But recently some college kids started drinking pre-mixed combos of alcohol and caffeine with names like Four Loko and Moonshot ’69. Moonshot ’69 is a pilsner beer with less than a coffee cup’s worth of caffeine. Until recently, Four Loko contained 12 percent alcohol—about the same as wine—and as much caffeine as a cup of coffee. A few students, after drinking Four Loko, landed in the hospital with alcohol poisoning. Naturally, hysterical news reports followed.

A new bogeyman was born: caffeinated alcoholic beverages.

As night follows day, the Food and Drug Administration in November ordered beverage companies to lose the caffeine or shut down. The FDA called caffeine an “unsafe food additive.” Phusion Products says it will now produce only noncaffeinated Four Loko. Moonshot ‘69 is off the market for now, which is bad news for Rhonda Kallman, who founded the company that makes it, New Century Brewing.

“There is nothing new about adults combining caffeine and alcohol,” Kallman writes on her company website. “Who hasn’t enjoyed a rum and Coke, Irish coffee, Kahlua or espresso martini? . . . Moonshot ‘69 is a beer for beer drinkers that has been enjoyed by craft-beer lovers since 2004.”

Her online petition states: “We the undersigned support the right of responsible adults to choose the beer of their choice. We support Moonshot ‘69 and the rights of craft brewers across the country to produce new and innovative offerings for the beer drinking public. . . . We call on the federal government to adhere to responsible regulation of alcoholic beverages that allows adults to enjoy the beer of their choice.”

Unfortunately, Kallman tries to separate her product from higher-alcohol FDA targets, but Nick Gillespie of Reason magazine argues that the FDA has no business limiting the sale of any of the alcohol/caffeine combos.

“This has been going on for as long as there have been colleges and universities,” he said. “You can go back to the Middle Ages, and booze and students go together like, I guess, beer and caffeine.”

Forced Underground

Aren’t some drinks more dangerous than others?

“I don’t think so. But when we raised the drinking age to 21 . . . we told young people . . . you can vote, you can enter a contract, you can go to war, you can die for your country, but if you want to drink and you’re going to college, you better go off campus into a basement apartment somewhere and chug like there’s no tomorrow because you don’t know when you’re going to be able to get drunk again.”

He points out that by forbidding pre-21 adults from drinking openly around their elders, we deny them the chance to be exposed to responsible drinking.

About the ban on caffeinated alcoholic drinks, he added, “You can’t minimize the overreach by the FDA.”

I asked the FDA why Moonshot ’69 is included on the ban list when it’s not marketed to pre-21 adults and it contains less alcohol than more sugary drinks. They replied that Moonshot was referred to the agency by state attorneys general concerned about alcohol and caffeine. The FDA asked New Century Brewing for data indicating the legal standard for safety had been met, but no data was provided.

Kallman points out that the FDA “didn’t fully research it either. So they put the onus on the small entrepreneur to have a scientist. But at the end of the day, it’s 5 percent alcohol by volume and less than a half a cup of coffee of natural caffeine. Where will they stop?”

Never. Government never stops.

Gillespie added, “What we should be having instead of bans [of] beverages that people like and . . . consume responsibly is . . . a national conversation about how, after a couple of hundred years of the American experiment, we can get past the prohibitionist mindset and teach people how to drink responsibly like they do in France, Italy, Spain and many other parts of the world.”

Almost 50 years ago Szasz published The Myth of Mental Illness. It changed the political framework in which mental illness was addressed by laying the foundation for a concept Szasz developed through a series of books, including The Manufacture of Madness (1970). That concept was “the Therapeutic State”—a collaboration between psychiatry and the State through which “undesirable” actions, thoughts, and behavior patterns were suppressed. Thus Szasz not only disputed the moral and scientific basis of psychiatry but also argued that modern medicine was an engine of social control, with pharmaceuticals as primary tools.

A new slate of drugs now addresses a wide range of so-called disorders, or dysfunctions, that former generations considered environmental problems or lifestyle choices: from obesity to attention deficit, from erectile dysfunction to social anxiety (shyness), from menopause to alcoholism. Indeed, laziness is now being discussed as “a neuro-developmental dysfunction” for which drugs are being developed. The current Therapeutic State may be best analyzed as a collaboration between modern medicine, the pharmaceutical industry, and the State.

The debate stirred by Szasz has muted. The medical establishment and mainstream media are now advocates of the Therapeutic State. Similar advocates dominate universities, studies, prestigious committees, FDA hearings, and governmental bodies. Since writing The Myth, Szasz himself has noted that “the formerly sharp distinctions between medical hospitals and mental hospitals, voluntary and involuntary mental patients, and private and public psychiatry have blurred into nonexistence. Virtually all medical and mental health care is now the responsibility of and is regulated by the federal government, and its cost paid, in full or in part, by the federal government.” Problems of everyday life have been medicalized, and people are viewed as having little or no ability to “cure” conditions such as alcoholism or drug abuse through willpower or change of habit. The focus Szasz tried to foster on the individual’s responsibility for his or her own dysfunctions has eroded.

Happily, a backlash against the medicalization of everyday life is occurring. Alas, it is being fought on the wrong ground.

In this regard, a fascinating book has just been published. Sex, Lies, and Pharmaceuticals: How Drug Companies Plan to Profit from Female Sexual Dysfunction by Ray Moynihan and Barbara Mintzes is a work of investigative journalism that explores the close financial relationship between the medical experts who define and develop the “science” behind new dysfunctions and the $500-plus billion pharmaceutical industry that profits from treating them. For example, Moynihan examines the makeup of experts on committees that define dysfunctions for the extremely influential Diagnostic and Statistical Manual of Mental Disorders (DSM); it is from the DSM that “social anxiety disorder” derives. (Revealingly, homosexuality was only delisted as a disorder in 1970.) Moynihan observes, “The DSM has been criticised for the closeness between the expert committees who write the definition of diseases and the pharmaceutical companies that sell the drugs prescribed to treat them. One study that looked closely at the affiliations of the men and women on those committees found that more than half of them had ties to drug companies. On the committees revising mood disorders, including depression, the figure was closer to 100 per cent.”

In short, he constructs a strong case for endemic bias within the medical establishment in favor of drug companies and the creation of disease.

Another sign of backlash is the emergence of grassroots rebellions against specific “diseases,” such as the currently emerging “female sexual dysfunction,” and against the use of drugs, such as Ritalin, to “cure” attention deficit disorder in children.

A reopening of debate on medicalizing everyday life is to be applauded. But, unlike Szasz, the new critics, such as Moynihan, do not take aim at the Therapeutic State; instead they focus on the therapeutic industry—that is, the flow of money between the medical establishment and the pharmaceutical companies. The culpability of the government in the creation of disease is either marginalized or denied.

