Regulatory capture: the perversion of our public bodies

 James Lyons-Weiler writes about regulatory capture in the US:

When the airline industry has a disaster, it goes under review by the National Transportation Safety Board. When corporations dump a toxic brew of chemicals into ground surface waters, they are supposed to answer to the EPA. When drug companies’ products - drugs and vaccines - cause more health problems than they prevent or cure, they are supposed to be subject to recall by the FDA.

When regulatory agencies become dominated by the corporations they are supposed to control, that agency has been captured by the industry. The public interest becomes a lower priority than the bidding of the will of the industry, and the industry flourishes - most of the time at the cost of human health. Regulatory capture is killing us, and we are two steps away from the totalitarian fascist Regulatory States of America, James Lyons-Weiler, 24 December

Of course, this is not just a US phenomenon, and perhaps there is an inevitabililty about it, even in the absence of some coherent conspiracy influencing each or all regulatory agencies. People are paid to turn up at the office, and at some point, perhaps years or decades after the founding of the organisation for which they work, the aggregated individual incentives of employees to keep their job and to expand or at least maintain their remit, supplant the stated objectives of the organisation. Then conflict arises between - and within - the employees. Do they stay faithful to the ideals that drove them to take on the job and the stated goals of the organisation? Or do they take the safer option, put their own priorities and those of their family first? Unfortunately, as organisations, be they public- or private-sector, the conflict grows worse with time. In the private sector and in theory, competition should see older, scelerotic corporations die, to be replaced by more nimble upstarts. But regulatory capture means larger corporations have more in common with larger public agencies: neither wishes to rock the boat. The result is a slew of regulations that stifle competition and cement in place the bigger companies and their outdated and anti-competitive ways of doing business. The losers are the public.

There might be ways in the current enviroinment to prevent regulatory capture, but if so they are piecemeal and ineffectual. We are seeing the results everywhere: extreme polarisation in politics, in the academic world; an extreme reluctance by salaried professionals - who owe their livelhioods to the ossified regulatory framework within which they work - to question the prevailing narrative, whether it concerns public health measures, identity politics, climate change or just about anything else. Too many people have a vested interest in avoiding necessary reform. 

Short of revolution, which usually doesn't lead to improved social or environmental well-being, what can be done? Even western-style democratic elections change nothing. The identity of the politicians might change, but their commitment to a scelerotic system doesn't. 

I propose two major steps: 

First: we refine the mission statements and objectives of existing government agencies. We should aim to express their goals in verifiable, quantifiable terms that are meaningful to ordinary people. 

Second: we should inject incentives into the achievement of such goals. My suggestion is that we issue Social Policy Bonds. These bonds would reward the achievement of each organisation's stated goals, regardless of who achieves them and regardless of how they are achieved. 

These are both radical suggestions. If implemented they are likely to bring about a new sort of organisation: one of protean structure and composition, whose every activity would be devoted to achieving its targeted goals as quickly and efficiently as possible. The immediate replacement of our current, corrupted public bodies with those solely aimed at improving people's well-being is highly unlikely to happen. But if Social Policy Bonds were to be issued, whether by groups of interested persons or government, then a transition from the current system to a bond regime is feasible. I outline how that might occur in chapter 4 of my book.

Incentives and health

The first step is to give up the illusion that the primary purpose of modern medical research is to improve Americans’ health most effectively and efficiently. In our opinion, the primary purpose of commercially funded clinical research is to maximize financial return on investment, not health. John Abramson, Harvard Medical School, quoted by Robert F Kennedy Jr in The Real Anthony Fauci, November 2021

Government funding for health innovation is subsidising drug industry profits while providing little public health benefit, a report from leading health economists says. Most new drugs are not meeting public needs while economic and regulatory incentives have created a “highly inefficient pharmaceutical sector” which spends more on marketing than research and development, and focuses the research it does do on profits, the report explains. Drug companies are incentivised to profit not to improve health, says report, Melanie Newman, summarising this paper published 16 October 2018

Incentives are crucial. If people have incentives to improve the health of the population, then that is what they will work towards. If they have incentives to increase the short-term profits or revenues or funding of the organisations for which they work, public- or private-sector, then all their activities will be in pursuit of that goal. The dysfunctionality of our healthcare systems begins at the top. There may be vague goals in the form of soundbites or mission statements, but there is no link between them and the incentives on offer.

The Social Policy Bond concept, applied to health, would change that. I have described how they would work here, or in a lot more detail here. Essentially, they would give a coalition of investors incentives to look for and exploit the most efficient approaches to dealing with society's long-term health problems - on a continuing basis. Health would be defined broadly, using some index of which one component could be Quality Adjusted Life Years. And the goal would be long term. The coalition of investors would be a new type of organisation; one whose structure and composition could change over time, but who could profit with the long (perhaps 50-year) lifetime of the bonds by buying bonds, doing whatever they can to advance toward the targeted goal, then selling their bonds at a higher price.

Is organic farming better?

