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Practice English Speaking&Listening with: Free To Choose 1980 - Vol. 07 Who Protects the Consumer? - Full Video

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Hello, Im Robert McKenzie.

Welcome again to the University of Chicago,

where a distinguished group of guests have

met together to watch a film and to

discuss it; a film by Milton Friedman

in his series, Free To Choose.

In it he examines the consumer movement,

the whole development of high-powered

government agencies in recent years

recent decades in this country-

which have set out to protect

the interests of the consumer.

Now does this consumerism really work?

Or are there better ways in protecting

the interests of the consumer?

Thats the question Milton Friedman

asks in this film.

(opening music)

(car engine roaring, tires squealing)

MILTON FRIEDMAN: The 1960s Corvair,

condemned by Ralph Nader as

unsafe at any speed.

(tires squealing)

Since Nader's attack it is being

increasingly accepted that we need

government protection in the marketplace.

(water splashing)

Today there are agencies all over

Washington where bureaucrats decide

what's good for us.

Agencies to control the prices we pay,

the quality of goods we can buy,

the choice of products available.

It's already costing us more than

$5 billion a year.

Since the attack on the Corvair

the government has been spending

more and more money in the

name of protecting the consumer.

This is hardly what the third

President of the United States,

Thomas Jefferson, whose monument

this is, had in mind when he

defined a wise and frugal government

as, “one, which restrains men from

injuring each other and leaves

them otherwise free to regulate

their own pursuits of

industry and improvement.”

Ever since the Corvair affair,

the U.S. government has

increasingly been muscling in between

buyer and seller in the

marketplaces of America.

By Thomas Jefferson's standards,

what we have today is not a

wise and frugal government- but a

spendthrift and snooping government.

The federal regulations that govern our

lives are available in many places.

One set is here, in the

Library of Congress in Washington, D.C..

In 1936, the federal government established

the Federal Register to record

all of the regulations, hearings

and other matters connected with

the agencies in Washington. This is

volume 1, number 1. In 1936,

it took three volumes like this

to record all these matters.

In 1937, it took four- and then it

grew and grew and grew.

At first rather slowly and gradually,

but even so, year by year-

it took a bigger and bigger pile

to hold all the regulations

and hearings for that year.

Then around 1970- came a

veritable explosion- so that one pile

is no longer enough to hold

the regulations for that year.

It takes two and then three piles.

Until on one day in 1977,

September 28, the Federal Register

had no fewer than 1,754 pages

and these aren't exactly what

you'd call small pages, either.

Many of those regulations

come from this building.

(telephone ringing)

Consumer Product Safety hotline -

can you hold please? Thank you.

The Consumer Product Safety Commission

is one of the newest agencies set up

on our behalf.

(phones ringing, workers talking)

One of its jobs is

to give advice to consumers.

The cue that gave it away is

that those that are involved….

What has been done about the

flammability of children's garments?

FRIEDMAN: But its main function

is to produce rules and regulations,

hundreds and hundreds of them,

designed to assure safety of

products on the market.

(typing sounds)

It's hard to escape the visible hand of

the Consumer Product Safety Commission.

Except for food and drugs,

ammunition and automobiles- which

are covered by other agencies,

it has power to regulate just about

anything you can imagine.

Already it costs $41 million a year

to test and regulate all these

products on our behalf, and

that's just the beginning.

The Commission employs highly-trained

technicians to carry out tests like this:

checking the brakes on a bike.

(bicycle brake sounds)

But the fact is that 80% of bike accidents

are caused by human error.

These tests may one day lead to

safer brakes, but even that isn't sure.

The one thing that is sure

is that the regulations that come out of

here will make bikes more expensive-

and will reduce the variety available.

(match being struck)

Yes, they really are testing

how matches strike.

And the tests

are very precise. The pressure must be

exactly one pound, the match

exactly at right angles.

(match being struck)

(telephone ringing)

Consumer Product Safety Commission.

(swing slamming into metal)

No matter how many tests are done,

children's swings are never going to be

totally safe. You cannot outlaw accidents.

(cap gun popping)

If you try- you end up with ludicrous results.

It hardly seems possible, but they really

do use highly-skilled people to devise

regulations that will prevent toy guns

from making too big a bang.

(various toy gun noises)

Consumer Product Safety...

FRIEDMAN: The Commission,

in effect, is deciding what

they think is good for us. They are

taking away our freedom to choose.

(bicycle clattering)

Consumers don't have to be

hemmed in by rules and regulations.

They're protected by the market itself.

They want the best possible products

at the lowest price. And the self-interest

of the producer leaves him to

provide those products in order

to keep customers satisfied.

After all, if they bring goods

of low quality here- youre not going

to keep coming back to buy.

If they bring goods that don't serve

your needs- you're not going to buy them.

And therefore, they search out all over

the world the products that might meet

your needs, and might appeal to you.

And they stand in back of them-

because if they don't- they're going

to go out of business.

You see the difference between the market

and the political action,

the governmental agency.

Here nobody forces you, youre free,

you do what you want to.

There's no policemen to take money

out of your pocket, or to make sure that

you do what you're told to.

Over a quarter of a century ago, I bought

second-hand, a desk calculator

for which I paid $300.

One of these little calculators today,

which I can buy for $10 or so,

will do everything that did-

and more besides.

What produced this tremendous

improvement in technology?

It was self-interest or, if your prefer, greed.

The greed of producers who wanted

to produce something that they can

make a dollar on. The greed of

consumers who wanted to buy things

as cheaply as they could.

Did government play a role in this?

Very little. Only by keeping the road

clear for human greed and self-interest

to promote the welfare of the consumer.

FRIEDMAN:When governments do

intervene in business, innovation is stifled.

Railroads have been regulated for nearly

a century, and they are one of

our most backward industries.

The railroad story shows what so often

results from the good intentions of

consumer protection groups.

(train whistle)

In the 1860s, railroad rates were lower

in the United States than anywhere

else in the world, and many customers

thought they were too high.

They complained bitterly about

the profits of the railroads.

Now, the railway men of the time

had their problems too, problems that

arose out of the fierce

competitiveness among them; many

railroads all trying to get their

share of the market, all trying

to make a name for themselves.