Other pharmaceutical dissidents tend to view the State as the solution, not part of the problem. For example, feminist activist Leonore Tiefer works through the World Health Organization to impose new legislation that promotes such “rights” (or entitlements) as “the right to comprehensive sexuality education” and “the right to sexual health care, which should be available for prevention and treatment of all sexual concerns, problems, and disorders.”

It is possible that critics like Moynihan and Tiefer will accomplish some good. Perhaps they will be able to reduce the widespread prescription of the powerful Ritalin to grade-school children. But without understanding the essential role played by the State in the medicalization of everyday life, critics can never strike at the root of the problem. Indeed, they may well worsen matters by shifting blame and giving more authority to the very agency most responsible for the creation of disease.

The Need for a New Focus

The focus of the reemerging debate needs to shift onto Szaszian grounds, onto an analysis of the Therapeutic State, in at least four ways.

First, it must be clear that government defines the framework for all medical practices within North America. Second, the protection offered to pharmaceutical companies should be analyzed as legal privilege. Third, the relatively new and influential “private-public partnerships”—a marriage between the corporate sector and government institutions—should be examined and exposed. And, fourth, the role government plays in “marketing” drugs through institutions like the public school system and social services must be examined.

Government framework. There is no genuine competition allowed in the practice of medicine or the administration of drugs. Both of these vital functions of society are monopolies that the government assigns to those who meet State requirements and abide by State rules. Thus the American Medical Association (AMA) is able to exert monopoly control of medical care, such as hospitalization, and has a long history of persecuting competitors such as midwives.

But licensing is only the most obvious way in which the State and AMA define medical care. There are many other labyrinthine ways in which the medical establishment partners with authority. In reporting on the AMA’s support of Obamacare, for example, the Wall Street Journal explained last year, “The organization wants to protect a monopoly that the federal government has created for it—a medical coding system administered by the AMA that every health-care professional and hospital must use if they wish to get paid for the services they provide. This monopoly generates income of $70 million to $100 million annually for the AMA. That makes the AMA less an association looking out for doctors and more a special-interest group beholden to Congress and the White House.”

FDA Approved

Legal privilege. All prescription drugs must be approved by the FDA; but, again, the monopoly privilege of being the sole legal drug dealers in society is only the most obvious one granted the pharmaceutical industry and hardly captures the extent of partnership. Moynihan chronicles a less obvious privilege in writing about “one of the biggest healthcare frauds in U.S. history. Pfizer was accused of illegally promoting an anti-arthritis drug for unapproved uses and, so, creating a health risk to users. Pfizer admitted to limited guilt and paid a criminal fine of $1.2 Billion and civil penalties of $1B.” Despite the hefty financial hit, not one executive was held personally responsible; no retribution was sought. The sentencing judge, federal District Court Judge Douglas Woodlock (Massachusetts) commented in his concluding remarks, “This is a case in which no human being, apparently, is going to be held responsible for substantial criminal activity by a corporation.” He notes that Pfizer absorbed the financial hit as a “cost of doing business” and still returned record profits.

Private-public partnerships (PPP). A PPP is a collaboration between government and the private sector in which a venture is funded (in part or in full) by tax dollars and operated through the private sector, or else the private sector raises capital under contract with the government to provide services. Although PPPs are most often associated with infrastructure projects, such as the repair of roads or building of bridges, this sort of ersatz capitalism is rampant within medical research and drug promotion. According to a 2001 study, “hundreds of millions of dollars” have been invested in the United States to promote partnerships around health issues, creating “thousands of alliances, coalitions, consortia and other health partnerships.” That trend has only increased in the ensuing years. Tax-funded research is commonly funneled through nominally private organizations or researchers. Conferences, studies, reports, and such are conducted at taxpayer expense. Arguably, such funding constitutes the greatest barrier to alternative, independent research.

Uncle Sam the Pusherman

Government peddling of pharmaceuticals. It is not merely that private for-profit organizations have used tax dollars to climb aboard the public health bandwagon. The government uses its agencies to create a market base. Just one example is the role of the public schools as a “pusher” of Ritalin—a form of speed more potent than cocaine—to millions of school-age children. Overwhelmingly, it is prescribed to boys who are “unruly” in class. A 2001 report stated, “If Huckleberry Finn and Tom Sawyer were in a school in Massachusetts today, they’d be drugged with Ritalin, according to many psychiatrists and other experts.” As a recent September Huffington Post headline asked, “Do 2.5 Million Children Really Need Ritalin?” Dr. Sanford Newmark continued, “What is going on here? Have millions of our children become so hyperactive and unable to focus that they are incapable of succeeding at school or dealing with the demands of normal life? Or are we creating an illness where there is none, calling normal variations in temperament and personality a ‘disease’ that requires the intervention of long term, and extremely profitable, pharmaceutical medication?”

Monopoly, legal privileges, the rise of PPPs, the use of tax dollars to create disease and eliminate competition, the peddling of pharmaceuticals through government agencies—these issues must be prominent in any productive discussion of the medicalization of everyday life. If the discussion focuses on corporate greed, then the Therapeutic State will have merely entered a new phase.

Let’s start with something simple, like ketchup. Hilts’s first regulatory hero is Dr. Harvey Wiley, a government chemist who in the early 1900s began campaigning for a ban on many food preservatives. Wiley came close to getting President Theodore Roosevelt’s backing for a prohibition on benzoate in ketchup, but failed. Hilts closes the chapter with Wiley supposedly being vindicated by history because some of the firms that originally opposed him eventually stopped using the chemical.

You won’t learn it from this book, but Wiley’s views of benzoate’s risks turned out to be wrong; even today, the chemical is widely used as a preservative. Banning benzoates in Wiley’s time might well have increased ptomaine poisonings. And finally (for you public-choice fans), it’s likely that the few ketchup companies that supported Wiley, such as Heinz, had more than the public interest at heart. Yes, they used better tomatoes and production methods, but they also charged more — Heinz cost over twice as much as regular ketchup. Wiley’s ban would have helped Heinz competitively, while punishing people who had better use for their money than high-priced ketchup.

Medicine is more complicated than ketchup, but Hilts’s simplistic approach doesn’t change here. In his world, corporate greed is to blame for all defective drugs, the FDA’s incentives are always beneficial, and the few government mistakes he acknowledges could be cured by more funding. As for the lives lost due to FDA delays in approving new therapies, those are a figment of the New Right conspiracy to dismantle the agency.

For example, Hilts excuses the FDA’s three-year delay in approving Interleukin-2 for advanced kidney cancer because, he claims, the drug “was useful to only a small number of patients” and during the delay the agency provided “early availability for those who felt they needed to take the risk.” Now it’s true that Interleukin-2 produced temporary remissions for only 15–20 percent of those taking it, and that the drug itself was highly dangerous. But many patients preferred that to the 100 percent death rate of the disease itself. As for its alleged pre-approval availability, the head of the National Kidney Cancer Association had a one-word comment at the time, a word we won’t reproduce in this magazine.

