David R. Henderson  

The Bizarre World of Regulation

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Today's Wall Street Journal carries an article that highlights how strange regulation can be. Before reading, recall that one of the major alleged goals of regulation of cigarettes was to handle the problem of second-hand smoke. The idea was that cigarette smokers don't take into account the damage done to others through second-hand smoke and, therefore, the government needed to regulate where smokers smoked. Kip Viscusi cast doubt on this, but let's take it, for these purposes, at face value.

Trust the free market, though, to upset the pattern. If smoking and blowing out cigarette smoke was going to be illegal, what would some entrepreneur do? Come up with a way of letting people enjoy smoking without creating second-hand smoke. And that's just what happened. E-cigarettes now allow people to enjoy nicotine and, instead of creating second-hand smoke, create second-hand water vapor, which is not alleged to be harmful.

Now, if the people who favored the smoking bans really cared about second-hand smoke, they would applaud such a development, right? But they haven't. Here's a paragraph from the Journal story:

The American Lung Association, along with the American Cancer Society Cancer Action Network, the American Heart Association and the Campaign for Tobacco-Free Kids, recently called for e-cigarettes to be removed from the market. The groups say e-cigarettes have yet to be proven safe and that kids may be attracted to the products, some of which come in flavors like chocolate and strawberry. "Nobody knows what the consumers are actually inhaling," says Erika Sward, director of national advocacy at the American Lung Association.

It's probably true that e-cigarettes have not been proved safe. But then you would think, given the potentially huge value of such devices, that the skeptics would want some evidence of safety. Instead, they call for e-cigarettes to be banned.

It gets more bizarre. The FDA wants to regulate the device, not because it's like cigarettes, but because it could be used by those who want to quit smoking. The Journal's author writes:

Regulators have acted quickly to quell the rising popularity of e-cigarettes, saying e-cigarettes are drug devices that need regulatory approval before being legally sold and marketed in the U.S. The Food and Drug Administration says that as of March 1 it "has refused 17 shipments of various brands of these 'electronic' cigarettes, cigars, and pipes, and their components."
The FDA has the power to regulate smoking-cessation products but not tobacco. It says it has examined electronic cigarettes and determined that they meet the "definition of both a drug and device under the Federal Food, Drug, and Cosmetic Act," according to legal filings. Drugs and delivery devices must receive FDA approval before being marketed.

Get it? The FDA wants to regulate the devices, not because they might be simple substitutes for cigarettes but because they might actually, perish the thought, help people quit.

Don't be surprised if you see some of the anti-smoking advocates call for a ban on e-cigarettes on the grounds that such devices will undercut the existing smoking bans in restaurants, bars, and restaurants. Thus does a belief in regulation to solve a problem become a belief in regulation independent of whether there's a problem at all.

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CATEGORIES: Regulation

TRACKBACKS (1 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/1917
The author at Sambal in a related article titled E-Cigarettes: Awesome writes:
    David Henderson writes about e-cigarettes and the growing desire to regulate them.  He’s concerned that the regulation of smoking, justified to the public as a measure to control secondhand exposure to nicotine and combustion products, was just... [Tracked on June 3, 2009 9:58 PM]
COMMENTS (20 to date)
John Fembup writes:

". . . because they might actually, perish the thought, help people quit."

Well, in this case, the government's action seems logical, considering all the tobacco settlement money the federal govt (not to mention the sates) stand to lose - if cigarettes don't sell.

redbud writes:

When arguments keep shifting, or involve hypocrisy, it's a sure sign of trouble. Trust is all about knowing what is, and what will be. Best wishes from Kansas!

Ken writes:

We know a lot about tobacco cigarettes: they are not good for your health and contain thousands of toxins.
Electronic cigarettes are certainly a better alternative.

