DRI-172 for week of 1-18-15: Consumer Behavior, Risk and Government Regulation

An Access Advertising EconBrief: 

Consumer Behavior, Risk and Government Regulation

The Obama administration has drenched the U.S. economy in a torrent of regulation. It is a mixture of new rules formulated by new regulatory bodies (such as the Consumer Financial Protection Bureau), new rules levied by old, preexisting federal agencies (such as those slapped on bank lending by the Federal Reserve) and old rules newly imposed or enforced with new stringency (such as those emanating from the Department of Transportation and bedeviling the trucking industry).

Some people within the business community are pleased by them, but it is fair to say that most are not. But the President and his subordinates have been unyielding in his insistence that they are not merely desirable but necessary to the health, well-being, vitality and economic growth of America.

Are the people affected by the regulations bad? Do the regulations make them good, or merely constrain their bad behavior? What entitles the particular people designing and implementing the regulations to perform in this capacity – is it their superior motivations or their superior knowledge? That is, are they better people or merely smarter people than those they regulate? The answer can’t be democratic election, since regulators are not elected directly. We are certainly entitled to ask why a President could possibly suppose that some people can effectively regulate an economy of over 300 million people. If they are merely better people, how do we know that their regulatory machinations will succeed, however well-intentioned they are? If they are merely smarter people, how do we know their actions will be directed toward the common good (whatever in the world that might be) and not toward their own betterment, to the exclusion of all else? Apparently, the President must select regulators who are both better people and smarter people than their constituents. Yet government regulators are typically plucked from comparative anonymity rather than from the firmament of public visibility.

Of all American research organizations, the Cato Institute has the longest history of examining government regulation. Recent Cato publications help rebut the longstanding presumptions in favor of regulation.

The FDA Graciously Unchains the American Consumer

In “The Rise of the Empowered Consumer” (Regulation, Winter 2014-2015, pp.34-41, Cato Institute), author Lewis A. Grossman recounts the Food and Drug Administration’s (FDA) policy evolution beginning in the mid-1960s. He notes that “Jane, a [hypothetical] typical consumer in 1966… had relatively few choices” across a wide range of food-products like “milk, cheese, bread and jam” because FDA’s “identity standards allowed little variation.” In other words, the government determined what kinds of products producers were allowed to legally produce and sell to consumers. “Food labels contained barely any useful information. There were no “Nutrition Facts” panels. The labeling of many foods did not even include a statement of ingredients. Nutrient content descriptors were rare; indeed, the FDA prohibited any reference whatever to cholesterol. Claims regarding foods’ usefulness in preventing disease were also virtually absent from labels; the FDA considered any such statement to render the product an unapproved – and thus illegal – drug.”

Younger readers will find the quoted passage startling; they have probably assumed that ingredient and nutrient-content labels were forced on sellers over their strenuous objections by noble and altruistic government regulators.

Similar constraints bound Jane should she have felt curiosity about vitamins, minerals or health supplements. The types and composition of such products were severely limited and their claims and advertising were even more severely limited by the FDA. Over-the-counter medications were equally limited – few in number and puny in their effectiveness against such infirmities as “seasonal allergies… acid indigestion…yeast infection[s] or severe diarrhea.” Her primary alternative for treatment was a doctor’s visit to obtain a prescription, which included directions for use but no further enlightening information about the therapeutic agent. Not only was there no Internet, copies of the Physicians’ Desk Reference were unavailable in bookstores. Advertising of prescription medicines was strictly forbidden by the FDA outside of professional publications like the Journal of the American Medical Association.

Food substances and drugs required FDA approval. The approval process might as well have been conducted in Los Alamos under FBI guard as far as Jane was concerned. Even terminally ill patients were hardly ever allowed access to experimental drugs and treatments.

From today’s perspective, it appears that the position of consumers vis-à-vis the federal government in these markets was that of a citizen in a totalitarian state. The government controlled production and sale; it controlled the flow of information; it even controlled the life-and-death choices of the citizenry, albeit with benevolent intent. (But what dictatorship – even the most savage in history – has failed to reaffirm the benevolence of its intentions?) What led to this situation in a country often advertised as the freest on earth?

In the late 19th and early 20th centuries, various incidents of alleged consumer fraud and the publicity given them by various muckraking authors led Progressive administrations led by Theodore Roosevelt, William Howard Taft and Woodrow Wilson to launch federal-government consumer regulation. The FDA was the flagship creation of this movement, the outcome of what Grossman called a “war against quackery.”

Students of regulation observe this common denominator. Behind every regulatory agency there is a regulatory movement; behind every movement there is an “origin story;” behind every story there are incidents of abuse. And upon investigation, these abuses invariably prove either false or wildly exaggerated. But even had they been meticulously documented, they would still not substantiate the claims made for them and not justify the regulatory actions taken in response.

Fraud was illegal throughout the 19th and 20th century and earlier. Competitive markets punish producers who fail to satisfy consumers by putting the producers out of business. Limiting the choices of producers and consumers harms consumers without providing compensating benefits. The only justification for FDA regulation of the type provided for the first half of the 20th century was that government regulators were omniscient, noble and efficient while consumers were dumbbells. That is putting it baldly but it is hardly an overstatement. After all, consider the situation that exists today.