Compare this to Hilts’s stirring account of how the FDA took only six weeks to approve the first of the protease inhibitors for AIDS. The agency didn’t insist on data of reduced mortality because such information would have taken far more time to collect and demanding it was viewed as unethical given the life-and-death situation of AIDS patients. Instead, the agency approved the drug on the basis of preliminary data that showed improved cellular function.

AIDS patients were highly organized; kidney cancer patients were not. If they had been, they probably would have been treated better by the FDA. When access to new therapies is controlled by government, political clout may well determine who gets better service. But this issue doesn’t fit into Hilts’s framework.

Corporate wrongdoing has certainly been a factor in such medical disasters as thalidomide and the Dalkon Shield, but regulatory delays inflict at least as much damage. When the FDA approves a life-saving therapy, some number of people have to have died waiting for the agency to act. Hilts, however, refuses to even acknowledge this. He characterizes as “grotesque” the argument that the FDA’s focus on preventing bad drugs may lead it to delay or deny useful drugs. But this risk is clear. While defective drugs and drug delays both have adverse medical consequences, their political impacts are incredibly different. Drug recalls are the subject of news stories and congressional hearings. Drug delays, on the other hand, rarely get noticed; all that their victims know is that their doctors can’t do more for them. The skewed regulatory incentives that result were acknowledged by former FDA head David Kessler, another of Hilts’s heroes, who wrote that “speeding access to urgently needed products was not nearly so deeply ingrained in our culture.”

In its emphasis on drug recalls and its rationalizations for drug delays, Protecting America’s Health unintentionally demonstrates this very point. It’s unfortunate that, in a book of this scope, this issue gets a bum’s rush.

Sam Kazman is general counsel of the Competitive Enterprise Institute (www.cei.org), a Washington, D.C.-based free-market advocacy organization.

To the Editor:

As a former wartime draftee — the Korean War — I’m of two minds re Aeon J. Skoble’s “Neither Slavery Nor Involuntary Servitude” piece in your September issue (“It Just Ain’t So!). No question, he did a very good job of picking apart the operational flaws inherent in any draft. But where I found him woefully deficient (especially considering the wonderful title of the piece!) was in how quickly he backed off from belaboring those two atrocious Supreme Court decisions designed back before 1920 to make military conscription look acceptable. I mean really, how can we libertarians hope to teach young people the rightness of our cause if we roll over so easily?
—JOHN SIMONS
Sheffield, Vermont

Aeon Skoble replies:

John Simons takes me to task for “how quickly [I] backed off from belaboring those two atrocious Supreme Court decisions” that failed to understand conscription from the point of view of the Thirteenth Amendment. But there’s nothing to belabor. My point was that it doesn’t matter, legally, whether I think that since conscription is involuntary servitude it ought to be forbidden by the Thirteenth Amendment—it only matters whether the Supreme Court thinks so. What does matter is my contention that regardless of the Supreme Court’s ruling, conscription is bad public policy. So I concentrated instead on replying to the flawed reasoning of contemporary academics and legislators who are in a position to drum up support for new policies. It would be important to refute the reasoning in Butler and Arver if I were preparing a brief for a court challenge to those decisions. But that’s not what is before us. What is before us are grandstanding politicians, backed up by some mistaken academic theories, proposing new laws that are irrational on several grounds. It is that reasoning to which I was responding. Simons wonders how we can “hope to teach young people the rightness of our cause if we roll over so easily?” I certainly wasn’t rolling over easily—I thought I was fairly strident—but there’s no point in pretending that Supreme Court decisions are other than what they are.

No Common Good?

To the Editor:

Professor Harold B. Jones, Jr.’s cursory dismissal of the idea of a “common good” deserves far more thought. (Review of The Collapse of the Common Good by Philip K. Howard, September 2003.) Relying as he seems to on individualism, of course, is a familiar theme for libertarians, but it seems to neglect matters of criminal law, constitutions, common law, natural law, and just plain common sense. While the author he reviews might have erred in his concept of the common good, e.g., in favor of collectivism, socialistic or bureaucratic solutions, gargantuan government, and so forth, the real debate should maintain respect for the common good while deciding just how far government should go. At times, this may even overlap what Jones might happen to consider the “well-being of the individuals of whom the commonality is composed.” (E.g., does he mean, “To each according to his needs?”) Otherwise, Jones will subject us to anarchy, another familiar pillar of libertarians which they’ve never entirely justified.

Jones’s idea of “justice” or “fairness to particular parties” is no easy paradigm. Both sides in court are seldom equally happy, so on what basis is it to be decided? His very mention of “fairness” and “justice” introduces an element above mere individualism.

Of course, rejecting the “common good” is a standard tactic for new movements — e.g., feminism, which considers it anathema — but it’s always a bit hypocritical since they also enjoy the benefits of civil society, courtesy, gentlemen, right law and order, family, property law, various ordered freedoms, security from predators, etc., all commensurate with the common good. That individuals benefit from the common good in many ways (a sort of trickle-down phenomenon) should be a given.
—W. EDWARD CHYNOWETH
Sanger, Calif.

Harold Jones, Jr., replies:

The “common good” is of necessity the good that is actually enjoyed by particular persons. There is no higher entity from which it can, in Mr. Chynoweth’s words, “trickle down.” It exists only to the extent that it bubbles up in the experience of concrete individuals.

A sense of “justice” is a part of this experience. It arises from the conviction that the law will be consistent in its defense of reasonable conduct. This does not mean that every party to every lawsuit will leave the court rejoicing. It means rather that third parties can look at the decision and reliably find either encouragement or warning with regard to whatever it is they may be planning. It means that laws can be trusted, in the words of Justice Holmes, as “prophecies of what the courts will do.”

The Collapse of the Common Good describes a society in which this has ceased to be the case. Its author fails to see that the ills he deplores are the result of what he suggests as a remedy. They are the result of government by men rather than by law. They are the result of precisely the fact that those whom Mr. Howard refers to as “people with responsibility” (bureaucrats) are permitted to impose their will on others “just because it seems right” (to the bureaucrat). The “plain common sense” to which Mr. Chynoweth makes his appeal says that any “good” forced upon the individuals concerned is not “common,” and it is unlikely to be experienced as “good.”

The level of social cooperation is highest when the government is restricted to guarding the borders, minding the infrastructure, and protecting the unoffending citizen. Under such a system, individuals can be confident about the rewards of honest effort. Each seeks his or her own good by providing something others regard as valuable. Any “debate,” as Mr. Chynoweth puts it, “over just how far government should go” is ultimately a debate over whose interests are to be encouraged and whose are to be sacrificed. When that debate is taken seriously, people seek to advance themselves not by providing a service but by having the law declare they are entitled to something at the expense of their neighbors. It is then only a short step to Hobbes’s description of the struggle of “every man against every man,” and to the social collapse of which Philip Howard writes.