Here is a quick introduction to electronic cigarettes.

sk writes:

Thanks David for blogging about this. I am a somewhat heavy smoker. Unfortunately, I found out about these electronic cigarettes just yesterday reading an article in nytimes. It struck me as a really cool thing. I then went on looking for websites that sell them and I was amazed to see the reviews on amazon...of people using these for 3 years or so. I don't know if I am some kind of a loner who doesn't hang out with people 'in the know' or if there is a reason it's not really really popular already. I want to try it out and I hope I'll like it. I also hope that FDA or some other agency doesn't ban these.

mgunn writes:

This appears bizarre if you think regulation is to combat externalities, but that's not what I think drives the pro-regulation crowd.

In this case, I think the people calling for regulation have some "enlightened" view on how other people should live, and any regulation that moves society in that direction, as a first order effect, is deemed to be worthwhile. Nicotine is bad. People shouldn't use nicotine. Any nicotine delivery device should be regulated and made more difficult to acquire.

It's the whole "some people don't do what I think they should," therefore "they are irrational" therefore "they would be better off if I forced them to live properly" logic. For them, big brother knows best.

Mike Moffatt writes:

"Get it? The FDA wants to regulate the devices, not because they might be simple substitutes for cigarettes but because they might actually, perish the thought, help people quit."

Actually, the FDA wants to do the job they're *required* to do under the Federal Food, Drug, and Cosmetic Act.

Serious question for David Henderson - do you believe government agencies should be ignoring their mandates under the law?

If you want to blame anyone for this situation, blame the lawmakers who make the laws, not the bureaucrats who are doing their job.

Ed Lopez writes:

Not about externalities. It' about paternalist caretaking of the unwashed masses. Here's an explicit and rigorous treatment:

David R. Henderson writes:

Dear Ed Lopez,
I read the NBER piece you cited quickly and I don't get it. I understand the piece but I don't understand how you're connecting it with this issue. Even an honest paternalist concerned about people smoking would want them to take the combination of nicotine and water vapor instead of nicotine and carcinogens.

Mike Rulle writes:

But we already knew this--right? Political, "anti-freedom" ideology always masks itself as something other than it is.

Stephen S writes:

I used to smoke fairly heavily. Now, I have completely quit cigarettes in favor of snus, which I import from www.buysnus.com

Snus have been shown to help people quit smoking at a rate almost double that of nicotine gum and other FDA-approved methods, and there is absolutely no risk of second-hand smoke from them. Furthermore, they are much, much safer than cigarettes.

Naturally, there have already been murmurs that they will soon be banned in the US, even as cigarettes get grandfathered in.

Tom writes:

Mike Moffatt must be on the payroll of the Big Tobacco companies. The FDA is doing the bidding of Big Tobacco because the e-cigarette is going to threaten the profits of these companies. Once again Big Business is using the tools of government power to retain their position of economic dominance.

Mike if you are not on the payroll yet, you might want to send Philip Morris an email requesting payment for fighting on their behalf. High powered lawyers are already on the case trying get the FDA to crush or extinguish the e cigarette. You might as well try to get on the payroll too.

Ed Lopez writes:


My point is that market failure theory is not very useful to understanding large swaths of regulatory initiatives and policies. If you look at the regulation of smoking as an exercise in paternalism, then the opposition to e-cigs is not strange at all.

To put this another way, it's no longer just about externalities but internalities. Regulators are motivated to help people---from THEMSELVES.

As a corollary, defenders of markets cannot simply point to a government policy as being inefficient. For one, many people are willing to give up some efficiency to pursue non-economic objectives through the state. And second, as I've said, policymakers aren't necessarily trying to pursue efficiency.

The neoclassical welfare standard is of limited use in understanding government and in critiquing government.



David R. Henderson writes:

Dear Ed,
I agree with what you say. But you didn't answer the question I asked you. I take you at your word that they're paternalists trying to save people from themselves. So why don't they? With reasonable cross-elasticities of demand, you know that these e-cigarettes will, on net, save people's lives. Yet these same paternalists don't seem to want to. Why?
I think it gets to what I said in the last sentence of my post:
"Thus does a belief in regulation to solve a problem become a belief in regulation independent of whether there's a problem at all."
In other words, they forget what they're after and end up just wanting to regulate. It's more primitive than paternalism.

