Daniel Carpenter on Smart Regulation | Conversations with Tyler

In a conversation with Tyler Cowen, Daniel Carpenter, a renowned expert on regulation and the US Food and Drug Administration, discusses the complexities of regulation, the role of the civil service, and the influence of the postal system.

He provides a detailed analysis of how these entities have shaped political institutions in the United States.

Necessity of Privacy Restrictions in the Postal System

Privacy restrictions in the postal system, both in terms of the content of mail and the behavior of postal workers, are of paramount importance.

While mechanisms to detect nefarious behavior are necessary, maintaining basic privacy restrictions is equally crucial.

Regulation at the State and Local Level

The notion that regulation is a one-way ratchet that only increases over time is debatable.

There are instances where government regulation has decreased, such as in the case of price regulation and antitrust mergers and acquisitions.

Understanding Agency Capture

Agency capture, where a regulatory agency is influenced by the industry it is supposed to regulate, is a complex concept.

It can evolve over time, and an agency that was not originally captured can become so.

Proving capture is challenging, as it requires a counterfactual of what an uncaptured agency would do in the same situation.

Improving Public Comments on Regulations

The process for public comments on regulations or pending regulations could be improved.

The current system is dominated by industrial interests, with most meetings taking place before the notice of proposed rulemaking.

This process should be more inclusive of consumer and non-industry perspectives.

Patterns in Regulatory Decision-Making

Larger and older firms often receive quicker or more favorable decisions than smaller and newer firms.

This is not necessarily due to regulator preference, but could be related to uncertainty avoidance.

Impact of Freedom of Information Act (FOIA) Laws

FOIA laws have altered the relationship between reporters and agency insiders, but they are crucial in preventing creeping authoritarianism.

FOIA laws are one of the most important laws in the area of regulation.

Role of the FDA in the Pharmaceutical Industry

The FDA’s main function is often about information rather than safety.

Its role as a veto player granting access to profitable markets creates powerful incentives for research and development.

Differentiating Between Cars and Drugs

While cars are experienced goods, drugs are credence goods.

It’s often difficult to determine whether a drug was the cause of our cure, making the information structure of the drug market quite different from that of cars.

Collective beliefs and Bayesian priors play a significant role in the value of a drug product.

I would say if we were trying to do this today, I would actually reduce the number of political appointees at the top levels of the civil service. – Daniel Carpenter

Importance of Corporate Reputation in the Pharmaceutical Industry

Corporate reputation plays a crucial role in the pharmaceutical industry.

Vaccine hesitancy is not just a regulatory construct or byproduct.

Credibility issues can contribute to people’s reluctance to take a vaccine.