David R. Henderson  

Peter Thiel on Regulation and Progress

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Peter Thiel gave an interesting talk at the International Students for Liberty Conference earlier this month. In it, he claimed that few sectors other than the relatively unregulated IT sector have had substantial progress decade by decade. He mentioned, for example, airplanes and cars. Decade by decade, he said, they improved, until about 1980, after which progress slowed or ground to a halt. He attributed this to government regulation. He also made the case quite well that the FDA is preventing us from getting drugs because it's setting up huge barriers to those drugs being developed. Many others, including me, have made that case. (See here and here, for instance.)

I think his big-picture story, that heavy regulation slows progress, is basically right. But I also think he missed a lot of more-subtle technological change that has improved things in many industries. My guess is that he missed it because he's biased by his own experience. He was and is in an industry with rapid technological change and I think that experience makes it hard for him to note subtleties in other industries.

Take even the highly regulated industry of medicine. We've seen dramatic improvements in treatments of various diseases and in surgical techniques, decade by decade. Fortunately, the FDA, as far as I know, has not yet tried to prevent surgeons from trying new techniques.

Or consider cars. I think CAFE (the Corporate Average Fuel Economy law) has focused the industry on better gas mileage at the expense of other improvements. But there have been other improvements. The main one is durability. Cars last much longer than they did in 1980.

There's a long Q&A session that lasts longer than Thiel's talk. Thiel is quite good in places and quite weak in places. He's particularly weak when he discusses monetary policy.

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CATEGORIES: Regulation

COMMENTS (8 to date)
Marcus Nunes writes:

Who´s not weak discussing MP these days? Even Bernanke has been pretty weak!

steve writes:

The railroads, airlines, and trucking industries were all significantly deregulated in the 70s. Their success since then has been pretty mixed. OTOH, beer, which was also deregulated then, has really flourished.

Mike Hammock writes:

I have to agree, it sounds like he's leaving out a lot of innovation, perhaps because he sees clearly the innovation in the industry with which he's most familiar. The amount of improvement in cars is amazing--they're safer, more reliable, and (for a given fuel economy) way more powerful than they used to be. They're stuffed full of gadgets, too.

Charlie Deist writes:

I wonder what he was thinking of when he said Friedman favored fixed exchange rates--maybe fixed percentage growth in the money supply?

Good to be reminded that even the best and brightest make mistakes!

Mark Plus writes:

Medical imaging has shown dramatic progress in the past 30 years. Doctors can extract detailed information about your internal organs using noninvasive techniques which would have sounded like science fiction not that long ago.

MG writes:

David brings up the issue of innovation in surgery, and to what extent its' being relatively more "softly" (my less than precise term) regulated than drugs may have facilitated innovation (at least relative to drug making). There may be a lot to unpack here, especially if you see surgery as being a more personalized, case by case intervention needing less of a one size fits all approach to oversight. Well, this is exactly what the future of drug making will be: personalized medicine. My understanding is that the current drug efficacy/effectiveness regulatory framework will increasingly be proven to be particularly bad at dealing with this kind of innovation. Another issue to explore is whether even surgery oversight could be improved and to what extent regulation via boards and tort law (which is I guess how surgery is "regulated") is more amenable to innovation.

nazgulnarsil writes:

car reliability improvements seem to come in waves that correspond to updated tooling. More precisely machines parts made of tougher materials that have been modeled better last longer.

Gian writes:

Scientific methods works very well in surgery as the results are visible to the eye with no delay.

With drugs, the scientific method faces problems: some drugs like statins work slowly and need to be taken for many years and there are too many interfering factors.
Witness the controversy over the real benefit of statins and diabetic drugs even now.

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