If you want to see what their

problems were as they saw them,

come and have a look at this.

(classical music playing)

From inside this private railroad car

it may not look as if the people

who ran the railroads had

any real problems. Some, like

the owner of this private car,

had done very well. This was the

equivalent of the private jets

of today's business tycoons.

But for each one who succeeded,

many didn't survive

the cutthroat competition.

What we have here is a

railroad map of the United States

for the year 1882. It shows

every railroad then in existence.

The country was literally crisscrossed

with railroads going to every

remote hamlet, and covering the

nation from coast to coast.

Between points far distant, like for

example New York and Chicago,

there might be a half a dozen lines

that would be running between those

two points, each of the half dozen

trying to get business- would

cut rates, and rates would get very low.

(trainyard sounds)

The people who benefited most

from this competition were the

customers shipping goods on a long trip.

(locomotive starting to move)

On the other hand, between

some segments of that trip,

say, for example, Harrisburg and

Pittsburgh, there might be only a

single line that was running,

and that line would take full advantage

of its monopoly position.

It would charge all that

the traffic would bear.

The result was that the sum

of the fares charged for the

short hauls was typically larger

than the total sum charged for

the long haul between the two

distant points. Of course, none of

the consumers complained about the

low price for the long haul,

but the consumers certainly did

complain about the higher

prices for the short hauls.

And that was one of the major

sources of agitation, leading ultimately

to the establishment of the

Interstate Commerce Commission.

The cartoonists of the day delighted in

pointing out that railroads had

tremendous political intrigues, as indeed

they did. They used the consumers'

complaints to get the government

to establish a commission that

would protect the railroad's interest.

It took about a decade to get

the Commission into full operation.

By that time, needless to say,

the consumer advocates had moved

on to their next crusade. But the

railway men were still there.

They had soon learned how to use

the Commission to their own advantage.

They solved the long haul-

short haul problem by

raising the long haul rates.

The customers ended up paying more.

Some protection!

(train moving on tracks)

The first Commissioner was Thomas Cooley,

a lawyer who had represented

the railroads for many years.

The railroads continued to

dominate the Commission.

(truck engine)

In the 1920s and 30s,

when trucks emerged as serious

competitors for long distance hauling,

the railroads induced the Commission

to extend control over trucking.

Truckers, in their turn, learned

how to use the Commission to

protect themselves from competition.

This firm carries freight to and from

the Dayton, Ohio International Airport.

Its the only one serving some routes-

and its customers depend on it.

But Dayton Air Freight has real problems.

Its ICC license only permits it

to carry freight from Dayton to Detroit.

To serve other routes, it's had to

buy rights from other ICC license holders,

including one who doesn't own

a single truck. It's paid as much as

$100,000 a year for the privilege.

Our company is in the process of trying

to get rights to go there now.

Yes, we'll do that, and

thank you for calling, sir.

The owners of the firm have been

trying for years to get their license

extended to cover more routes.

Now, I have no argument

with the people who already have

ICC Permits, excepting for the fact

that this is a big country, and since

the inception of the ICC in 1936,

there has been very few

entrants into the business. They do

not allow new entrants to come in and

compete with those who are already in.

FRIEDMAN: Of course, Dayton Air Freight

suffers, but so do the customers,

who pay higher freight charges.

Quite frankly, I don't know why

the ICC is sitting on its hands

doing nothing. This is the third time,

to my knowledge, that we've supported

the application of Dayton Air Freight

to help us save money,

help free enterprise, help the country

save energy, help, help, help!

It all comes down to the consumers

ultimately going to pay for all of this...

and they are the blame.

The ICC has to be the blame.

FRIEDMAN: Dayton Air Freight now has

many of its trucks lying idle,

trucks that could be providing

a valuable service. Far from

protecting consumers, the ICC has

ended up making them worse off.

As far as I'm concerned, there is

no free enterprise in interstate commerce.

It no longer exists in this country.

You have to pay the price- and you

have to pay the price very dearly.

That not only means that

we have to pay the price,

it means that the consumer

is paying that price.

(harpsicord playing)

FRIEDMAN: The price consumers pay

when it comes to medicine

could be their lives.

In the 19th century, pharmacies

contained an impressive array

of pills and potions. Most were

ineffective- and some were deadly.

There was an outcry about drugs

that maimed or killed.

The Food and Drug Administration,

in response to consumer pressure,

succeeded in banning a whole range

of medicines.

The tonics and lotions

with their excessive claims disappeared

from the market. In 1962,

the Kefauver Amendment gave the

FDA power to regulate all drugs

for effectiveness as well as for safety.

Today, every drug marketed in

the United States must pass the FDA.

It's clear that this has protected us

from some drugs with horrific side effects,

like thalidomide, and we all know of

people who have benefited from

modern drugs. What we don't hear

much about, however, are the beneficial

drugs that the FDA has prohibited.

Well, if you examine the

therapeutic significance of drugs

that haven't arrived in the U.S.

but are available somewhere in

the rest of the world, such as

in Britain, you can come across

numerous examples where the patient

has suffered. For example: there

are one or two drugs called

beta blockers which, it now appears,

can prevent death after heart attack

(we call this secondary prevention

of coronary death after

myocardial infarction),

which, if available here, could be

saving about 10,000 lives a year

in the United States.

In the ten years after the

1962 amendments no drug was

approved for hypertension, that's for

the control the blood pressure,

in the United States, where as

several were approved in Britain.

In the entire cardiovascular area,

only one drug was approved in the

five-year period from67 to72.

And this can be correlated with

known organizational problems at FDA.

FRIEDMAN: These carts are taken to

an FDA official-- the documents required

to get just one drug approved.

WORKER: Well, hi there, must be the

new one they called me about.

FRIEDMAN: It took six years work by the

drug company to get this drug passed.

WORKER: This one right here...

all 119 volumes.

DR. WARDELL: The implications for the

patients are- that therapeutic decisions that

used to be the preserve of

the doctor and the patient-

are increasingly becoming made at

a national level by committees

of experts. And these committees

and the agency for whom they

are acting, the FDA, are highly

skewed towards avoiding risks.

