6 ms·

I think the core problem is the incentives of the regulators. Groups like the FDA are democratic institutions, but if their only goal is to have the approval of

by lacker 3y ago

I think the core problem is the incentives of the regulators. Groups like the FDA are democratic institutions, but if their only goal is to have the approval of national politicians, the feedback they get is either negative if there's a bad product released, or neutral if there is no terrible product released. The FDA must have done something right - what have they done right? We don't even know. Their incentives are basically, stop as many drugs as possible, but avoid public scandals. As long as the incentives stay the same, I don't see how a change to, say, liability model, would make any difference. The regulator can still set legal penalties high enough to stop any innovation, if they want to. Ideally there would be some positive incentive on the regulator as well as negative incentives. Perhaps somehow they could be responsible for the overall success of an industry, rather than just avoiding the negatives. It's especially hard though when you are regulating foreign businesses. It might be dumb to prevent the Microsoft-Activision merger, but what incentive do UK regulators have to get it right? If the incentives are all just politics then maybe the only real answer is politics, like the YIMBY movement seems to be somewhat effective at fighting anti-housing regulation. It is not really changing the paradigm per se, it is just changing the rules to be more pro-housing.

pjscott 3y ago
> The regulator can still set legal penalties high enough to stop any innovation, if they want to. A liability model has a couple of advantages despite this: 1. The regulator has some slack to not set penalties insanely high. As long as they're seen enforcing those penalties against someone periodically, and as long as the penalties sound like a big number to the general public, they can look like Stern Serious Regulators who are doing their jobs properly. The difference between a $5M fine and a $10M fine can have huge financial implications, but to the political circus those numbers are both roughly the same size, i.e. big. This allows the regulators to be more reasonable if they want to be. 2. Using liability rather than specific procedural rules lets the people closer to the ground decide how to most efficiently mitigate risk. Suppose that you run a factory, and sometimes people get injured by careless operation of a rotary saw. A naive regulatory approach might be to require that an additional person be watching whenever the rotary saw is in use. And that would probably help with safety somewhat, though at great cost. But if the regulator instead just requires workman's compensation payments to be made when someone gets hurt, then you can try to figure out a better way using your own knowledge of how your factory operates. (Historically, the adoption of workman's comp laws led to factories hiring engineers to make the equipment harder to accidentally misuse. That rotary saw, for example, would have had a cheap guard retrofitted -- and that would improve safety much more, for a much lower cost, than the "have an observer at all times" rule.)
- js8 3y ago
  The liability model has a big downside, though. Because sometimes people in charge are idiots, they ignore common sense and make risks. So they possibly get burned only when accident happens, which costs human health and lives. Regulation is intended to prevent human harm by setting and enforcing a safety standard.
  - pjscott 3y ago
    The usual hack for dealing with this is to require liability insurance. The insurer has incentives to set premiums at a level that reflect risk, along with reasonable contract conditions -- e.g. "Put guards on all your rotary saws, and yes we will be sending inspectors in to make sure they're being used properly." (How is this different from an ordinary procedural regulator? Because the insurance market has competition, which means that the insurance companies aren't only trying to optimize for reducing risk -- they're trying to reduce risk efficiently. And if they're not very good at it, they can be outcompeted by someone who is.)
    - gusgus01 3y ago
      Why would they check that the guards are in place when they can reject the claim after an accident happens because the guard wasn't in place? Who regulates the insurers?
  - AnthonyMouse 3y ago
    That only applies to large rare risks. If a risk is common, anyone who ignores it quickly goes out of business from the liability, so anyone still in business is taking effective measures. If a risk is rare and has a low impact, ignoring it frequently is the right thing to do. You're left with things like plane crashes, which have to be minimized even if they're already rare. But that kind of regulation is extraordinarily expensive, and then the same regulatory model gets applied where it isn't needed.
    - roenxi 3y ago
      > You're left with things like plane crashes, which have to be minimized even if they're already rare. I know we're all trying to be moderate here, but I'm not very good at that: 1) It is irrational. The cost-benefits of aircraft safety make no sense. Planes are held to a standard that we don't hold buses and trains to. We should strive to make rational decisions as a matter of policy. 2) There is no reason to think the US regulators are any good at what they are doing. As the thread root comment points out, the incentives are terrible. US industrial policy over my life time has consistently led to Asian growth and US stagnation in ways that were predictable. The US has banned most of the avenues that it could grow by, and coincidentally growth has largely stopped. Very similar story in Europe too, big focus on banning stuff (plus a bit of redistribution) and small focus on how to achieve more prosperity. The US is dedicating the lives of countless smart people to taking a thing that was going to fly through the air like a bird and ... not changing the outcome much. They could have been doing something else that was more useful, like competing with China for telecoms leadership. I don't think the evidence is there for this "having" to be minimised. The big picture looks a lot like people are behaving emotionally, that is sometimes leading to irrational decisions and those irrational decisions have added up to cause real harm. People should be more accepting of other people taking reasonable risk.
