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Regulations, even well-intentioned, may be dangerous

A regulation intended to save children resulted in many more deaths. The reason is the lulling effect.

Do well-intentioned regulations ever produce the opposite effect? In 1972 the Food and Drug Administration introduced regulations requiring child-resistant bottlecaps for aspirin and some other medications. The goal was to reduce aspirin poisonings among children. Surely this is a laudable goal. If government has the capability to reduce these tragedies, why wouldn’t we implement laws or regulations?

When W. Kip Viscusi looked at data, he found something striking and very sad: After the implementation of the regulations, there was no significant impact on the rate of aspirin poisonings. The intended goal of the regulation was not met.

But here’s the real problem, writes Viscusi: “… there has been an alarming, upward shift in the trend of analgesic ingestion rates since 1972. The source of this pattern appears to be attributable to a general reduction in parental caution with respect to such medicines, which has had an adverse spillover effect on unregulated products. The economic mechanisms involved can be best understood by considering the nature of individuals’ response to regulatory protection.”

Because of the response of people to the regulations, Viscusi estimates an additional 3,500 children died each year. This is a regulation intended to protect children.

The research is presented in The Lulling Effect: The Impact of Child-Resistant Packaging on Aspirin and Analgesic Ingestions. I’ve excerpted from the conclusion:

Analgesic poisoning rates for children under age 5 escalated from 1.1 per 1,000 in 1971 to 1.5 per 1,000 in 1980. Even after taking into account increases in analgesic sales, 47 percent of this increase is attributable to an unexplained upward shift in the analgesic poisoning rate beginning in 1972. The coupling of the absence of any shift in the trend of aspirin poisoning rates with an upsurge in analgesic poisoning rates is consistent with the hypothesis that there is a significant indivisibility in safety precautions. Moreover, absence of a significant effect of safety caps on aspirin poisonings and the 47 percent unexplained shift in analgesic poisonings suggests that the impact of the regulation on balance was counterproductive, leading to 3,500 additional poisonings of children under age 5 annually from analgesics.

It is possible but unlikely that such a strong impact could emerge from fully rational consumer decisions. Moreover, this effect is not only large but reasonably widespread, as I have identified a similar pattern for prescription drugs, and for cleaning and polishing agents. A more likely explanation for these dramatic effects is that consumers have been lulled into a less-safety-conscious mode of behavior by the existence of safety caps. The presumed effectiveness of the technological solution may have induced increased parental irresponsibility.

A variety of regulatory efforts have sought to reduce individual risks through mandated technological changes. These measures will be effective if individual actions remain unchanged. In practice, these regulations will produce a lulling effect on consumer behavior because the perceived need for precautions will decline, potentially producing adverse spillover effects on the safety of other products. The strength of these impacts should highlight the importance of taking individual behavior into account when designing regulations intended to promote safety.

So we see regulations lulling people into assuming safety, assuming that all is well, but danger is actually increased.

Do you remember Bernie Madoff? He operated in the highly-regulated securities investment industry, yet he was able to steal billions from his clients over a long period of time. Did his clients assume that regulations would keep their money safe? I’m sure that many did.

Recently John Stossel has an episode of his television show devoted to the subject of regulations. He said: “America drowns in law. There are 175,000 pages of federal regulations that you must obey, or some lawyer can wreck your life. For every pound of good the regulations do, they do a ton of harm. 175,000 pages alone strangles life.”

Stossesl also recently wrote: “EBay’s business model is also threatened by fraud. How can a buyer trust that, say, a seller will actually deliver a $25 pack of baseball cards and that the cards will be what he claims they are? In theory, you could sue; but in practice, our legal system is too slow and costly for that. So eBay came up with self-regulation: The buyers rate the sellers.”

When we look to government to solve problems, we can end up with systems that actually make the problem worse. When trading baseball cards, that’s not good. When investing for retirement, regulatory failure is very harmful. But when trying to protect children from poisoning, and then actually causing more deaths — that’s a man-made disaster of the highest order.

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