So there is a tendency for us

to have drugs that are safer,

but not to have drugs

that are effective.

Now, I've heard some remarkable

statements from some of these

advisory committees in considering drugs.

One has seen the statement:

There are not enough patients

with the disease of this severity

to warrant marketing this

drug for general use.”

Now that's fine...if what you are

trying to do is to minimize drug

toxicity for the whole population.

But if you happen to be one of

these "not enough patients,"

and you have a disease that is

of high severity- or a disease

that's very rare...then that's

just tough luck on you.

FRIEDMAN: For ten years,

Mrs. Esther Usdane suffered from

severe asthma. The medication she

received had serious side effects.

Her condition was getting worse.

But the drug her doctor preferred

was prohibited by the FDA.

(car engine starting)

So, twice a year, Mrs. Usdane

had to set out on a journey.

MRS. USDANE: I had been very sick.

I had been in and out of the hospital,

several times... and they couldn't

seem to find a way to control

the asthma, and I had to change

my lifestyle once I was out-

even for a short time, mainly

because the cortisone derivatives were

softening the bones, and causing

a puffiness of the face, and other

changes in my body. The doctors

were pretty anxious to get me

off the cortisone derivative.

FRIEDMAN: The drug her doctor

wanted her to have had been

available for use for five years

in Canada.

(roaring waterfall)

Once across the border at Niagara Falls,

Mrs. Usdane could make use

of a prescription that shed obtained

from a Canadian doctor.

All she had do was go to any pharmacy.

There she could buy the drug

that was totally prohibited

in her own country.

The drug worked immediately.

USDANE: This one made

such a difference in my life,

both because of the shortness of

breath being resolved, and also

because now we don't have to

worry so much about the

softening of the bones.

Fortunately, once I got that

medicine, very quickly everything

sort of reverted back to a

much more of a normal lifestyle,

and I'm very grateful

that I was able to find relief.

FRIEDMAN: It was easy

for Mrs. Usdane to get around

the FDA regulations, because she happens

to live near the Canadian border.

Not everyone is so lucky.

It's no accident that despite

the best of intentions, the

Food and Drug Administration

operates so as to discourage the

development, and prevent the

marketing of new and potentially

useful drugs. Put yourself in the

position of a bureaucrat

who works over there.

Suppose you approve a drug that turns out

to be dangerous, a thalidomide.

Your name is going to be on

the front page of every newspaper.

You will be in deep disgrace.

On the other hand, suppose you

make the mistake of failing to

approve a drug that could have

saved thousands of lives.

Who will know? The people whose

lives might have been saved

will not be around.

Their relatives are unlikely to know

that there was something that

could have saved their lives.

A few doctors, a few research workers,

they will be disgruntled,

they will know.

You or I, if we were in the

position of that bureaucrat,

would behave exactly the same way.

Our own interests would demand

that we take any chance whatsoever-

almost, of refusing to approve

a good drug in order to be sure that

we never approve a bad one.

(loud machinery)

Drug companies can no longer afford

to develop new drugs in the United States

for patients with rare diseases.

Increasingly, they must rely on

drugs with high volume sales.

Four drug firms have already

gone out of business, and the number

of new drugs introduced is going down.

Where will it all lead?

We simply haven't learned from experience.

Remember Prohibition?

(jazz music)

In a burst of moral righteousness

at the end of the First World War,

when many young men were overseas,

the non-drinkers imposed on

all of us prohibition of alcohol.

They did it for our own good.

And there is no doubt that

alcohol is a dangerous substance.

Unquestionably, more lives are lost

each year through alcohol, and also

the smoking of cigarettes- than through

all the dangerous substances

that the FDA controls.

But where did it lead?

This place is today a legitimate business.

It's the oldest bar in Chicago.

But during Prohibition days,

it was a speakeasy.

Al Capone, Bugs Moran, many of the

other gangsters of the day- sat around

this very bar planning the exploits

that made them so notorious:

murder, extortion, hijacking, bootlegging.

Who were the customers who came here?

They were people who regarded themselves

as respectable individuals, who would

never had approved of the activities

that Al Capone and Moran were engaged in.

They wanted a drink, but in order

to have a drink, they had to break the law.

Prohibition didn't stop drinking,

but it did convert a lot of otherwise

law-obedient citizens into lawbreakers.

Fortunately, we're a very long way

from that today with the prohibition

cyclamate and DDT.

But make no mistake about it;

there is already something of a gray market

in drugs that are prohibited by the FDA.

Many a conscientious physician

feels himself in a dilemma, caught between

what he regards as the welfare of

his patient, and strict obedience to the law.

If we continue down this path,

there is no doubt where it will end.

After all, if it is appropriate for

the government to protect us

from using dangerous cap guns

and bicycles, the logic calls for

prohibiting still more dangerous activities

such as hang gliding, motorcycling, skiing.

If the government is to protect us

from ingesting dangerous substances,

the logic calls for prohibiting

alcohol and tobacco.

Even the people who administer

the regulatory agencies are appalled

at this prospect, and withdraw from it.

As for the rest of us-

we want no part of it.

Let the government give us information,

but let us decide for ourselves

what chances we want to take

with our own lives.

As you can see all sorts of silly things happen

when government starts to regulate our

lives, setting up agencies to tell us what we

can buy, what we can't buy, what we can do.

Remember, we started out this program with

the Corvair, an automobile that

was castigated by Ralph Nader

as unsafe at any speed.

The reaction to his crusade led to the

establishment of a whole series of agencies

designed to protect us from ourselves.

Well, some ten years later, one of the

agencies that was set up in response to that

move finally got around to testing

the Corvair that started the whole thing off.

What do you suppose they found?

They spent a year and a half comparing the

performance of the Corvair with the

performance of other comparable vehicles

and they concluded, and I quote,

"The 1960-63 Corvair compared

favorably with the other contemporary

vehicles used in the tests."

Nowadays, there are Corvair fan clubs

throughout the country.

Corvairs have become collector items.

Consumers have given their verdict on Ralph

Nader and the government regulations.

As Abraham Lincoln said, “You can't fool all

of the people all of the time.”

