos, these risks and benefits were well understood, but political pressure pushed regulators into making a risk-increasing decision.

There are numerous other more recent examples of non-cost-effective regulations. For example, the US EPA's "land disposal restrictions" when toxins are present impose annual costs of approximately $205m, in order to avoid 0.22 cases of cancer annually from groundwater contamination and 0.037 cases from air pollution - that is, about one case of cancer every four years - and $20m from property damage. Another example is the Occupational Safety and Health Administration's requirements for wind standards for "manufactured housing": costs are $511m per year, while benefits are only $79m. Then there is a proposed Department of Transportation rule that would force infants to occupy their own seats on commercial flights, which would yield an expected savings of one life per two years - but would produce a significant net increase in risk, if parents choose to drive rather than purchase additional air tickets.

Some of the worst regulatory excesses occur when government is exercising its "gatekeeper" role, in which it must grant permission before a product can be marketed, as is the case for pharmaceuticals and pesticides. Regulators are highly risk-averse, often discounting or ignoring the costs of life-saving products that are delayed or abandoned. As a result of pharmaceutical regulators constantly raising the bar for approval, bringing a new drug to market in the US now takes 12 to 15 years and costs more than $1bn (in direct and indirect costs). And the regulation of gene-spliced, or genetically modified (GM) crops and foods in Europe has been nothing short of catastrophic, affording no human health or environmental protection - GM products are widely recognized to have palpable benefits and to be at least as safe as conventional products - but imposing huge regulatory costs, depriving farmers of a critical tool, and raising food prices.

Instead of attempting to regulate everything simply because they can and because over-regulation gives the appearance of a commitment to the public interest, policy makers should consider carefully how much regulation is necessary and sufficient for a given product, process or activity, and should strive to make those costs commensurate with the societal benefits. Excessive, wrong-headed regulation is a drag on innovation, diminishing competition and the number of products available to consumers, and inflating prices.

As British writer Paul Johnson observed: "Left to themselves, the creative forces in society will always deliver, but keeping them reasonably free to do so is a perpetual, grinding battle. It is one that must never be lost." Too often, our governments seem to be fighting on the wrong side of that battle.