TruePath writes:

Like many issues we see in politics this is more about morality than some rational policy preference. Many people have come to see smoking as dirty and some kind of moral infraction. In other words smoking tobacco is viewed much the way that many people view anal sex, smoking pot, or the like. Ultimately then the regulations are an expression of this disapproval not any rational attempt to achieve any policy goal so the policy consequences are mostly irrelevant.

I mean is this any different than the way people behave about drug laws or did behave about alcohol prohibition. If it was really policy consequences driving the issue one would think that the empirical data would be of great interest and importance but yet it rarely seems to be.

Mike Moffatt writes:

"Mike if you are not on the payroll yet, you might want to send Philip Morris an email requesting payment for fighting on their behalf. High powered lawyers are already on the case trying get the FDA to crush or extinguish the e cigarette. You might as well try to get on the payroll too."

I would, but the germ warfare folks and hardcore pornographers I represent keep me busy enough as is.

J Cortez writes:

David Henderson said: "In other words, they forget what they're after and end up just wanting to regulate. It's more primitive than paternalism."

If you by primitive you mean that they only care about their own power, level of pay/comfort and will try to continue it by justifying their own existence, I agree. I think there's three things, sometimes by themselves and sometimes in combination.

Paternalism: I think the paternalism motive does exist, but that it is as base as any other motive. Paternalism is basically a self interest in seeing people live well, as you define living well. With competing views on what is best differing from individual to individual, it makes no sense to have a government agency define this except in only the most basic and universal terms: Do what you want, provided you harm no one. Unfortunately, paternalists don't care about choice at all. I know I state the extreme version of it here, but the usual default position of many of these types is: "the masses are not responsible adults in the way we define it, so they must be taken care of like children. . ." I remember speaking with one woman (she later became a superintendent of a large metropolitan school system) who advocated pregnancy licenses and mandatory exercise programs. Her ideas sounded more like prison than life.

Adhering to the law: The regulator/clerk/commissioner/etc might not like enforcing a particular law or regulation, but they are forced to follow it due to the nature of government. Sometimes this is only a strong dedication to the rules but sometimes there is self interest involved. Consider that to do otherwise means disciplinary action in the form of docked pay, forced leave, bad performance reviews, no raises, less benefits and maybe even loss of employment or even legal action.

Power: My experiences with governmental "services" is a 50/50 hit or miss in terms of quality and efficiency, unlike private business which does what I say (at minimum) 90% of the time or I fire them. I'm sure everybody has experienced standing in front of an inspector or clerk for some type of simple license or legal form and seen the self-importance that some of them project. And since their bureau is effectively a monopoly, you have no choice but to acqcuiesce to whatever attitude they have. That's not to say all are bad, but some are. There's a few people here and there that believe they have their own little fiefdom. These fiefdoms might be as small as the local county clerk's office or as large as the FCC, but in the end it's still about power.

I remember something Don Boudreaux said once about self interest and incentives existing in all settings, whether government or private-- That because something is government, doesn't somehow make the human beings involved any different, it just grants them coercive state power that normally wouldn't exist in a regular market setting. I think that concept is important to keep that in mind when discussing any regulation.

Ed Lopez writes:


Sorry for late reply. Yes, paternalism is of limited explanatory power too, like correcting for market failure is. And so is logic.

I won't presume to decipher motive, other than to say they are maximizing their own utility, which includes a vision of the world the way they think it ought to be, subject to the constraints of the written law and public opinion. E-cigs are competition for their preferred solution, which is to ban cigarettes or better yet vilify and tax them heavily. Perhaps e-cigs threaten to render irrelevant a lot of past efforts toward these ends. I guess men of systems don't like it when entrepreneurs invent ways for the chess pieces to move about on their own?

Capt. A. writes:

Dear David Henderson,

Thanks for your informative article. I have just a few things to mention...