It's time all of us stopped being fooled by

those well-meaning bureaucrats who

claim to protect us because they say

we can't protect ourselves.

The men and women who have fostered

this movement have been sincere.

They believe that we as consumers are not

able to protect ourselves; that we need the

help of a wise and beneficent government.

But as so often happens the results have

been very different from the intentions.

Not only have our pockets been picked of

billions of dollars, but also we are left less

well protected than we were before.

ROBERT MCKENZIE: Now back at the

University of Chicago the consumerists,

themselves, get their chance to

argue their case.

KATHLEEN O'REILLY: I agree with Mr.

Friedman with respect to those agencies

which have had the major purpose of

economically propping up a certain industry,

which is why consumer advocates like myself

advocate the elimination of the ICC, the

CAB, the Maritime Commission.

But when you're talking about consumer

protection in the marketplace and when

you're talking about government watchdog

in competition, consumers need and, as

every poll is showing, they're demanding

more and more protection.

And to give just two examples of how

information is simply not enough to protect

the consumer, five years ago I could not have

bought a child's crib in this country that

would have had the slats sufficiently close

together that I did not have to worry

about the child strangling.

Not until the government and the Consumer

Product Safety Commission stepped in did

consumers then have the choice to buy

that type of a crib, strangulation's

down 50 percent.

And in 1975, if I had wanted to lease a

Xerox machine, I could not have done it.

And not until the Federal Trade Commission

antitrust stepped in and forced competition

into that marketplace did I have that choice,

and in one year the price went from

14,000 dollars to 5,000 dollars.

Those are dollars back in our pocketbooks to

say nothing of minimized emotional trauma.

MCKENZIE: Well, before we ask Milton

Friedman to come back on that, lets

establish the viewpoint of our other

participants and experts.

Dr. Richard Landau, what's your reaction?

RICHARD LANDAU: Well I think the cost is

certainly outrageously large and the benefits

are trivial if any.

I think that perhaps Milton overstates it

slightly to make his point, but basically I

would have to agree with it in the area that

I know best, which is the regulation

of new drug development.

MCKENZIE: And Joan Claybrook.

JOAN CLAYBROOK: Well in the auto safety

field we've saved about 55,000 lives and

millions of injuries because of auto safety

regulations since the mid-1960s.

I might also comment that the cost of auto

crashes each year to the American public is

48 billion dollars a year, fairly substantial

when you compare it to other things, much

less, again, the human trauma.

MCKENZIE: Bob Crandall.

ROBERT CRANDALL: Well I think it's

impossible to disagree with Milton Friedman

on the effects of economic rate regulation of

the sort that the railroads and the trucking

industry have been through.

The intent of that legislation was, of course,

to protect the railroads and to protect the

trucks, and the same thing is true for

maritime regulation.

What sustains regulation is sort of a populist

theory that somehow through government

we will redistribute wealth from people who

own business firms to consumers.

In fact it doesn't work that way.

It doesn't work that way in economic

regulation and there's very little evidence

that it works that way in any

kind of regulation.

As to whether we get any value from

health and safety regulation,

I think much of it is too new to know.

MCKENZIE: Well now that's the area I want

to start with because, remember, that was

the first part of his argument, the whole idea

of consumer product safety

action by the state.

Now, is that so far working?

Very close to your interest I know.

What's your reaction, Kathleen O'Reilly?

O'REILLY: Well in product safety in the state

of that, the lawnmower industry had said for

twenty years they could not

design a safe lawnmower.

Only when the Consumer Product Safety

Commission forced them with the

new standard, suddenly their

creative genius was overnight.

They came up with net whips that were

made out of plastic and they came up with

very innovative forces.

Which is why -- where that government

presence actually triggered innovation that

otherwise would have been left uncovered.

MILTON FRIEDMAN: It's very easy to

see the good results.

The bad result it's very much harder to see.

You haven't mentioned the products that

aren't there because the extra costs imposed

by Consumer Product Safety Commission

have prevented them from existing.

You haven't mentioned the case of the Tris

problem on the flammable garments.

Here you had a clear case where the

regulation of the CPSC essentially had the

effect of requiring all manufacturers of

children's sleepwear to

impregnate them with Tris.

O'REILLY: Oh, but that's not true at all. FRIEDMAN: Three years --

five years later the regulation required that

garments to be nonflammable and, as it

happened, Tris was the most readily

available chemical which could do it.

MCKENZIE: Kathleen O'Reilly.

O'REILLY: It's absolutely not true.

FRIEDMAN: But let me finish the story first.

Because the second half of the story is the

important part of it.

It turned out that Tris was a carcinogen.

And five years later or three years later, I'm

not sure the exact time, the same agency

had to prohibit the use of those sleepwear

garments, forced them to be disposed of

at great cost to everybody concerned.

O'REILLY: All right, lets look at the real

interesting history here. In 1968, when

Congress passed the Flammable Fabric Act,

they did not tell the CPSC what chemicals

would comply with that and what would not.

And so initially when industry said,

"we're going to use Tris," the Consumer

Product Safety Commission, from their initial

tests, were disturbed by it and had

announced informally to industry that they

were not going to allow Tris to be used.

Industry balked and said, "We're gonna to

take you to court because the Act only says

it has to be flame retardant.

You, the government, cannot tell us

how to comply.”

And it was the industry that forced

the hand of CPSC away.

And they don't even deny that now. FRIEDMAN: I'm not trying to

defend the industry.

Go slowly.

I am not pro-industry.

I am pro-consumer.

I'm like you.

I'm not pro-industry and, of course,

industry will do a lot of bad things.

The whole question at issue is what

mechanism is more effective in protecting

the interests of the consumers, the

disbursed, widespread forces of the market.

Take the case of the flammable fabrics,

suppose you had not had the requirements.

MCKENZIE: But you believe it was right

to test them, don't you?

For a government agency to test it?

FRIEDMAN: No, not at all.

MCKENZIE: No, no. FRIEDMAN: There are private

consumer testing agencies.

There's the Consumers Research.

There's Consumers Union.

You speak about a widespread demand for

more protection, those agencies

have never -- those organizations - CLAYBROOK: Oh, of course,

they have all these publications on carsFRIEDMAN: Of course.