jjoonathan 3y ago
Yeah, this is tough, because the obvious counterbalance to "only negative incentives" is to add some positive incentives but the US Patent and Trademark Office is an example of what can go wrong with positive incentives: there are loads of garbage patents on the book and one can't help but wonder if that's because the USPTO is financially incentivized to put them there.
- fallingknife 3y ago
  Overall I agree, but I would say that is also an example of a negative incentive. A patent is restrictive and prevents innovation and competition in the market. So the patent office erring on the side of granting dubious patents is a restrictive policy same as the FDA erring on the side of not approving useful drugs.
- Nifty3929 3y ago
  I agree, though I am much less bothered by a proliferation of pointless patents than by a dearth of life-saving treatments.
cornholio 3y ago
The regulator has not only negative feedback when they fail, but also everyday pressure from lobby and interest groups, politicians, companies etc. to do their job faster and "cut the red tape". See for example the very public shaming of FAA by Elon Musk when while expecting launch licenses, tweeting 'sad Escobar in swing' memes etc. And that was just the visible tip of an iceberg of lobbying under the table. So there is some sort of equilibrium forming, not necessarily an optimal one, but the ratchet does loosen occasionally. For example, FDA has famously succumbed to public pressure and reformed its procedures for drugs for terminal diseases so that patients who have nothing to lose can accept much riskier treatment trials, to speed up development for such drugs. I say it's not an optimal equilibrium because nobody incentivizes for the common good. Politicians should, but they seldom do. For example, the nuclear industry would lobby and pressure for rapid approval of their existing traditional methods, but they would, as a whole, be very aggressive against a startup with an innovative design. What better way to kill such a competition than to call your regulator, lay out your 'concerns' and bash the startup with thick rulebook, even if those rules are not at all relevant for the new thing, they still have to comply for a 'fair' playing field.
marcosdumay 3y ago
> the feedback they get is either negative if there's a bad product released, or neutral if there is no terrible product released Yeah, in some ideal world things would work like that. On the real world, there is also an strong incentive not to block the profitability of any powerful person, and your paragraph applies only to powerless ones. A couple of decades ago, there was a strong movement on the governments to measure and publicize the societal costs of the regulators procedures. Leaded by the US and Germany. But then we got the stupidification of politics, that stopped it completely.
Nifty3929 3y ago
I wonder if part of the issue is that FDA approval implies Medicare coverage, which is expensive. And so as a pragmatic matter the FDA slows approval for financial reasons. I don't know if it works at all like this, but the thought did come to mind.
hanniabu 3y ago
> The FDA must have done something right They have just as many issues as any other regulating body. There's many ingredients that are deemed safe in the US that the rest of the world has banned. Every regulating body has been compromised thanks to late stage capitalism.
slavboj 3y ago
The FDA is emphatically not a democratic institution. Who exactly do I vote for if I disagree with FDA policy? Can a civil service FDA employee be fired on the grounds of supporting a particular wildly unpopular policy?
- rt4mn 3y ago
  I feel like thats a deliberate misreading of the parent comment. Of course the FDA is not, itself, a democratic instution. But then neither is your local police department or NASA. The reason those institutions are accepted despite the lack of direct democratic accountability is because they are still situated within the larger democratic institution (the US government) and subject to oversight by those elected representatives. If you hate the FDA your best bet is to lobby against it yourself (or help others that do). Its to much of an in-the-weeds issue for it to be a high priority for most lawmakers (unless maybe you live in a district with a lot of businesses regulated by FDA)
  - firstlink 3y ago
    > Groups like the FDA are democratic institutions > deliberate misreading of the parent comment > Of course the FDA is not, itself, a democratic instution. Can't tell if doublethink or just motte-and-bailey.
    - Karrot_Kream 3y ago
      What are we supposed to get out of your comment, or is this supposed to just be an unvarnished sneer?
      - firstlink 3y ago
        As readers we are supposed to learn that we are being misled. One hopes GP commenter would learn they cannot always get away with this sort of deception. What, if anything, are we supposed to get out of your comment, which seems to question the value of critical reading?
JumpCrisscross 3y ago
> the feedback they get is either negative if there's a bad product released, or neutral if there is no terrible product released Patient activists and drug companies lobby to make stonewalling approvals difficult.
- throwway120385 3y ago
  Yeah, I'm pretty sure lobbying and hiring good lobbyists to the FDA is the only reason one of the projects I worked on saw the light of day. If our CEO hadn't already been through the process it would have died in De Novo.
singron 3y ago
Reminds me about the overnight pizza issue. I.e. the USDA claims pizza that's 2 hours old will kill you despite people eating old pizza all the time and probably no documented significant negative consequences. https://news.ycombinator.com/item?id=26635856 https://news.ycombinator.com/item?id=26635856
frankfrankfrank 3y ago
If you think the regulators are Democratic I have this wonderful bridge I would like to sell you as an investment. I’m old enough to remember that dictators also hold elections with the same kind of results as the DC presidential election results. Rather ironically, your naive perspective is precisely why “democracy” is a self-evidently failed system and there are clear arguments that it is also a counterproductive, intrinsically unsustainable, and self-defeating system.