I used to live in the United States. (I left more than 31-years ago at age 45) I used to be a U.S. citizen. I’m no longer either living in the States or exercising servility as a citizen. Life is too short. Whether it’s loss of individual freedom, liberty, privacy or private property rights, here’s an eye-opening suggestion for those individuals that truly VALUE the attributes mentioned above: LEAVE! Sometimes—time spent trying to change a system—is TIME “best” spent looking for a system, a venue, you don’t have to change! Whether it’s cigarettes, regulations, bureaucrats, politicians ... ad nauseam, why spend the only life you will ever have fighting, the corruption of those who would instigate the use of force, fraud or coercion while spending your “time,” the only time you will ever have on such poppycock! I guess if that’s all the value that one places on his or her life ... then so be it!

Life is to be lived, treasured to the fullest and to enjoy its pleasures. The IRS, FDA, FAA, and every damnable government agency in existence, to merely “take time” away and frivolously waste it. The government proves this every single day. They take from your productive wealth-producing energy; screw you with edicts, regulations, bad law and yet the American booboisie continue to VOTE for more of the same! Absolute shear stupidity! The self-inflicted terminal stupidities exercised by ALL those who “vote” in puking-dog democracies (Frank Chodorov’s quip) lend legitimacy to the very subjugation and control you allude to. It’s nuts! Americans, as well as most of the world’s people, live in serious “denial.” Most will not get what they want—but they will surely get exactly what they deserve! You can take that to the bank!

You get the picture. Again, I ask the serious question: Why live the only life you will ever have in “hell on earth?” Those who wile away their life “hoping” for “change” will get the cattle prod. Having just returned from the Far East on a recent business trip, a cohort, a Chinese elder passed on this axiom: "Where fear or hope reside, there can never be peace.” Certainly the U.S. government has proved beyond the pale that is specializes in “fear” along with absolute control of the reins. Why would anyone with a rational, reasoning brain even be in such a venue? Poppycock on stilts! I’ve heard every excuse in the book and then some.

“Most people dream away their lives with the illusion that everything would be perfect -- if only...” ~Capt. A.

Well, it’s time to enjoy and light up a Cuban Cohiba and pour a fine glass of cognac while looking out over the Mediterranean. Try smoking a real Cuban cigar in America and see what happens to you if the feds find out... Crowbar hotel ... with no view.

C’est la guerre,

Capt. A.
Principaute de Monaco
“Anyone who needs to be persuaded to be free, doesn’t deserve to be.” ~ L. Neil Smith

Anonymous writes:

Capt. A, I too left the USA in 1988 and live in a country that HAS many repressive laws, but they don't have the competence or desire to enforce them. Great climate at 3200 feet altitude, cheap cost of living, and no (not much at least) big brother to annoy me.
Where am I? (close to the USA-southwards)

Capt. A. writes:

Good for you Anonymous!

It’s rare for individuals who have the “Big Picture” to stop “talking” and take ACTION on how they live life. It’s actually very rare. I applaud you! As I said in the note above, “life is too short.” Not allowing “others” to live your life for you is a daunting task. It can be done though. I take great pleasure in knowing that the world has individuals that absolutely refuse to live their life on the terms of others. They don’t talk—they act! Here’s something for continued thought:

"The fact is that the average man's love of liberty is nine-tenths imaginary, exactly like his love of sense, justice and truth. He is not actually happy when free; he is uncomfortable, a bit alarmed, and intolerably lonely. Liberty is not a thing for the great masses of men. It is the exclusive possession of a small and disreputable minority, like knowledge, courage and honor. It takes a special sort of man to understand and enjoy liberty—and he is usually an outlaw in democratic societies." -- H.L. Mencken, Baltimore Evening Sun, Feb. 12, 1923

The very best to you Anonymous. I think you will prosper and live your life well. Make it so.


Capt. A.
Principaute de Monaco
“Anyone who needs to be persuaded to be free, doesn’t deserve to be.” ~ L. Neil Smith

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