CLAYBROOK: -- but what they do is they

test the brakes and steering.

They never crash test them and the most

important thing to know about a car when

you buy it is if the car crashes are

you going to be killed unnecessarily?

FRIEDMAN: The reason theyCLAYBROOK:Can't even get that information.

FRIEDMAN: But the reason they don't test -

CLAYBROOK: It's too expensive,

that's the reason why. FRIEDMAN: Of course.

And why is it too expensive for them

because the number of consumers who are

willing to buy their service and

take it is very, very small.

CLAYBROOK: That is not why.

The reason why is because

it's enormously expensive.

FRIEDMAN: Of course, but if they had a

large enough number of customers,

if there were enough customers, enough

consumers who wanted theCLAYBROOK: Yes, but that's a chicken

and egg situation which is ridiculous.

FRIEDMAN: It's not a chicken

and egg situation.

The whole situationCLAYBROOK: If you believe that

technological information is important for

consumer to have, which is that basis and

the thesis of your argument, surely that you

would say that one of the things that society

does as it groups together to provide basic

services to the public; police,

traffic services, all sorts of basic kinds of

things, the mail service and the

fire service and all the rest of it.

Why is that they shouldn't even do testing

of technological subjects which the

public has no way of knowing?

MCKENZIE: Before you reply, I want one

or two others in on this, Bob Crandall.

CRANDALL: It seems to me that Professor

Friedman could give a little

bit on this ground.

Certainly in the dissemination of information

there's a free rider problem.

And one of the problems is that while you

and I might value the results from a

Consumer Union rather highly,

we don't have to pay for it.

We can look over the shoulder of

someone else, borrow the magazine

from the library and so forth.

I wouldn't go so far as to say that the

government should not at all be in the

business of generating information,

though I am concerned about exactly the

same forces, this evil industry that

Miss O'Reilly talks about, having its influence

on how this information is prepared.

I don't see how we guard

ourselves against that.

FRIEDMAN: We don't.

CRANDALL: But it seems to me that there

is a case to be made that the market

does not supply enough information.

FRIEDMAN: It may not.

But the market supplies a great deal

and there is also a free rider problem in the

negative sense on government provision

of information, because people who have

no use for that information

are required to pay for it.

MCKENZIE: Milton, I don't quite understand

your position on this.

Are you saying, though, that there's no

place for government to test

consumer product safety at all?

FRIEDMAN: I am saying,

lets separate issues.

I am saying there is no place for government

to prohibit consumers from buying products,

the effect of which will be

to harm themselves.

There is, of course, a place - MCKENZIE: How do they know that effect?

FRIEDMAN: Well, for a moment I'm trying

to separate the issues.

There is a place for government to

protect third parties.

If we go to your automobile case -

CLAYBROOK: Well, how about children?

Children don't -- aren't choosers.

FRIEDMAN: No, no. CLAYBROOK: They don't make choices

because they ride in the cars. FRIEDMAN: The parents make their choices.

But let's go - O'REILLY: But if the industry has it

there's no choice.

FRIEDMAN: We can only take one

issue at a time.

We're a little difficult to take

them all at once.

Let's take one at a time.

I say there is no place for government to

require me to do something

to protect myself.


FRIEDMAN: If government has information -

MCKENZIE: Has or obtains?

for a moment, suppose it

has information, then it should

make that public and available.

The next question is: Are there

circumstances under which it's appropriate

for government to collect information?

There may be some such circumstances.

They have to be considered one at a time.

Sometimes there is...

...and sometimes there isn't.

But you see, I want to get back.

Take your area, Miss Claybrook.

You are now involved on the airbag problem.

CLAYBROOK: That's right.

FRIEDMAN: If I understand the situation-

I don't know anything about the

technical aspects of it, but the

airbag, in a car, is there to protect me

as a driver. It doesn't prevent me

from having an accident, hurting

somebody else- because it's only activated

by an accident. All right then,

why shouldn't I make that decision?

Who are you to tell me that

I have to spend whatever it is,

two hundred, three hundred, four

hundred dollars on that airbag?

CLAYBROOK: Well, we don't tell you that.

What we say is, that when a car

crashes into a brick wall at

30 miles an hour, the front seat

occupants have to have automatic

protection built into the car.

FRIEDMAN: Have to...why have to?

And it's a very -- it's a very minimal

FRIEDMAN: Why have to?

FRIEDMAN: I don't care whether it's

an airbag or a seatbelt.

CLAYBROOK: The reason why...

well, there are two reasons why.

One is that the sanctity of life

is a fairly precious entity in this country.

FRIEDMAN: It's more precious to

me than it is to you.

My life is more precious

to me than to you.

(Laughter) Well, you know!

CLAYBROOK: Do you wear you seatbelt?

Sometimes I do, and sometimes I don't.

CLAYBROOK: I see. Well then,

it couldn't be too precious to you,

because if it were, you'd

wear it all the time.

I beg your pardon?


FRIEDMAN: Other things are precious, too!

CLAYBROOK: Yes. Okay, but

wearing your seatbelt is a relatively

simple thing to go into.

But now my question is...

but I want an answer, a direct answer.

CLAYBROOK: But there is

a very -- there's a very basic reason why.


And it's because a person does not

know when they buy a car- what

that car is gonna do when it performs

in various and sundry different ways:

that's number one. Number two: there's

a basic minimum standard,

it's performance standard. It's not a

requirement, that you have certain pieces

of products in your cars, but it's a

basic performance standard built into

your car that when you buy it-

no one's going to have less than that.

So that you don't have people needlessly

injured on the highway, the cost to society,

the cost to the individuals, the trauma

to their families...and so on.

You're suggesting, theoretically, that it's

much better to let people go out

and kill themselves- even though they really

don't know that that's what's gonna happen

to them when they have that crash.

FRIEDMAN: Excuse me.

You're evading the fundamental issue.

If you have the information,

give it to them. The question is not

a question of giving them the information.

