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.)
Regulation is intended to prevent human harm by setting and enforcing a safety standard.
(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.)
Who regulates the insurers?
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.
I know we're all trying to be moderate here, but I'm not very good at it:
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.
(The optimal number of plane crashes is not zero, as the saying goes, and it’s probably more than we have now.)
Some plane crashes can be prevented with a $0.30 warning light. Preventing those plane crashes is optimal.
Some plane crashes can only be prevented by permanently grounding all planes, because they'll be caused by a confluence of improbable events. Trying to mitigate every implausible circumstance that could potentially lead to a crash is not optimal, even when some of them proceed to actually happen.
I suppose you could let the market decide, and just have airlines publish their failure rates, and more process means a higher ticket price. But it's a bit grisly.
> I suppose you could let the market decide
People think of the market as just involving the principles, but in practice you actually get a ecosystem of controls, between insurance companies, vendors setting standards beyond the normal risk of consumer litigation. The tradeoff is really one of how many specific procedures are specified top-down by government, or required by your insurance company (which may in-turn require something like third-party certification). In-practice plenty of the private regulatory regimes can provide just as much protection, or even better protection for the public as governmental review. They can also be worse. But they do tend to be nimbler, and also tend to leave more room for experiments and risk takers on the margin.
What are the poor ROI irrational decisions that the FAA makes on airline safety, how many lives do they save, and how many dollars do they add to the price of my ticket?
It's easy to say that things are not optimal. Let's say that's the case. What would you change?
> 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.
The US isn't a command economy, it can't redirect human effort like that, introducing subsidies into telecoms will distort the markets, and most of the country's intellect is wasted on financial innovation and adtech and middle management, anyways.
I'm not sure of a good way to have a middle ground between excessive regulation and devaluing human wellbeing. In that case, I'd rather that we err on the side of excessive regulation; especially since there are already powerful financial interests advocating for the other side.
There aren't actually powerful interests advocating for reduced safety. What they want is increased profits.
One way to do that is by eliminating safety measures to save costs, but liability for harm already removes that financial incentive because the cost of the liability should be greater than the cost of the mitigation in any case where the mitigation is cost effective.
Another way to increase profits is to impose "safety regulations" on smaller competitors so they go out of business and larger incumbents can raise prices. Powerful financial interests do not oppose this, they promote it.
Or highway/pedestrian/cyclist safety, for that matter?
I am not sure how well this works in practice - but I think the idea has real merit.
This privatizes regulation. It works, in many cases. But it's replacing a public board of professionals with a private one. If there isn't a case for competing boards delivering better results, a public one may be superior. (And you'll still need a public insurance regulator.)
This ignores that regulators are also people, with the same traits, but with no vested interest in making anything work.
2. If you look at IRBs, how much do you think Scott Alexander is going to be able to pay for liability insurance? The review model does have some advantages.
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.
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.
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.
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)
> 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.
What, if anything, are we supposed to get out of your comment, which seems to question the value of critical reading?
Sneering without reason brings the quality of discussion down on this site. Either substantively disagree or move on.
The point is that its not really relevant to the point they are making, which is that the FDA as an institution has some weird incentives.
> motte-and-bailey.
I'm not familiar with this idiom so I cant say.
Patient activists and drug companies lobby to make stonewalling approvals difficult.
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.
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.