Dan Conable writes, in a letter published in the New Yorker, about his organic grain farming operation:

[T]hough my practices may have a relatively benign impact on my surroundings as compared with conventional farming, their larger environmental impact is not so clear. Controlling weeds without herbicides generally requires more tillage. Turning the soil more frequently means using more diesel fuel per ton of grain, as well as freeing more of the carbon stored in the soil. More important from a climate-change perspective, organic farmers’ reliance on manure as the critical nitrogen source for crops in the grass family (corn, wheat, oats, barley) makes us utterly dependent on animal agriculture. If the world were to feed itself wholly by organic methods, an increase in cattle, pig, and poultry production would be needed to provide the necessary fertilizer—at least until scientists can genetically modify grasses to capture their own nitrogen. But, then, G.M.O.s aren’t organic. Letter from Dan Conable, 'New Yorker', dated 20 December

The sort of life-cycle analyses (LCAs) required to establish the environmental benefits or otherwise of shifts in our behaviour are bedevilled by boundary issues, measurement difficulties and the difficulty of weighting one type of environmental impact against another. They might be better than going on the gut feeling that organic agriculture is 'better' than the conventional kind, or that vegan clothes are better than animal fabrics, rail is better than air travel, solar power is better than coal-fired power stations, etc, but for the making of robust policy LCAs would need to be continually reassessed in the light of our ever-expanding knowledge of the environment, our ever-changing environmental priorities, and our every-changing technological endowment. 

Government policy cannot ever be so responsive nor, probably, can any single organisation - at least not as currently structured. If government were to use life-cycle analysis with the aim of altering our behaviour, it would necessarily do so on the basis of a one-time, limited, and possibly subjective assessment of environmental costs and benefits. It’s not good enough, but even worse would be what we largely have now: environmental policy based on corporate interests, 'what feels right', media stories and the launching of visually appealing initiatives that attract air time but are otherwise useless. These often focus on trendiest problems, of which the current one is climate change, which tends to crowd out other, possibly more urgent crises.

The Social Policy Bond concept as applied to the environment would take a different approach. It would first clarify what environmental goals, national or global, we wish to achieve. Say, for instance, that we wish to preserve the Earth's marine environment. A Social Policy Bond issue that rewarded the sustained achievement of such a goal would generate incentives for bondholders to bring it about at least cost. They might well carry out life-cycle analyses in their attempt to do so. But there is an important difference between the way do they would conduct their research and the way government, or any supra-government body would do so: bondholders have continuous long-term incentives to achieve our goals efficiently. This is likely to mean responding to and stimulating increased knowledge of scientific relationships, and technical advances. Investors might conduct LCAs, but they would do so in ways that optimise the benefit to the marine environment per dollar spent.

Effective environmental policy must take a long-term view and for national or global goals, will need to encourage diverse, adaptive approaches. The environment and our knowledge about it are just too complex for the simplistic 'it feels good', command-and-control approach that, for instance, brands 'organic farming' as good, or plastic shopping bags as bad. Diverse, adaptive approaches to addressing complex problems are precisely the sort of responses that government does very badly. However, government does have crucial roles in articulating society’s environmental goals and in raising the revenue to pay for their achievement: in the democratic countries government performs these functions quite well. But actually achieving society's social and environmental goals is a different matter. Such achievement requires continuous, well-informed and impartial decisions to be made about the allocation of scarce resources. For that purpose, Social Policy Bonds, with their incentives to achieve targeted outcomes efficiently would, I believe, be far better than the current ways in which environmental policy is formulated.
 

For more about applying the Social Policy Bond principle to the environment see here. (For a personal policy paper on organic agriculture, see here.)

Cascading incentives

Dr David Healy, towards the end of a long article entitled The Eclipse of Medical Care, summarises how medical science has been eclipsed: 

1. Clinicians do not have access to clinical trial data on medicines or vaccines.
2. Close to all of the medical literature reporting trial results for on-patent drugs and vaccines is ghostwritten, hyping the benefits and hiding the harms.
3. Clinical trials of these treatments that are negative on their primary or their most common outcomes are often published in prestigious journals as positive.
4. Clinical trials have their harms airbrushed out of ghostwritten publications.
5. Regulators (FDA, Health Canada, MHRA, EMA) do not get to see the full trial data.
6. Regulators approve treatments as working even when more people die on active treatment than on placebo.
7. Regulators approve medicines on the basis of negative studies and agree not to let the wider world know about this.
8. Regulators say nothing when companies publish negative studies as positive and make adverse effects of treatment, including death, vanish.
9. For many trials there are more deaths on active treatment than on placebo, but this does not lead regulators to warn about hazards as to do so would in their stated view deter people from seeking a benefit (even when the benefit is better characterized as a commercial benefit to a company rather than a benefit to the individual in terms of a live saved or a restoration of function).
10. Regulators do not have pharmacovigilance expertise and a variety of factors inhibit them from linking a treatment to a hazard after that treatment comes on the market. 

The Eclipse of Health Care, David Healy, 29 November

This is typical of the sort of corruption that blights so many of our public- and private-sector bodies. How does this happen? Often cited is regulatory capture which occurs when a regulatory agency that is created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate an industry or sector the agency is charged with regulating. But why does that happen? 

I do think that there's been an erosion of trust is western societies, but that is subjective and does not point toward an actionable solution. So I'd like to suggest that, rather than rely on nebulous mission statements to guide our public-sector agencies (or an apparently weak moral compass), we instead focus on the outcomes that society as a whole wishes to achieve. In this example, then, medical care would be subordinate not to the goals of the organisations supposed to supply it, but to the broader and more meaningful goal of the health of society's health. 

Doing so using the Social Policy Bond concept would replace organisations' goals (essentially that of self perpetuation) with those of society. Incentives to improve society's health would cascade downwards from that over-arching goal.These incentives, as under the current system, would largely be financial, but that does not mean that the people responding to them be entirely motivated by greed. Rather, it means that they would find a way of making a living compatible with society's goals, the goals of the bodies for which they work, and ethical behaviour. 

For a short piece on how the Social Policy Bond concept can be applied to health, see here. For a longer treatment, see here.