by lacker 3y ago

pjscott 3y ago

> The regulator can still set legal penalties high enough to stop any innovation, if they want to. A liability model has a couple of advantages despite this: 1. The regulator has some slack to not set penalties insanely high. As long as they're seen enforcing those penalties against someone periodically, and as long as the penalties sound like a big number to the general public, they can look like Stern Serious Regulators who are doing their jobs properly. The difference between a $5M fine and a $10M fine can have huge financial implications, but to the political circus those numbers are both roughly the same size, i.e. big. This allows the regulators to be more reasonable if they want to be. 2. Using liability rather than specific procedural rules lets the people closer to the ground decide how to most efficiently mitigate risk. Suppose that you run a factory, and sometimes people get injured by careless operation of a rotary saw. A naive regulatory approach might be to require that an additional person be watching whenever the rotary saw is in use. And that would probably help with safety somewhat, though at great cost. But if the regulator instead just requires workman's compensation payments to be made when someone gets hurt, then you can try to figure out a better way using your own knowledge of how your factory operates. (Historically, the adoption of workman's comp laws led to factories hiring engineers to make the equipment harder to accidentally misuse. That rotary saw, for example, would have had a cheap guard retrofitted -- and that would improve safety much more, for a much lower cost, than the "have an observer at all times" rule.)

js8 3y ago
The liability model has a big downside, though. Because sometimes people in charge are idiots, they ignore common sense and make risks. So they possibly get burned only when accident happens, which costs human health and lives. Regulation is intended to prevent human harm by setting and enforcing a safety standard.
- pjscott 3y ago
  The usual hack for dealing with this is to require liability insurance. The insurer has incentives to set premiums at a level that reflect risk, along with reasonable contract conditions -- e.g. "Put guards on all your rotary saws, and yes we will be sending inspectors in to make sure they're being used properly." (How is this different from an ordinary procedural regulator? Because the insurance market has competition, which means that the insurance companies aren't only trying to optimize for reducing risk -- they're trying to reduce risk efficiently. And if they're not very good at it, they can be outcompeted by someone who is.)
  - gusgus01 3y ago
    Why would they check that the guards are in place when they can reject the claim after an accident happens because the guard wasn't in place? Who regulates the insurers?
- AnthonyMouse 3y ago
  That only applies to large rare risks. If a risk is common, anyone who ignores it quickly goes out of business from the liability, so anyone still in business is taking effective measures. If a risk is rare and has a low impact, ignoring it frequently is the right thing to do. You're left with things like plane crashes, which have to be minimized even if they're already rare. But that kind of regulation is extraordinarily expensive, and then the same regulatory model gets applied where it isn't needed.
  - roenxi 3y ago
    > You're left with things like plane crashes, which have to be minimized even if they're already rare. I know we're all trying to be moderate here, but I'm not very good at that: 1) It is irrational. The cost-benefits of aircraft safety make no sense. Planes are held to a standard that we don't hold buses and trains to. We should strive to make rational decisions as a matter of policy. 2) There is no reason to think the US regulators are any good at what they are doing. As the thread root comment points out, the incentives are terrible. US industrial policy over my life time has consistently led to Asian growth and US stagnation in ways that were predictable. The US has banned most of the avenues that it could grow by, and coincidentally growth has largely stopped. Very similar story in Europe too, big focus on banning stuff (plus a bit of redistribution) and small focus on how to achieve more prosperity. The US is dedicating the lives of countless smart people to taking a thing that was going to fly through the air like a bird and ... not changing the outcome much. They could have been doing something else that was more useful, like competing with China for telecoms leadership. I don't think the evidence is there for this "having" to be minimised. The big picture looks a lot like people are behaving emotionally, that is sometimes leading to irrational decisions and those irrational decisions have added up to cause real harm. People should be more accepting of other people taking reasonable risk.

jjoonathan 3y ago

Yeah, this is tough, because the obvious counterbalance to "only negative incentives" is to add some positive incentives but the US Patent and Trademark Office is an example of what can go wrong with positive incentives: there are loads of garbage patents on the book and one can't help but wonder if that's because the USPTO is financially incentivized to put them there.

