Important Essay from Michael Wolf SSC: Lifting and Liberty

[Brodie Butland]

If you think about it, there are two basic ways that we can argue against personal trainer regulation:
1. Gov't regulation is often a good idea that does great things, but here in this specific circumstance, it's not and here's why.
2. Gov't regulation is often or always a bad idea that doesn't lead to the better outcome it purports to advance, and here's why.

I think there's a third option: Government regulation generally does not lead to better outcomes, but there are instances where (imperfect) governmental regulation is preferable to market decisionmaking.

The problem with (2) is that it may be intellectually honest and consistent, but it doesn't get buy-in from the general population. This is why I deliberately chose not to write my anti-PT regulation article from a libertarian perspective...the libertarians already agree with me, it's the people who think there is a role for government regulation that I need to win over. The problem with (1) is that it's foolhardily optimistic and invariably creates far more inefficiency than would otherwise exist.

As a general rule, I don't like the government controlling things, because the government has a tendency to screw things up...often badly, and at very little personal recourse to the folks who caused the problem. I think government employees often get an unjustified bad rap, but "good enough for government work" is a famous quip for a reason. The way I put it in my article is, the default rule should be against regulation, and regulation should only be imposed if (1) there is an actual problem, (2) governmental regulation is capable of mitigating the problem, and (3) the cost of governmental regulation is significantly outweighed by the mitigation that would occur as a result of governmental regulation (the "significantly" outweighed is an important qualifier...because our presumption is against regulation, we should have to do better than a mere preponderance of the evidence).

Two examples. First, pollution. There is very little incentive for a factory to stop belching shit into the air (or rather, incur the costs required to avoid belching shit into the air) if every other factory is doing the same thing. It's classic tragedy of the commons, and the free market was simply ineffective in dealing with the problem. Which would be completely expected--even if you posit that mass boycotts would ensue if a company was an excessive polluter (which history indicates is an erroneous assumption), the consumers can only boycott if they know of the problem in the first place...but no one really knows absent governmental collection of data exactly how much or on what ways businesses are polluting. So with the environment, you not only have the tragedy of the commons problem, but you also are dealing with highly opaque information that undermines consumers' abilities to make decisions on that basis. (All that being said, I do think that market-like pollution regulation along the lines of cap and trade would be a far more effective solution to environmental concerns than the current one-size-fits-all standards, in part because it creates market incentives for companies to reduce their pollution even below the permissible EPA levels...market incentives which don't currently exist.)

Second, cartels and monopolistic practices. Economic theory says that cartels simply won't happen because it's too easy for a cartel participant to cheat and gain market share...especially for fungible goods. The reality is that cartels happen far more frequently than economic theory predicts, and there are several high profile examples from the last two decades that show that theory simply doesn't line up with reality. Economic theory likewise says that monopolistic processes won't be successful because ultimately consumers can just choose not to buy the product, or someone will develop a cheaper substitute...but I imagine neither Netscape Navigator nor consumers who need Epipens are particularly comforted by that theoretical assurance. To have a functioning competitive economy, some kind of antitrust regulation is absolutely necessary to prevent price collusion, and this necessarily requires the government to set rules of the game. To be fair, the rules must be carefully drafted and enforced so as to not stymie legitimate competitive behavior...but some rules are needed to avoid some of the worst anticompetitive abuses, or at least allow the victims of the abuses to recover something.

So circling back to personal trainer regulation and the free market in the fitness industry. In my judgment, it flunks all three prongs of my proposed framework. First, there isn't any evidence that incompetent trainers are causing actual harm to the public...and this is not just me stating this, but state legislatures who have considered and ultimately decided not to license personal trainers. To the contrary, the limited proxy data available (such as injury rates for various physical activities) suggests that working with personal training is one of the safest activities a person can do. Second, even if there was a problem, there is no proposed bill I have seen that would actually mitigate the problem because of the nature of gym injuries--I will not bore anyone by rehashing the lengthy explanation in my article of why this is the case. And finally, the cost to the public is simply too damn high in this instance, not only in terms of raising the cost of personal training, but also in unnecessarily limiting the choices that consumers have...so even if we assumed personal training licensure might mitigate some effects, that mitigation does not come anywhere near outweighing the costs.

[tfranc]

What regulation would have prevented the behavior that resulted in harms that are free from liability now? A regulation that requires time travel to determine harm? If manufacturers knew about the harm and went ahead ignoring the future liability, why wouldn’t they have just ignored the regulations?

The thing is that the harm was decently well known (not widely known, just well known by those who studied it) prior to the boom and emerging companies knew that if regulations were put in place, they would be out of business. And that’s exactly what happened in 1990 (I think actually an official ban on manufacturing from the EPA occurred in the late 70’s, but US distributors were allowed to clear their inventories until 1990). The manufacturers saw a massive opportunity to make a lot of money, so they ignored the science and potential consequences, made deniability part of industry culture, and no one held them accountable until a lot of damage had been done. The paradigm around workforce safety regulations has changed a lot in the past 75 years as well, so part of this is ethics and part of this is trends and what people think is acceptable, but it shouldn’t be about trends at all. Being exposed to extremely toxic substances in the workplace or as a consumer is just unacceptable, period. And I think that sentiment goes much deeper than simply being someone’s trivial opinion.

[Michael Wolf]

Thoughtful, reasonable disagreement post...

You remind me of Richard Epstein here, which I hope you take as a compliment because I'm a fan of his, even though I lean more towards the libertarian side than he (and I think you) do. I won't bore with further technical minute points of disagreement. If what you propose was actually the criteria by which all regulatory and/or licensure decisions were made, I would happily support it directionally. As in, even getting to that would carry us pretty well far in the direction I'd like to see, towards the smaller endpoint where our opinions might diverge, and I'd gladly support a move in that direction compared to the licensure and regulatory boondoggle we are now in.

That said, I tend to think the above is unlikely to occur, due to the inherent "externalities" and "market failures" I described earlier in the political process.

[tfranc]

(All that being said, I do think that market-like pollution regulation along the lines of cap and trade would be a far more effective solution to environmental concerns than the current one-size-fits-all standards, in part because it creates market incentives for companies to reduce their pollution even below the permissible EPA levels...market incentives which don't currently exist.)

Right, and I would go as far to say that any $ incentive to conduct private regulation actually runs completely opposite to the incentives for companies continuing to create the pollution, so it's hard to imagine it happening that way, ever. It's too bad because private regulation wouldn't cave for special interest groups, etc.

You could also argue that even if people know enough about it to boycott, maybe they won't or can't. I think pollution from necessary daily driving falls into this category.