The Helpless Consumer

An interesting post over at the Cato Blog suggests that the notion of the helpless consumer, and the corollary that government intervention is the solution is not quite correct. The basic gist of the argument is that the FDA doesn’t have any authority to regulate dietary supplements. If the Helpless Consumer Theory is true, then there would be no testing for the safety, efficacy, and quality of these supplements. The poor consumer would be basically buying snake-oil and possibly suffering ill health consequences.

The reality is that the market place has provided a solution: ConsumerLab.com. ConsumerLab.com provides these very services to consumers of dietary supplements, but for a price. Some might object to this and say that the FDA’s services are free. Not quite. We pay for the FDA’s services via tax dollars. Further, we also pay via reduced choice. Finally, there is a third choice in terms of opportunity costs. Suppose there is a drug that is effective against a certain type of medical problem. However, there is some concern about the drug’s safety, so it is withheld from the public. If the drug is effective then people suffer by not having access to it. Granted, there is a very serious concern about the safety of the drug, but this raises the question of who should make the decision to take such drugs? If the patient, in consultation with a doctor (or doctors) thinks the risks are reasonable, then shouldn’t the patient be allowed to assume that risk? Basically, the FDA promotes ignorance on the part of the consumer because the consumer assumes that products have been “screened” by the FDA and passed, hence pose no or very little risk.

One could argue that the market based approach isn’t perfect or subject to bias. This is undoubtedly true, but each charge can be responded to simply. The FDA isn’t perfect either and the FDA can be subjected to bias as well. At least with the market place, if a firm that is supposed to be providing unbiased reports on a products safety, quality, and so forth turns out to be providing biased information there is a quick solution: consumers look elsewhere for the information. This has the salutary effect of financially damaging the company that produced the biased reports. Is there a similar mechanism for the current political-bureaucratic approach? Sure you can “vote the bastards out of office” 2 to 4 years down the road…maybe, but the overall this kind of response seems imprecise and cumbersome.

FILED UNDER: Economics and Business, Health, Science & Technology,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.