The question is: What is your right

to force somebody to spend money

to protect his own life- not anybody else,

but only himself, and the next question

I'm gonna ask you: Do you doubt

for a moment that prohibiting alcohol

would save far more lives on

the highways than an airbag,

seatbelts and everything else, and on

what grounds are you opposed to

prohibition, on grounds of principle- or only

because you don't think you can

get it by the legislature?

CLAYBROOK: I'm opposed

to prohibition because I don't

think it's gonna work.

That's the reason I'm opposed to it.

FRIEDMAN: But suppose

it would work? I want to get

to the -- I want to get to the principle.

CLAYBROOK: Can I answer you -- sure.

FRIEDMAN: I want to --

suppose you could believe it would work.

Suppose you could believe... McKENZIE: Prohibition?

...prohibition could work.

Would you be in favor of it?

No. What I am in favor of

is building products -- I am in favor of

building products so that at least

they service the public.

I was fascinated by some of the

initial comments. Everybody agrees that

the old agencies are bad, but the new

agencies that we haven't had a chance...

McKENZIE: No. You're trying

McKENZIE: to sweep them into your net.

They didn't agree to that. But anyway-

hold on to your point.

O'REILLY: When you talk about--

if the basic principle is:

give me the information.

Let me choose for myself.

If that's the ultimate goal,

why is it that in any hearing

that you've ever gone to, and I

beg anyone to find me an exception,

whether it's airbags or on DES,

saccharine, whatever, you never

have the victims of the injury, who

lost their arm because of a lawnmower,

standing up and saying, "Thank God

that you gave me the right

to become incapacitated." Never do

you hear a victim thanking the government

for backing off. Never do you hear the

the victim of an anticompetitive action

thanking the Justice Department

for not bring a suit.

McKENZIE: Dr. Landau,

I promised you could make

an observation on that- without

going into great detail.

LANDAU: Now, when DES

was used to preserve pregnancies in

women 25 and 30 years ago,

there was absolutely zero evidence

that it would cause cancer in anybody,

certainly not in the children of

the women who were pregnant, and

for you to say that it is -

O'REILLY: Then you're ignoring

the 1941 studies that show just that.

There is no 1941 study. This happens to be

my area of expertise, I'm an

endocrinologist. There was nothing.

Well, there are a lot -

McKENZIE: Now let's not go

any further down that road.

CRANDALL: Let me ask you

-- yeah, let me ask Miss O'Reilly

a question. I don't see -- if the problem

in drugs is that there is a lack

of competition, there are a number

of drug companies in the United States-

O'REILLY: That's one of them.

CRANDALL: -- and around the world,

and a lack of innovation,

how regulation, which is designed to

keep products off the market,

that is, further restrict the supply

of drugs is going to enhance either

competition or innovation; as a

matter of fact, everything that I have

learned in economics would tell me

that that is likely to reduce innovation

and reduce competition. And one of

the great benefits of drug regulation

is that if I'm a pharmaceutical company,

with an old tried and true drug

on the market, I really want the FDA to

keep new drugs off the market.

It will enhance the market

value of that drug.

I think that's the lesson that

you learn from government regulation,

whether it's National Highway

Traffic Safety Administration regulation

of fuel economy standards; be it drugs;

be it pollution controls; their effect

is anticompetitive- it's not

procompetitve at all.

FRIEDMAN: If I can go on with Bob's point

for just a moment.

He and I...I'm sure, and all economists

would agree- that the most effective way

to stimulate competition would be

to have complete free trade

and eliminate tariffs.

The most anticonsumer measures

on our statute books are

restrictions on foreign trade.

McKENZIE: Milton-

Has the Consumer Federation of America

testified against tariffs?

O'REILLY: We haven't even been asked to!


McKENZIE: Now, the Food and Drug

Administration...and here, Doctor, I know

you're keenly interested in this --

what was your reaction to Milton's analysis

of where it's fallen down?

LANDAU: Well, I think it's even

worse than Milton's analysis, or

Dr. Wardell's analysis of it.

If one could look at the past

25 or 30 years of new drug innovation,

one could see that most of the drugs

that you all would regard as

miracle drugs were developed before

the Kefauver Amendments.

McKENZIE: That's the 1962 amendments-

The 1962 amendments.

McKENZIE: Which ruled what

now again? Just a rundown...

Well, the 1962 amendments, as Milton said,

added efficacy to the regulation of safety.

Actually, it's what the regulators

did with this law that went haywire.

I don't see how one can object

to the law in itself. But what the

regulators did was go mad

with respect to safety. When the only

thing that was added to the law

was the point of efficacy.


After all, the two are intertwined

inextricably for a very hazardous disease

like cancer- you will tolerate a

very dangerous drug, and for a headache

it's got to be very, very safe.

Now this we've know all the time,

but the regulators have gone to

the point of utilizing some hysteria

over thalidomide- and new legislation

which I think was originally designed

by Kefauver, to get himself to be president

by lowering the cost of drugs,

to make regulations which

are absolutely obstructive.

Now, instead of 75 percent

of the new drugs used in this country

being developed in this country, less

than 25 percent of them are.

They're being developed elsewhere.

McKENZIE: Yeah, now could we

just clarify this point, though?

Are you saying there should not

be government intervention in the

food and drug field of that kind,

or is it simply the policy

adopted by the FDA or imposed

on it by the Kefauver Amendment

is where it went wrong?

LANDAU: I believe that

certain guidelines are necessary, and

it's possible to construct guidelines

based upon the Kefauver Amendment,

taking the responsibility for decision-

making away from the bureaucrats in

the Food and Drug Administration.

You say, how? I would say

by giving it to panels of impartial

experts to make this decision.

McKENZIE: Now, Milton, do you take that?

Do you buy that?

FRIEDMAN: Nope. I'm don't buy that.

McKENZIE: Why not?

FRIEDMAN: Because I have

never seen -- have you ever

seen a cat that barked?

McKENZIE: Not especially, no.

FRIEDMAN: Well, governmental

agencies and governmental laws

follow their own laws. Just as the

physical laws say that cats don't bark,

these laws of social science say that

when you start and set up a

regulatory agency with power, those

powers are going to be used.

McKENZIE: I want to move on, though,

to the third area that Milton chose,

the Interstate Commerce Commission

as an illustration. Now this is

closer to your line, Robert.

