One regulatory agency that actually tries to regulate

Robert Kuttner

July 03, 1991|By Robert Kuttner

HAVE you ever asked a waiter whether the fish is fresh, only to get an indignant reply, "Of course our fish is fresh."

"I mean, is it fresh as opposed to frozen?" you persist.

"Well, it's fresh-frozen" the waiter allows.

Recently, David Kessler, the new food and drug commissioner, spoiled a similar linguistic sleight of hand when he ordered Procter & Gamble to stop labeling its Citrus Hill reconstituted orange juice "fresh."

The word fresh has lots of meanings, of course. But to most reasonable people fresh fish means fish that never was frozen, and fresh orange juice means juice that came directly from the orange without being dehydrated, adulterated, concentrated or frozen.

You can argue with a waiter. But you can't demand additional information from a carton of orange juice. We have a Food and Drug Administration, and other agencies like it, because people with products to sell are always tempted to cheat, and this is a problem that the free market cannot solve.

Individual consumers simply do not have the infinite time and investigative skill required to sort out all of this information. And in the absence of labeling regulation, manufacturers, like Lewis Carroll's Red Queen, are free to use words to mean whatever they choose.

In some quarters, regulation is said to be a drag on free markets. But in truth there is a symbiotic relationship between markets and regulation which many defenders of free markets simply miss. Regulation makes the free market operate more efficiently -- in this case by assuring that consumers will make free choices based on information that is accurate. This is regulatory paradox number one.

The FDA has been the Rip van Winkle of federal agencies. Under Kessler, it has suddenly emerged from its coma, behaving in a robust manner that defies the reigning Republican ideology of deregulation.

Kessler has also compelled manufacturers to cease implying that foods low in cholesterol are necessarily low in fat, and he has gone after drug manufacturers for promoting hazardous, cosmetic uses of products that have not been medically proven.

As food, drug and bioengineering technology become ever more sophisticated, the need for honest language enforced by competent regulation only increases. "Low-fat frozen yogurt," for example, is sometimes neither low-fat nor yogurt. The Upjohn Company, whose prescription product Rogaine actually grows hair on some people's bald spots, markets an over-the-counter (and overpriced) companion shampoo "for thinning hair" slyly called Progaine -- which contains none of the active ingredient in Rogaine.

During the past decade, the Reagan and Bush administrations have sought to undermine regulation by dishonoring it, by adulterating it and by starving it. The budgets of most regulatory agencies have been slashed. Yet, weak regulation is more likely to be bad regulation. That is regulatory paradox number two.

The pharmaceutical industry's chronic complaint, echoed by conservative editorialists, is that the FDA takes forever to approve new drug products. But obviously, the more the FDA is deprived of personnel, the longer will be the regulatory queue and the more slap-- the regulatory deliberations.

Commissioner Kessler hopes to balance his new toughness on behalf of consumers with the streamlining of regulatory decisions that industry justifiably demands. However, FDA staffing levels are up to Bush's Office of Management and Budget, an agency that also functions as the administration's ideologist. And OMB can hardly be thrilled with Kessler's Naderesque view of regulation.

It is not entirely clear whether Kessler's convictions somehow slipped through the White House ideological filter by accident, or whether this dramatic policy shift is a calculated effort to pre-empt an issue that the Democrats could capitalize on, if they had more spine.

Kessler's brand of regulation is both sound economics and good politics. The public may wish to "get the government off our backs" when the incarnation of the government is the tax collector. But nobody resents the government when it protects us from dangerous products or deceptive labeling.

Unfortunately, the FDA remains the exception. For the most part -- in banking, in airlines, in antitrust, in labor law -- the Bush administration remains more committed to dismantling regulation than to repairing it.

This is a pity, for as the banking scandals and the run-up in deregulated airfares demonstrate, it isn't only in food and drugs that a healthy market system depends on regulators. One reason airfares are so uncompetitive is that the Justice Department allows individual airlines to dominate air routes.

Recently, someone from the long-dormant antitrust division of the Justice Department phoned to let me know that his division was helping the new market economies of Eastern Europe set up antitrust regulations -- since efficient capitalism is incompatible with monopoly.

How charming, I thought. Perhaps, the division can next bring antitrust regulation to America.

Robert Kuttner is an economist based in Massachusetts.

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