Nature Conservancy Is Not Benign

To the Editor:

Re: Arthur Williams’s letter on the Nature Conservancy (TNC) in your October 2003 issue: TNC is not the benign organization that Mr. Williams holds it out to be. It lives not on individual donations but on corporate grants and federal tax dollars—more than $32 million between 1995 and 2000. Your readers may want to read the Washington Post’s investigative series on TNC, peruse some of the TNC-related postings on www.propertyrightsresearch.org and www.eco.freedom.org (instructive is the article “Nature Conservancy—Fraud and Theft”), and read “Nature’s Landlord,” published by Range Magazine.

The TNC may not engage in the terrorist activities used by Earth First, but it is advancing the same environmentalist goal— evict humans from broad areas of the country (a.k.a. The Wildlands Project) and prevent the productive use of land. The ongoing revelations about TNC’s modus operandi bring to mind Lord Acton’s observation on power and corruption.

—JOHN D’ALOIA JR.
St. Mary’s, Kansas

No Tears for Drug Companies, Please

To the Editor:

I always enjoy the articles in The Freeman: Ideas on Liberty. As a physician, I wish to comment on Doug Bandow’s article, “Healers Under Siege,” in the November 2003 issue.

In the article, the author paints the drug companies as underdogs — under siege. The reality is these companies have had their “foot in the door” at the Food and Drug Administration (FDA) for about 100 years. The Bureau of Chemistry, later renamed the FDA, was formed in 1906. Recent studies showed that over 50 percent of FDA employees were consultants for or in some way had worked for drug companies before or after their tenure at the FDA. This is a shocking case of the “revolving door” between a government agency and the industry it is supposed to regulate.

The legal “drug culture” in America, the product of excellent public relations and FDA rules, is not improving the health of the American people. That is a major reason health-care costs are rising so fast. Drugs are excellent for short-term trauma medicine. However, many drugs are toxic, and longterm they damage the body.

A recent study by the American Medical Association found that side effects of pharmaceuticals killed about 192,000 people each year, just in hospitals. This makes pharmaceuticals the fourth leading cause of death in America. There is definitely trouble in paradise, and the cost explosion in health care is but a symptom. Drug manufacturers lobby hard to defeat any proposals that would allow alternative products on the market that are far safer and less costly. The drug industry is part of a medical cartel held in place by licensing laws, hundreds of other anti-consumer laws, and the FDA, which has legislative, executive, and judicial powers all rolled into one.

For this reason, I grow weary of articles praising or feeling sorry for the drug industry. The reality of the legal drug culture is a classic case of government regulation gone awry.
—LAWRENCE WILSON, MD
via e-mail

Doug Bandow replies:

There’s no doubt that drug makers work hard to game the regulatory process, but that’s hardly a surprise when Washington asserts its control over the approval of new medicines. Government control is no more justified there than elsewhere in the healthcare system—such as limiting competition with MDs by other medical professionals. And while drugs should not be viewed as the only remedy for disease and injury, their benefits can be enormous.

What are those inflationary forces? . . . [M]ost important among them are the incentives in the payment and organization of medical care that cause physicians, hospitals and other medical care facilities to focus at least as much on income and profit as on meeting the needs of patients. . . . The incentives in such a system reward and stimulate the delivery of more services. That is why medical expenditures in the U.S. are so much higher than in any other country, and are rising more rapidly. . . . Physicians, who supply the services, control most of the decisions to use medical resources. . . .

The economic incentives in the medical market are attracting the great majority of physicians into specialty practice, and these incentives, combined with the continued introduction of new and more expensive technology, are a major factor in causing inflation of medical expenditures. Physicians and ambulatory care and diagnostic facilities are largely paid on a piecework basis for each item of service provided.

As a health care worker, I have personally witnessed this kind of mutual log-rolling between specialists and the never-ending addition of tests to the bill without any explanation to the patient. The patient simply lies in bed and watches an endless parade of unknown doctors poking their heads in the door for a microsecond, along with an endless series of lab techs drawing body fluids for one test after another that’s “been ordered,” with no further explanation. The post-discharge avalanche of bills includes duns from two or three dozen doctors, most of whom the patient couldn’t pick out of a police lineup. It’s the same kind of quid pro quo that takes place in academia, with professors assigning each other’s (extremely expensive and copyrighted) texts and systematically citing each other’s works in order to game their stats in the Social Sciences Citation Index. (I was also a grad assistant once.) You might also consider Dilbert creator Scott Adams’s account of what happens when you pay programmers for the number of bugs they fix.

One solution to this particular problem is to have a one-to-one relationship between the patient and a general practitioner on retainer. That’s how the old “lodge practice” worked. (See David Beito’s “Lodge Doctors and the Poor,” The Freeman, May 1994).

But that’s illegal, you know. In New York City, John Muney recently introduced an updated version of lodge practice: the AMG Medical Group, which for a monthly premium of $79 and a flat office fee of $10 per visit provides a wide range of services (limited to what its own practitioners can perform in-house). But because AMG is a fixed-rate plan and doesn’t charge more for “unplanned procedures,” the New York Department of Insurance considers it an unlicensed insurance policy. Muney may agree, unwillingly, to a settlement arranged by his lawyer in which he charges more for unplanned procedures like treatment for a sudden ear infection. So the State is forcing a modern-day lodge practitioner to charge more, thereby keeping the medical and insurance cartels happy—all in the name of “protecting the public.” How’s that for irony?

Regarding expensive machinery, I wonder how much of the cost is embedded rent on patents or regulatorily mandated overhead. I’ll bet if you removed all the legal barriers that prevent a bunch of open-source hardware hackers from reverse-engineering a homebrew version of it, you could get an MRI machine with a twentyfold reduction in cost. I know that’s the case in an area I’m more familiar with: micromanufacturing technology. For example, the RepRap—a homebrew, open-source 3-D printer—costs roughly $500 in materials to make, compared to tens of thousands for proprietary commercial versions.

More generally, the system is racked by artificial scarcity, as editor Sheldon Richman observed in an interview a few months back. For example, licensing systems limit the number of practitioners and arbitrarily impose levels of educational overhead beyond the requirements of the procedures actually being performed.

Libertarians sometimes—and rightly—use “grocery insurance” as an analogy to explain medical price inflation: If there were such a thing as grocery insurance, with low deductibles, to provide third-party payments at the checkout register, people would be buying a lot more rib-eye and porterhouse steaks and a lot less hamburger.

The problem is we’ve got a regulatory system that outlaws hamburger and compels you to buy porterhouse if you’re going to buy anything at all. It’s a multiple-tier finance system with one tier of service. Dental hygienists can’t set up independent teeth-cleaning practices in most states, and nurse-practitioners are required to operate under a physician’s “supervision” (when he’s out golfing). No matter how simple and straightforward the procedure, you can’t hire someone who’s adequately trained just to perform the service you need; you’ve got to pay amortization on a full med school education and residency.