What is your reaction, first to

his analysis and what do you

think needs doing about it?

Well, you're not going to get much

dispute from- I don't think anybody's

sitting around here as to what the

benefits of -- or costs of rate regulation

in transportation are. The only

group that you will find now

supporting continued regulation would be

the American Trucking Association,

and they can't even make a very

persuasive case, or one that is

consistent from one day to the next.

There simply is no good reason

for continuing this type of regulation.

It might continue longer than, say

airline regulation did- because the

number of people whose wealth has

been enhanced by this regulation,

that is people who drive trucks,

people who own licenses to operate,

to haul only hardbound books

between Peoria and Springfield, Illinois-

or something of that sort,

those people are very numerous.

And it's going to very hard

to do something about it.

McKENZIE: Does this prove

anything about the nature of government

intervention and regulation, or is it

simply an example of where the

thing was done extremely badly, and

not in the interest of the public?

CRANDALL: It proves -- I think

it proves a great deal about

government regulation and it is

no different, I don't think, in the area

of health and safety regulations.

Let me give you one piece of

information about one area of

very important health and safety regulation-

which I think even Milton Friedman

would be in favor of in some form, and

that is the regulation of pollution control,

or at least the establishment of

property rights, so as to somehow

reduce pollutant levels from what

they would be if we allowed

unlimited pollution.

In the case of environmental policy,

the strongest proponents in the Congress

for environmental policy come from the

northeastern part of the United States,

and the weakest proponents, those with

the worst voting records in the Congess

come from the Southwest and from Alaska.

You might ask yourself, “Why is that?”

And one possible answer I guess

is that, well, the air's dirty in

New York City, but I don't think

you find many people really worried

about the quality of the air

in New York City.

What they're worried about

is their future employment, and the

value of their assets in New York City.

What would happen in the absence of

environmental policy in this country

is that more business would move

to the Southwest, and to the Western

part of the United States.

As a result, eastern Congressmen are

very much in favor of a policy

which prohibits through pollution control

regulations, prohibits a gravitation.

McKENZIE: Do you favor that, too?

I don't prohibit the form it takes,

but they use this as an excuse,

just as they will use various excuses,

let's say, before the -- Miss Claybrook's

agency, to plump for a very tight

standards in order to promote

the value of their product.

McKENZIE: Well, before we go

back to ICC, and I want to do that,

Milton, what's your reaction to his

pollution point, because I know

he's very keenly interested in it?

FRIEDMAN: Well, he and I

would -- I would agree with his

general position that there is a role

for government in pollution. I would

agree, second, that the present

techniques of controlling pollution

are terrible. And they are terrible

and they are what they are- for precisely

the reasons he specifies, because

they are an effective way in which

you could use the excuse of pollution

to serve some very different objectives.

That's part of the way in which

governments meow, if I may go back

my cat. We've discussed this at

greater length in a book that we've

written to go along with this program

on Free to Choose.

The program itself was too short for us

to be able to get much in

about pollution. Indeed, we really had

to skip it, because it's such

a complicated and difficult subject.

But there is a real role for government

because that is a case in which

you're protecting third parties.

And every one of the valid cases,

in my opinion, for government entering in

has to do with third parties.

There's a case for requiring brakes,

because that's to protect the person

you might hit. That's wholly different.

There's no case for requiring

an airbag in my opinion, but there is

a case for requiring good brakes.

McKENZIE: Do you accept

that distinction, by the way?

O'REILLY: No, because when

you're injured because of a failure

to use a passive restraint, I am

in a sense, going to have to help

pick up part of your medical bills,

part of your insurance rates

FRIEDMAN: Absolutely. O'REILLY: --because they're spread across.

FRIEDMAN: Absolutely. O'REILLY: And so only on

Gilligan's Island, when you have

six or nine people not interacting

such that all of society is affected,

does your distinction have any validity.

FRIEDMAN: Go slowly.

CRANDALL: The same thing

is true in alcohol. When you're sick

from alcoholism, who pays for it?

O'REILLY: On the alcohol,

the studies have only shown

excessive amounts of alcohol

to be injurious.

I'm not speaking of accidents.

What about cirrhosis of the liver,

my dear? It's a very common disease.

O'REILLY: All of the reasons

why we need a stronger

LANDAU: Because it's a long

and expensive disease.

McKENZIE: Could we pause on

-- Milton's made a very interesting

distinction here, that you can

damage yourself, you've been saying.

Or it's up to you if you want to

run the risk of damaging yourself, but

if -- but can you make the distinction?

FRIEDMAN: But let me

go back to her question, because

she says, "No, we mustn't do that,

because the fellow who hurts himself

is going to go to a government

subsidized hospital."

O'REILLY: Not just government, no, no.

CRANDALL: Oh, but it's more than that.

It's all the parties and liability as well...

answer that issue with it. Because my -

FRIEDMAN: Go slowly. Let me

separate the two issues, because I really

want to get to this- because

your answer is a very favorite one

and there is an element

of a validity to it. Of course.

Well, it's only because

we've made two mistakes.

O'REILLY: But you don't have

to be in a government hospital

for it to be valid, because

when you're in traction -

FRIEDMAN: Excuse me.

Hold on for a moment. The problem with

your answer is that you're saying

one wrong justifies another. I believe

that we ought to have much less

government intervention into those

areas as well. And I don't -- am

not willing to follow a policy which

implies saying, you -- that every person

goes around with a sign on his back

saying: "Property of the U.S. Government

do not mutilate, spindle or bend."

O'REILLY: Do you favor

the government intervention in

those areas where, for example

the bar associations and the eyeglass

industry were not allowing their members

to advertise- and then the

Federal Trade Commission stepped in,

and now consumers have the ability to

make those kinds of comparisons?

FRIEDMAN: You're getting into

another area, but the answer, a brief

answer because we oughtn't to discuss this

here; I am against those governmental

measures which have enabled the

organizations to have the power

to prevent advertising.

O'REILLY: But they were no government -

McKENZIE: Now, now look,

Bob Crandall said -- Bob Crandall said

that in an area like the

Interstate Commerce Commission

there is nothing really to be said

in defense at all. Does anybody

dissent from that- or have we

knocked them down flat?

