The recent fiasco with the Boeing plane door blowing out mid-flight gives evidence of the failure of government regulation. Too often we have seen the failure of government regulators to do their job. When a terrible event occurs as the result of a failure by government regulators to do their job, there is never a consequence for the regulator.
When thousands of investors lost money with the con-man Bernie Madoff, no regulators lost their job. When Purdue Pharma convinced the FDA to classify Oxycontin as a non-addictive painkiller, thousands of Americans became enslaved by and hooked on Oxycontin. No government regulator lost their job as a result of this national catastrophe.
Roger Silk recently proposed a radical change to government regulation. He believes that private entities tied to insurance would be a better way to regulate industry.
Too often we see regulatory capture. This occurs when the industry being regulated has more depth of experience than the government regulators. Too often, the best and brightest are not working for the government. The government salaries are limited, so the smartest move to the private sector for employment.
Because of this imbalance of intellectual power, the regulated industries often “capture” the regulating governmental agency. We have heard reports of this for years in the airline industry and the pharmaceutical industry.
Silk contends that a private entity that regulated industry combined with insurance would work better than the government regulators. If the private regulators set the standard too high, they would not receive business. If they enforced the standards too loosely, there would be accidents and the insurance costs would be high and cause the private regulator to go out of business.
We have seen this work in the food industry with Kosher certifications in the Jewish community. There are several private companies that regulate “what is kosher.” One company was found to be too lenient in their enforcement of the rules and they lost most of their business.
The current regulatory system is a paper tiger that too often fails. The public assumes that the regulations are being enforced. They do not realize that the regulators who are government employees are often “over their head” and unable to properly assure the public safety.