Drug patents have the same effect, increasing the cost per pill by up to 2,000 percent. They also have a perverse effect on drug development, diverting R&D money primarily into developing “me, too” drugs that tweak the formulas of drugs whose patents are about to expire just enough to allow repatenting. Drug-company propaganda about high R&D costs, as a justification for patents to recoup capital outlays, is highly misleading. A major part of the basic research for identifying therapeutic pathways is done in small biotech startups, or at taxpayer expense in university laboratories, and then bought up by big drug companies. The main expense of the drug companies is the FDA-imposed testing regimen—and most of that is not to test the version actually marketed, but to secure patent lockdown on other possible variants of the marketed version. In other words, gaming the patent system grossly inflates R&D spending.

The prescription medicine system, along with state licensing of pharmacists and Drug Enforcement Administration licensing of pharmacies, is another severe restraint on competition. At the local natural-foods cooperative I can buy foods in bulk, at a generic commodity price; even organic flour, sugar, and other items are usually cheaper than the name-brand conventional equivalent at the supermarket. Such food cooperatives have their origins in the food-buying clubs of the 1970s, which applied the principle of bulk purchasing. The pharmaceutical licensing system obviously prohibits such bulk purchasing (unless you can get a licensed pharmacist to cooperate).

I work with a nurse from a farming background who frequently buys veterinary-grade drugs to treat her family for common illnesses without paying either Big Pharma’s markup or the price of an office visit. Veterinary supply catalogs are also quite popular in the homesteading and survivalist movements, as I understand. Two years ago I had a bad case of poison ivy and made an expensive office visit to get a prescription for prednisone. The next year the poison ivy came back; I’d been weeding the same area on the edge of my garden and had exactly the same symptoms as before. But the doctor’s office refused to give me a new prescription without my first coming in for an office visit, at full price—for my own safety, of course. So I ordered prednisone from a foreign online pharmacy and got enough of the drug for half a dozen bouts of poison ivy—all for less money than that office visit would have cost me.

Of course people who resort to these kinds of measures are putting themselves at serious risk of harassment from law enforcement. But until 1914, as Sheldon Richman pointed out (“The Right to Self-Treatment,” Freedom Daily, January 1995), “adult citizens could enter a pharmacy and buy any drug they wished, from headache powders to opium.”

The main impetus to creating the licensing systems on which artificial scarcity depends came from the medical profession early in the twentieth century. As described by Richman:

Accreditation of medical schools regulated how many doctors would graduate each year. Licensing similarly metered the number of practitioners and prohibited competitors, such as nurses and paramedics, from performing services they were perfectly capable of performing. Finally, prescription laws guaranteed that people would have to see a doctor to obtain medicines they had previously been able to get on their own.

The medical licensing cartels were also the primary force behind the move to shut down lodge practice, mentioned above.

In the case of all these forms of artificial scarcity, the government creates a “honey pot” by making some forms of practice artificially lucrative. It’s only natural, under those circumstances, that health care business models gravitate to where the money is.

Health care is a classic example of what Ivan Illich, in Tools for Conviviality, called a “radical monopoly.” State-sponsored crowding out makes other, cheaper (but often more appropriate) forms of treatment less usable, and renders cheaper (but adequate) treatments artificially scarce. Artificially centralized, high-tech, and skill-intensive ways of doing things make it harder for ordinary people to translate their skills and knowledge into use-value. The State’s regulations put an artificial floor beneath overhead cost, so that there’s a markup of several hundred percent to do anything; decent, comfortable poverty becomes impossible.

A good analogy is subsidies to freeways and urban sprawl, which make our feet less usable and raise living expenses by enforcing artificial dependence on cars. Local building codes primarily reflect the influence of building contractors, so competition from low-cost unconventional techniques (T-slot and other modular designs, vernacular materials like bales and papercrete, and so on) is artificially locked out of the market. Charles Johnson described the way governments erect barriers to people meeting their own needs and make comfortable subsistence artificially costly, in the specific case of homelessness, in “Scratching By: How the Government Creates Poverty as We Know It” (The Freeman, December 2007).

The major proposals for health care “reform” that went before Congress would do little or nothing to address the institutional sources of high cost. As Jesse Walker argued at Reason.com, a 100 percent single-payer system, far from being a “radical” solution,

would still accept the institutional premises of the present medical system. Consider the typical American health care transaction. On one side of the exchange you’ll have one of an artificially limited number of providers, many of them concentrated in those enormous, faceless institutions called hospitals. On the other side, making the purchase, is not a patient but one of those enormous, faceless institutions called insurers. The insurers, some of which are actual arms of the government and some of which merely owe their customers to the government’s tax incentives and shape their coverage to fit the government’s mandates, are expected to pay all or a share of even routine medical expenses. The result is higher costs, less competition, less transparency, and, in general, a system where the consumer gets about as much autonomy and respect as the stethoscope. Radical reform would restore power to the patient. Instead, the issue on the table is whether the behemoths we answer to will be purely public or public-private partnerships. [“Obama is No Radical,” September 30, 2009]

I’m a strong advocate of cooperative models of health care finance, like the Ithaca Health Alliance (created by the same people, including Paul Glover, who created the Ithaca Hours local currency system), or the friendly societies and mutuals of the nineteenth century described by writers like Pyotr Kropotkin and E. P. Thompson. But far more important than reforming finance is reforming the way delivery of service is organized.

Consider the libertarian alternatives that might exist. A neighborhood cooperative clinic might keep a doctor of family medicine or a nurse practitioner on retainer, along the lines of the lodge-practice system. The doctor might have his med school debt and his malpractice premiums assumed by the clinic in return for accepting a reasonable upper middle-class salary.

As an alternative to arbitrarily inflated educational mandates, on the other hand, there might be many competing tiers of professional training depending on the patient’s needs and ability to pay. There might be a free-market equivalent of the Chinese “barefoot doctors.” Such practitioners might attend school for a year and learn enough to identify and treat common infectious diseases, simple traumas, and so on. For example, the “barefoot doctor” at the neighborhood cooperative clinic might listen to your chest, do a sputum culture, and give you a round of Zithro for your pneumonia; he might stitch up a laceration or set a simple fracture. His training would include recognizing cases that were clearly beyond his competence and calling in a doctor for backup when necessary. He might provide most services at the cooperative clinic, with several clinics keeping a common M.D. on retainer for more serious cases. He would be certified by a professional association or guild of his choice, chosen from among competing guilds based on its market reputation for enforcing high standards. (That’s how competing kosher certification bodies work today, without any government-defined standards). Such voluntary licensing bodies, unlike state licensing boards, would face competition—and hence, unlike state boards, would have a strong market incentive to police their memberships in order to maintain a reputation for quality.

The clinic would use generic medicines (of course, since that’s all that would exist in a free market). Since local juries or arbitration bodies would likely take a much more common-sense view of the standards for reasonable care, there would be far less pressure for expensive CYA testing and far lower malpractice premiums.