FRIEDMAN: That happens to be

the one area on which, so far

as I know, you cannot find any

dissent anywhere, even -- one of the

most effective presentations of what was

wrong with ICC was done by one

of Ralph Nader's groups, maybe you were

associated with that group. That's the

thing that really baffles me.

Fundamentally, here are people,

like Ralph Nader and his groups,

who look at an ICC and what is

their solution to the problem?

More of the same, a

different kind of regulation -

CLAYBROOK: No. FRIEDMAN: -- the only problem is

that the wrong people

were in there regulating.

CLAYBROOK: No, no, no.

That's not true. No, that's a

complete misrepresentation.

McKENZIE: You work with Nader now, that's CLAYBROOK: Yes.

FRIEDMAN: That's Dr. Landau's

solution for the medical problem.

Let's have the right people

FRIEDMAN: doing the regulating. CLAYBROOK: No, no, no.

CLAYBROOK: That's a complete misnomer

about the difference between ICC,

and Health and Safety regulation.

There are a number of differences.

One is: one involves the

economics and the benefits of profits

to industry, and the other involves

the sanctity of life in-among people.

FRIEDMAN: Excuse me.

MCKENZIE: Now let her finish

this point, Milton.




CLAYBROOK: The second one,

and it deals with your third-party

relationship, is that what you're talking

about there is brakes because they're gonna

affect somebody else, but there are also

other third-party effects. For example,

if you don't have a helmet used by someone

and you hit them with your motorcycle,

you're gonna have huge damage payments

to make because they didn't properly take

proper precautions on the public highways.

And the question is: Should the public

highways be used so that they're gonna

harm somebody else, potentially?

FRIEDMAN: There is nothing that two people

do in a world. No man is an island to himself,

everything has third-party issues.

But you've got to have a sense of proportion.

And the important thing is that government

intervention has third-party issues.

When government intervenes into these

affairs, that harms third parties. It picks my pocket.

It reduces my freedom.

It restricts many activities around the world.

CLAYBROOK: That's what you question is:

what are the benefits? And if the benefits in

the auto field, for example, are 55,000

deaths saved, it means -

FRIEDMAN: That's a very dubious statistic

because once again every study has looked

at the benefits and not looked at the costs.

CLAYBROOK: Oh no, that's not true at all.

Absolutely not that they haven't

looked at the costs.

FRIEDMAN: I mean the costs in life.

You haven't looked at the fact, for example -

MCKENZIE: Let me clarify this, Milton. I don't quite follow you.

FRIEDMAN: Sure. MCKENZIE: Would you explain

what you mean exactly?

FRIEDMAN: Of course.


FRIEDMAN: Look, take the automobile.

By making automobiles much more

expensive it makes it more profitable to keep

older automobiles on the road.

The increased age of the automobile

is an antisafety factor.

By making automobiles safer so people are

-- can drive them, people drive them faster

or more recklessly then they

they otherwise would. There are more

pedestrian deaths.

CLAYBROOK: That's a totally unproven and

indeed fully rebutted theory.

And, in fact, all the savings in lives could

MCKENZIE: By whom? You or

CLAYBROOK: Well, no, there are numerous

studies, including from-

CLAYBROOK: -- Yale and Cooper from Yale

and so on, but the key issue has been shown

by the regulation that's been in in the last

ten years, you've had a huge saving in lives,

a decrease in the -- the vehicle deaths

that have occurred, the rate of vehicle

deaths occurred and so on.

FRIEDMAN: Let me go back again

for a moment?

You see, the major effect on the saving of

life has been from 55-mile-an-hour

speed limits.

CLAYBROOK: Oh no, that's not true.

FRIEDMAN: Which is not after all in there

CLAYBROOK: Well that is also a regulation.

FRIEDMAN: -- as a safety regulation.

That primarily is a fuel regulation.

CLAYBROOK: Yeah, that's right.

It's a regulation.


CLAYBROOK: But your statement's

not accurate.

FRIEDMAN: All right.

CLAYBROOK: That the savings in life

have not been primarily --

they've been, they're important from 55

But there have been 55,000 deaths saved

by vehicle crash safety regulations.

FRIEDMAN: Excuse me.

There have been 55,000 deaths that you

have estimated to have been saved by it.

CLAYBROOK: Not me, the General

Accounting Office.

FRIEDMAN: Excuse me. Other estimates

the estimate by Professor Sam

Peltzman of this university, a very, very

serious study estimated that there were no

lives saved if you took into account all of the

indirect effects.

Now maybe his study isn't exactly right.

CLAYBROOK: I don't think it is.

FRIEDMAN: I'm not going to try to --

but maybe the other study isn't exactly right



O'REILLY: But if you're somewhere in

between. If you look at -- consumers have

have done well if it's even in between.

FRIEDMAN: No, no. I beg your pardon.

If people voluntarily want to risk their lives

Are you saying again you really would

not be in favor of prohibiting hang gliding?

CLAYBROOK: we asked the auto industry if

FRIEDMAN: That's far more dangerous.

Did you prohibit the 500-mile speedway?

CLAYBROOK: I think the --

let me answer this. We asked the auto

industry if they would remove all the

safety standards that have been in effect

since 1968 and what would be the savings to

the public if they did that.

And the answer, sir, that they came back with

was, "We couldn't remove those, they expect

them now." The laminated windshields that

don't crack their head open and the

collapsible steering assemblies and the

padded dashboards. That -- why the public

-- that is now the societal norm. Regulation

has changed the thinking of the public

and the understanding of what's possible and

so the, you know, what you're suggesting

is that government regulation is willy-nilly

and it produces things the public doesn't

want, but you don't have any-

FRIEDMAN: Excuse me for a moment.

You can't take credit for everything that's

happened in this area. Four-wheel brakes

were introduced before there were safety

regulations. Many of these developments

would have -

MCKENZIE: Well, we leave the matter now

for this week and we hope you'll join us

again for the next episode in a week's time.

The Description of Free To Choose 1980 - Vol. 07 Who Protects the Consumer? - Full Video