fallingknife 3y ago
Overall I agree, but I would say that is also an example of a negative incentive. A patent is restrictive and prevents innovation and competition in the market. So the patent office erring on the side of granting dubious patents is a restrictive policy same as the FDA erring on the side of not approving useful drugs.
Nifty3929 3y ago
I agree, though I am much less bothered by a proliferation of pointless patents than by a dearth of life-saving treatments.

cornholio 3y ago

The regulator has not only negative feedback when they fail, but also everyday pressure from lobby and interest groups, politicians, companies etc. to do their job faster and "cut the red tape". See for example the very public shaming of FAA by Elon Musk when while expecting launch licenses, tweeting 'sad Escobar in swing' memes etc. And that was just the visible tip of an iceberg of lobbying under the table. So there is some sort of equilibrium forming, not necessarily an optimal one, but the ratchet does loosen occasionally. For example, FDA has famously succumbed to public pressure and reformed its procedures for drugs for terminal diseases so that patients who have nothing to lose can accept much riskier treatment trials, to speed up development for such drugs. I say it's not an optimal equilibrium because nobody incentivizes for the common good. Politicians should, but they seldom do. For example, the nuclear industry would lobby and pressure for rapid approval of their existing traditional methods, but they would, as a whole, be very aggressive against a startup with an innovative design. What better way to kill such a competition than to call your regulator, lay out your 'concerns' and bash the startup with thick rulebook, even if those rules are not at all relevant for the new thing, they still have to comply for a 'fair' playing field.

marcosdumay 3y ago

> the feedback they get is either negative if there's a bad product released, or neutral if there is no terrible product released Yeah, in some ideal world things would work like that. On the real world, there is also an strong incentive not to block the profitability of any powerful person, and your paragraph applies only to powerless ones. A couple of decades ago, there was a strong movement on the governments to measure and publicize the societal costs of the regulators procedures. Leaded by the US and Germany. But then we got the stupidification of politics, that stopped it completely.

Nifty3929 3y ago

I wonder if part of the issue is that FDA approval implies Medicare coverage, which is expensive. And so as a pragmatic matter the FDA slows approval for financial reasons. I don't know if it works at all like this, but the thought did come to mind.

hanniabu 3y ago

> The FDA must have done something right They have just as many issues as any other regulating body. There's many ingredients that are deemed safe in the US that the rest of the world has banned. Every regulating body has been compromised thanks to late stage capitalism.

slavboj 3y ago

The FDA is emphatically not a democratic institution. Who exactly do I vote for if I disagree with FDA policy? Can a civil service FDA employee be fired on the grounds of supporting a particular wildly unpopular policy?

rt4mn 3y ago
I feel like thats a deliberate misreading of the parent comment. Of course the FDA is not, itself, a democratic instution. But then neither is your local police department or NASA. The reason those institutions are accepted despite the lack of direct democratic accountability is because they are still situated within the larger democratic institution (the US government) and subject to oversight by those elected representatives. If you hate the FDA your best bet is to lobby against it yourself (or help others that do). Its to much of an in-the-weeds issue for it to be a high priority for most lawmakers (unless maybe you live in a district with a lot of businesses regulated by FDA)
- firstlink 3y ago
  > Groups like the FDA are democratic institutions > deliberate misreading of the parent comment > Of course the FDA is not, itself, a democratic instution. Can't tell if doublethink or just motte-and-bailey.
  - Karrot_Kream 3y ago
    What are we supposed to get out of your comment, or is this supposed to just be an unvarnished sneer?
    - firstlink 3y ago
      As readers we are supposed to learn that we are being misled. One hopes GP commenter would learn they cannot always get away with this sort of deception. What, if anything, are we supposed to get out of your comment, which seems to question the value of critical reading?

JumpCrisscross 3y ago

> the feedback they get is either negative if there's a bad product released, or neutral if there is no terrible product released Patient activists and drug companies lobby to make stonewalling approvals difficult.

throwway120385 3y ago
Yeah, I'm pretty sure lobbying and hiring good lobbyists to the FDA is the only reason one of the projects I worked on saw the light of day. If our CEO hadn't already been through the process it would have died in De Novo.

singron 3y ago

Reminds me about the overnight pizza issue. I.e. the USDA claims pizza that's 2 hours old will kill you despite people eating old pizza all the time and probably no documented significant negative consequences. https://news.ycombinator.com/item?id=26635856 https://news.ycombinator.com/item?id=26635856

frankfrankfrank 3y ago

If you think the regulators are Democratic I have this wonderful bridge I would like to sell you as an investment. I’m old enough to remember that dictators also hold elections with the same kind of results as the DC presidential election results. Rather ironically, your naive perspective is precisely why “democracy” is a self-evidently failed system and there are clear arguments that it is also a counterproductive, intrinsically unsustainable, and self-defeating system.