Basic care could be financed by monthly membership dues, with additional catastrophic-care insurance (cheap and with a high deductible) available to those who wanted it. The monthly dues might be as cheap as or even cheaper than Dr. Muney’s. It would be a no-frills, bare-bones system, true enough—but to the 40 million or so people who are currently uninsured, it would be a pretty damned good deal.

Empowered to regulate industry marketing practices, the FDA must develop warning labels that must cover 50 percent of the side space on cigarette packages. The labels must draw from a catalog of congressionally sanctioned phrases that include:

WARNING: Cigarettes are addictive. WARNING: Tobacco smoke can harm your children. WARNING: Cigarettes cause fatal lung disease. WARNING: Cigarettes cause cancer. WARNING: Cigarettes cause strokes and heart disease. WARNING: Smoking during pregnancy can harm your baby. WARNING: Smoking can kill you. WARNING: Tobacco smoke causes fatal lung disease in nonsmokers. WARNING: Quitting smoking now greatly reduces serious risks to your health.

As dramatic as this all seems, this extension of FDA powers received a somewhat mixed response from the medical and health-advocate communities.

John Cohn, a lung-disease specialist at Thomas Jefferson University Hospital in Philadelphia said, “It’s sort of like asking the police commissioner to regulate prostitution.” Perhaps Cohn anticipates agency capture of the sort typically seen in Washington.

Matthew Myers, president of the Campaign for Smoke-Free Kids, a leading lobbyist for the law, took a more optimistic but still somewhat guarded position. “You can stay with the status quo, with industry controlling the level of nicotine in products and companies deciding what health claims to make. Or you can give control to an agency with a history of scientific expertise in regulating products. This fills an important gap.”

All Bark

This somewhat tepid celebration was prompted by uncertainty about how the FDA would really manage its new authority. There is also the feeling that this statute, like many others, had a title that sounded more powerful than the content justified. The word “prevention” in the title sounds rather dramatic, but the teeth in the law itself are more like baby teeth than fully mature incisors. (Consider, for example, the exception made for menthol-flavored cigarettes.)

The politicians’ commentary that followed the law’s passage was much more boastful and self-congratulatory. Senator Edward Kennedy, long an advocate for more government control of the industry and sponsor of the Senate version of the law, exclaimed, “Miracles still happen. The United States Senate has finally said ‘no’ to Big Tobacco.”

Had Congress really said no?

In a way, Kennedy misstated what had actually happened. The Senate had not entirely said no. Indeed, the biggest of big tobacco, Altria Group, the producer of market-leader Marlboro, had lobbied long and hard for the bill’s passage. Altria’s two major competitors, Lorillard and Reynolds Tobacco, saw the law as giving Marlboro, with its market share locked and a lead in developing no-nicotine products, an unfair advantage. As is often the case, the Senate picked a winning horse and rode it. The Senate said yes to one and no to two others.

With Kennedy unable to lead the battle for his bill due to illness, Senator Christopher Dodd assumed leadership. Not quite as dramatic in his comment as Kennedy, but in a way equally inaccurate, Dodd said, “For more years than anyone can count, we’ve had an industry that’s gone basically unregulated.”

Unregulated Tobacco?

It is true that tobacco products have not been regulated by the FDA, though the agency has attempted to do so almost since its 1906 founding. But after decades of regulation by the Federal Trade Commission (FTC), the Federal Communication Commission (FCC), and Congress itself, hardly anyone who has followed the industry would say it has gone “basically unregulated.”

Instead, some would argue that it was regulation that defined the industry’s trade practices and, by doing so, maintained the industry’s high profits and expanded the sale of products in just those markets Tobacco-Free Kids and others worry about. (See John Calfee’s “The Ghost of Cigarette Advertising Past, Regulation, Nov.-Dec. 1986.)

How could this be? Consider the following capsules that come from a long tobacco saga (these and more can be found in Bruce Yandle, et al., “Bootleggers, Baptists and Televangelists: Regulating Tobacco by Litigation,” University of Illinois Law Review, 2008):

Almost from the start, tobacco products were regulated. The first government efforts to control tobacco consumption date at least to 1629, when the colonial authorities in Massachusetts Bay prohibited settlers from planting tobacco except in small quantities used for medicinal purposes. (Kennedy’s position follows a historic Massachusetts tradition.) Health interest groups have a long history of activism as well. The focus was on cigarettes. There were several hundred anti-cigarette leagues in the United States with more than 300,000 total members by the turn of the nineteenth century.

Twenty-six states banned the sale of cigarettes to minors by 1890, and 16 states totally prohibited cigarette sales by the end of 1909. World War I is said to have been a stimulus for cigarette consumption. As a result of extensive lobbying by tobacco producers, by 1927 all of the state bans on sales to minors were repealed. As bans declined, state taxes appeared, beginning in 1921 in Iowa and spreading to nearly all states by 1960. Politicians learned that tobacco products were a mother lode for tax revenues. There were no more total bans.

The FDA was explicitly denied authority to regulate tobacco when Congress passed the Pure Food and Drug Act of 1906, which created the agency. Just before passing the act, nicotine, then listed as a drug, was removed from the U.S. pharmacopeia. This assured the FDA could not regulate nicotine as a drug. Since 1906, when amending the FDA act and related legislation, Congress has consistently rejected proposed amendments to grant FDA regulatory powers. Congress regulated the industry itself.

While scientific data may have been lacking, popular recognition of the harms from smoking showed up in expressions that developed for cigarettes and related ailments: coffin nails, smoker’s cough, gasper, wheezer, lung duster. Yet a 1938 Consumer Reports article on smoking and health indicated no scientific evidence of harm from smoking. Nevertheless, marketplace recognition of health problems led the tobacco companies to go on the attack: “Not a cough in a carload” and “Remember Juleps, forget your cough” (Chesterfield); “Not a single case of throat irritation due to smoking” (Camels); and “Why risk sore throats?” (Old Gold).

In 1950 the FTC issued cease-and-desist orders against major cigarette companies on all health-effect advertising. The commission found that all popular cigarettes were harmless for healthy smokers. On these grounds, comparative health claims–”less smoker’s cough,” for example–were prohibited. Later, when cigarette producers introduced filters and began to advertise levels of tar and nicotine, the FTC struck again. In February 1960 the FTC announced that it had negotiated a voluntary agreement with the tobacco companies to cut all tar and nicotine claims from cigarette advertising. The agency heralded the “industry-government cooperation.” The FTC action brought to an end health-effect advertising that had led to a sharp decline in tar-weighted cigarette sales and the demise of some of the stronger cigarette brands.

In 1964 the Surgeon General reported a causal connection between smoking and lung cancer, chronic bronchitis, and coronary disease. He also stated that “cigarette smoking is a health hazard of sufficient importance in the United States to warrant appropriate remedial action.” Immediately, the FTC initiated proceedings to regulate cigarette advertising. In a final proposed rule, the FTC called for all cigarette packages to carry this warning: “Cigarette Smoking is Dangerous to Health and May Cause Death from Cancer and Other Diseases.” Congress intervened, sharply rebuked the FTC, and in 1965 passed the Federal Cigarette Labeling and Advertising Act that required a milder warning: “Caution: Cigarette Smoking May Be Hazardous to Your Health.” The FTC was banned from further meddling for at least four years.

Cigarette Regulation May Be Fatal to New Entrants

In May 1969 the FTC attempted to require all cigarette advertising to warn that “Cigarette Smoking is Dangerous to Health and May Cause Death from Cancer, Coronary Heart Disease, Chronic Bronchitis, Pulmonary Emphysema, and Other Diseases.” Once again, Congress countered and passed the Public Health Cigarette Smoking Act of 1969, which banned all cigarette advertising on electronic media after January 1, 1971,and mandated that all cigarette packages bear a milder statement: “Warning: The Surgeon General Has Determined that Cigarette Smoking Is Dangerous to Your Health.” The ban on radio and TV advertising ended the public-health messages required by the FCC, which had been shown to cut cigarette consumption, and reduced most of the $200 million annual advertising cost for existing tobacco products. The ban also made it more costly for new entrants to gain market share.

In 1998, 46 state attorneys general negotiated a settlement with tobacco producers after several successful state suits against tobacco companies based on recovering the cost of Medicaid payments for tobacco-related illnesses. The settlement yielded payments to the states that totaled $200 billion, which converted to an average annual payment to each state of $180 million in perpetuity. To generate the revenue the tobacco producers were allowed to collude and raise prices, doubling the wholesale price of cigarettes. Total sales volume went down. Profits went up. In effect the tobacco firms became well-paid tax collectors for the states. The settlement also contained a rich set of regulations that affected the marketing of tobacco products to youthful consumers.

Industry-Serving Regulation

No, there is no evidence to suggest that tobacco has until now been “an industry that has gone basically unregulated.” But there is ample evidence that tobacco regulation has served the interests of the industry and the politicians that broker favors to the industry. Meanwhile, consumers of tobacco products, who are generally a lower-income population, have been denied the benefits of competitively determined product information; they also have unwittingly become major sources of revenue for state politicians, who generally provide more benefits to higher-income than lower-income consumers.

One can only speculate about what might have happened had the FTC not outlawed health-effects advertising and had the industry not become one of the more regulated industries in America.

There is a growing subset of consumers who would prefer not to buy their milk this way. They want it unpasteurized, unhomogenized—in a word, “raw.” They would prefer to drink their milk as humans have consumed it for centuries, which is also how every single signer of the U.S. Constitution drank it.

To procure such a basic product, however, these consumers—with some exceptions—are forced to break the law. The basic retail sale of raw milk for human consumption is legal in only eight states—Arizona, California, Connecticut, Maine, Pennsylvania, South Carolina, New Mexico, and Washington. Its sale for human consumption across state lines is illegal nationwide. In some other states raw milk can be sold at the farm site only, sold through “cow share” programs, or legally marketed as “pet food.” Seventeen states completely forbid the sale of raw milk in any way.

How did this happen? We all learned in childhood about Louis Pasteur’s development of pasteurization in the mid-1800s. For mass-produced milk in an age before refrigeration, pasteurization was indeed a godsend. Early in the twentieth century, as people died at alarming rates due to contaminated milk from filthy urban dairy centers, pasteurization caught on as a hot market trend. In a time when milk collection and storage on large-scale farms was unsanitary and unrefrigerated (and when additives as diverse as marigold petals and animal brains were placed in milk to add body), pasteurization helped save lives. Thus people were willing to pay for it. But then one city after another began to mandate the process through legislation. In 1948 Michigan became the first state to ban the sale of unpasteurized milk, and other states soon followed suit. In 1986 a federal judge ordered that interstate shipments of raw milk be banned, further limiting supply for consumers.

Now, despite advances in dairy-production techniques, it doesn’t matter how clean the equipment or how healthy the cow; raw milk is either illegal or highly suspect, and state and federal bureaucracies see it as a threat to the population. Regulation overstepped the free market and did an end run around common sense.

Raw-milk advocates argue that milk in its pure state is quite beneficial to health. According to the Weston A. Price Foundation, a leading natural-foods organization, raw milk reduces the incidence of asthma, eczema, and hay fever in children. Unpasteurized milk also aids the body’s natural digestive system. Pasteurization, the Foundation insists, kills helpful bacteria and breaks down delicate proteins in milk, leading to the dairy intolerance seen in so many individuals in this modern age. Advocates also state that unpasteurized milk strengthens the immune system and provides optimal growth and development for young people.

The opinion of government officials, backed up by the bulk of the medical community, is that every bit of that is hogwash. A joint press release from the U.S. Food and Drug Administration and the Centers for Disease Control, dated March 1, 2007, reminds consumers “of the dangers of drinking milk that has not been pasteurized.” Among the litany of diseases said to be carried by raw milk are “listeriosis, salmonellosis, campylobacteriosis, typhoid fever, tuberculosis, diphtheria and brucellosis.” It is enough to make one wonder how Amish communities manage to survive.

The FDA/CDC claims that “There is no meaningful nutritional difference between pasteurized and raw milk.” The Price Foundation retorts that no research is cited by the FDA/CDC to substantiate such claims. The press release also states that “From 1998 to May 2005 CDC identified 45 outbreaks of foodborne illnesses,” accounting for “1,007 illnesses, 107 hospitalizations, and two deaths.” Aside from the fact that these are minuscule numbers for a population of nearly 300 million being tracked over seven years, there seems to be little evidence to back up the figures. Thomas Bartlett, in an article on raw milk (“The Raw Deal,” October 1, 2006), went looking for such cases of illness. In addition to finding no anecdotal evidence whatsoever, he also asked John Sheehan, then-director of the FDA’s dairy and egg safety division, for evidence linking raw milk to deadly disease outbreaks.

Sheehan admitted that he didn’t know of any such cases in the United States in the past 20 years. Nevertheless, the official line on raw milk is so ingrained as to be farcical. In interviewing a Maryland state health official about raw milk sales, Bartlett was told selling raw milk was as bad as selling marijuana, and the official compared such producers to heroin dealers.

Indeed, the question is far more important than, “Is raw milk beneficial?” or even, “Is raw milk safe?” It is this: What right does the state have to outlaw the sale of unpasteurized milk in the first place?

Imagine the case of Mark Nolt of New Line, Pennsylvania. Nolt was arrested—arrested—last May in a sting operation in which undercover officials purchased raw milk from his farm. Nolt, a Mennonite farmer with ten children, was fined $4,040, had his equipment and products seized, and was threatened with jail if he tried to sell raw milk again. His case is not unique. Nolt’s spokesman at his trial, Jonas Stoltzfus, eloquently summed up the situation: “This issue has very little to do with raw milk and health, and everything to do with freedom.”

Controlling the Milk Supply

But why milk? Indeed, as the 2008 pepper scare has proven, harmful bacteria can find their way to many other food sources. However, milk is different from most other food products. It is a staple among staples. To control the milk supply is to control the food supply.

Pasteurization is not a cheap process, and therefore the legal demand for pasteurization favors large producers. A small, independent dairy farm may very well not be able to afford pasteurization equipment (not at government standards, at least), and thus micro-dairies can rarely operate legally on their own. With the dairy industry more centralized, it becomes easier to track and regulate—and control.

Control of the milk supply has been a primary step in the state’s efforts to control the larger food supply. Agriculture continues to fall further and further under the eye of government regulation, as do businesses as diverse as potato-chip manufacturers and fast-food restaurants. The USDA, FDA, and myriad other state and federal agencies make no bones about their goal of controlling every morsel Americans consume—all for our own good, of course.

And where better to start than with milk? Think of the psychological benefits for the state emanating from such regulation. If a product as central and wholesome as milk can only be safe through government control, reliance on the paternalistic state grows. Has it worked? Ask a random acquaintance if he would consider drinking unpasteurized milk. You may very well get a look of horror in return. Why do people feel that way? Simply because they have been indoctrinated to feel that way. Why not be just as accepting of government regulation over their mayonnaise or their chicken or their lettuce? How about their water supply or the cars they drive or how warm they keep their homes in the wintertime? Though not necessarily a conscious progression, control by the state, when left unchecked, simply grows and expands naturally.

As ingrained in our social conscience as pasteurization has become, it is hard for many to step back and realize just how preposterous milk laws happen to be. One must ask if the many citizen-farmers who valiantly fought for liberty two centuries ago could have ever envisioned a “free” state in which one citizen would be legally barred from selling milk from his cow to another citizen. Even King George III would have laughed at that idea.

The Energy Independence and Security Act of 2007 mandated that oil companies increase the amount of ethanol mixed with gasoline. The argued benefits were that it would decrease our dependence on foreign oil and provide a more environmentally friendly fuel. Anyone with an ounce of brains would have realized that diverting crops from food to fuel would raise the prices of a host of corn-related foods, such as corn-fed meat and dairy products. A Purdue University study found that the ethanol program has cost U.S. consumers $15 billion in higher food costs in 2007, and it will be considerably higher in 2008. Higher food prices, as a result of the biofuels industry, have had international consequences as seen in the food riots that have broken out in Egypt, Haiti, Yemen, Bangladesh, Mexico, and other nations.

Anti-Terrorism Spending

The victims of benefits-oriented policies, such as those of the Energy Independence and Security Act of 2007, are visible, but for many other policies the victims and the costs are invisible. That is the case with anti-terrorism expenditures. Take Wyoming with its two major cities: Cheyenne (population 53,000) and Casper (50,000). Federal and state homeland security anti-terrorism expenditures there in 2007 totaled $6,673,910. The benefits of such expenditures are that they might prevent Wyoming from being attacked and if attacked, ameliorate some of the consequences.

There’s no precise way to determine Wyoming’s risk of a terrorist attack and its cost, but simple reasoning suggests that too little or too much can be spent. The costs of spending too little might result in a devastating terrorist attack that could have been prevented. The costs of spending too much are less obvious because the victims are invisible. For example, the price for dump trucks for snow and ice removal ranges between $140,000 and $160,000. How many Wyoming lives could have been saved had some of the anti-terrorism expenditures been spent on additional dump trucks to clear streets and roads of snow and ice? Those victims are invisible.

Environmentalism

Environmentalists have been very active and successful in California in getting huge tracts of land set aside as “open space,” on which nothing can be built, and enacting “smart growth” policies severely restricting residential and business construction. Open space and smart growth are seen as benefits. The cost is skyrocketing housing prices at some multiple of housing prices nationwide, whereas before the 1970s they were similar. Dr. Thomas Sowell wrote, “One of the ways of coping with high housing costs is with ‘creative’—and risky—financing. Roughly two-thirds of the home mortgages in the San Francisco Bay area are interest-only mortgages. Theoretically, you could make mortgage payments forever without acquiring a cent of equity in your home. . . . In reality, the interest-only mortgage payments apply for only a limited number of years—three to five years in most cases—after which the payments rise, so as to contribute something toward the payment of the principal. People who expect their incomes to rise significantly in a few years assume that they will be able to handle the higher payments then. Of course that assumption can turn out to be wrong and the house can be lost” (“Froth in Frisco?” Wall Street Journal, May 26, 2005). Such practices have contributed to the subprime crisis we now face.

There’s another cost. According to Census estimates, the number of black residents in San Francisco has shrunk from 13.4 percent of the population in 1970 to just 6.5 percent in 2005—the steepest decline in any major American city. Guess what. San Francisco Mayor Gavin Newsom appointed a task force to study how to reverse decades of policies that black leaders say have fueled the flight. He made no mention of environmentalist policies that have driven the cost of housing beyond the reach of many blacks.

FDA

The Food and Drug Administration’s (FDA) beneficent mission is to ensure the safety and effectiveness of pharmaceuticals. FDA officials can make two types of errors: approving a drug that has unanticipated dangerous side effects, or disapproving and delaying a drug that is both safe and effective. An FDA official has unequal incentives to avoid these two types of errors. Making the first error, erring on the side of under-caution, the victims are visible and he is directly accountable. Erring on the side of over-caution, the cost and the victims are invisible and there is no accountability. Victims die never knowing why.

In an article in Regulation magazine, Robert M. Goldberg examined some examples of the costs of FDA delay:

Beta Blockers: Beta blockers regulate hypertension and heart problems. The FDA held up approval of beta blockers for eight years because it believed they caused cancer. In the meantime, according to Dr. Louis Lasagna of the Tufts University Center for the Study of Drug Development, 119,000 people died who might have been helped by that medication.

Clozaril: First approved and used in 1970 in Europe, Clozaril’s ability to treat schizophrenics who did not respond to other medicines became known in 1979. Yet the drug was not approved in the United States until 1990 because companies believed the FDA would reject it on the grounds that 1 percent of all patients who take the drug contract a blood disease. As an article in the New England Journal of Medicine marveled . . . : “What is remarkable is that [Clozaril] has a beneficial effect on a substantial proportion [30 to 50 percent] of patients who have an inadequate response to other. . . drugs.” FDA delay therefore meant that nearly 250,000 people with schizophrenia suffered needlessly, when relief was at hand.

Mevacor: Mevacor is a cholesterol-lowering drug that has been linked to reduction in death due to heart attacks. It was available in Europe in 1989 but did not become available in the United States until 1992. Studies confirm what doctors saw to be the case: taking the drug reduced death due to heart disease by about 55 percent. During that three-year period as many as a thousand people a year died from heart disease because of the FDA delay.

The economist’s bottom-line message is that for the sake of human compassion and efficiency, any discussion of benefits from this or that public policy should entail an explicit acknowledgment of costs.