Plentiful varieties of products exist for consumers to pick from. They exist because consumers want them to exist, not because the FDA decreed their existence. Over-the-counter medications are plentiful and effective. The FDA tries to regulate their uses, as it does for prescription medications, but thankfully doctors can choose from a plethora of “off-label” uses. Nutrient and ingredient labels inform the consumer’s quest to self-medicate such widespread ailments as Type II diabetes, which spread to near-epidemic status but is now being controlled thanks to rejection of the diet that the government promoted for decades and embrace of a diet that the government condemned as unsafe. Doctors and pharmacists discuss medications and supplements with patients and provide information about ingredients, side effects and drug interactions. And patients are finally rising in rebellion against the tyranny of FDA drug approval and the pretense of compassion exhibited by the agency’s “compassionate use” drug-approval policy for patients facing life-threatening diseases.

Grossman contrasts the totalitarian policies of yesteryear with the comparative freedom of today in polite academic language. “The FDA treated Jane’s… cohort…as passive, trusting and ignorant consumers. By comparison, [today’s consumer] has unmediated [Grossman means free] access to many more products and to much more information about those products. Moreover, modern consumers have acquired significant influence over the regulation of food and drugs and have generally exercised that influence in ways calculated to maximize their choice.”

Similarly, he explains the transition away from totalitarianism to today’s freedom in hedged terms. To be sure, the FDA gave up much of its power over producers and consumers kicking and screaming; consumers had to take all the things listed above rather than receive them as the gifts of a generous FDA. Nevertheless, Grossman insists that consumers’ distrust of the word “corporation” is so profound that they believe that the FDA exerts some sort of countervailing authority to ensure “the basic safety of products and the accuracy and completeness of labeling and advertising.” This concerning an agency that fought labeling and advertising tooth and claw! As to safety, Grossman makes the further caveat that consumers “prefer that government allow consumers to make their own decisions regarding what to put in their bodies…except in cases in which risk very clearly outweighs benefit” [emphasis added]. That implies that consumers believe that the FDA has some special competence to assess risks and benefits to individuals, which completely contradicts the principle that individuals should be free to make their own choices.

Since Grossman clearly treats consumer safety and risk as a special case of some sort, it is worth investigating this issue at special length. We do so below.

Government Regulation of Cigarette Smoking

For many years, individual cigarette smokers sued cigarette companies under the product-liability laws. They claimed that cigarettes “gave them cancer,” that the cigarette companies knew it and that consumers didn’t and that the companies were liable to selling dangerous products to the public.

The consumers got nowhere.

To this day, an urban legend persists that this run of legal success was owed to deep financial pockets and fancy legal footwork. That is nonsense. As the leading economic expert on risk (and the longtime cigarette controversy), W. Kip Viscusi, concluded in Smoke-Filled Rooms: A Postmortem on the Tobacco Deal, “the basic fact is that when cases reached the jury, the jurors consistently concluded that the risks of cigarettes were well-known and voluntarily incurred.”

In the early 1990s, all this changed. States sued the tobacco companies for medical costs incurred by government due to cigarette smoking. The suits never reached trial. The tobacco companies settled with four states; a Master Settlement Agreement applied to remaining states. The aggregate settlement amount was $243 billion, which in the days before the Great Recession, the Obama administration and the Bernanke Federal Reserve was a lot of money. (To be sure, a chunk of this money was gobbled up by legal fees; the usual product-liability portion is one-third of the settlement, but gag orders have hampered complete release of information on lawyers’ fees in these cases.)

However, the states were not satisfied with this product-liability bonanza. They increased existing excise taxes on cigarettes. In “Cigarette Taxes and Smoking,” Regulation (Winter 2014-2015, pp. 42-46, Cato Institute), authors Kevin Callison and Robert Kaestner ascribe these tax increases to “the hypothesis… that higher cigarette taxes save a substantial number of lives and reduce health-care costs by reducing smoking, [which] is central to the argument in support of regulatory control of cigarettes through higher cigarette taxes.”

Callison and Kaestner cite research from anti-smoking organizations and comments to the FDA that purport to find price elasticities of demand for cigarettes of between -0.3 and -0.7 percent, with the lower figure applying to adults and the higher to adolescents. (The words “lower” and “higher” refer to the absolute, not algebraic, value of the elasticities.) Price elasticity of demand is defined as the percentage change in quantity demanded associated with a 1 percent change in price. Thus, a 1% increase in price would cause quantity demanded to fall by between 0.3% and 0.7% according to these estimates.

The problem with these estimates is that they were based on research done decades ago, when smoking rates were much higher. The authors estimate that today’s smokers are mostly the young and the poorly educated. Their price elasticities are very, very low. Higher cigarette taxes have only a miniscule effect on consumption of cigarettes. They do not reduce smoking to any significant extent. Thus, they do not save on health-care costs.

They serve only to fatten the coffers of state governments. Cigarette taxes today play the role played by the infamous tax on salt levied by French kings before the French Revolution. When the tax goes up, the effective price paid by the consumer goes up. When consumption falls by a much smaller percentage than the price increase, tax revenues rise. Both the cigarette-tax increase of today and the salt-tax increases of the 17th and 18th century were big revenue-raisers.

In the 1990s, tobacco companies were excoriated as devils. Today, though, several of the lawyers who sued the tobacco companies are either in jail for fraud, under criminal accusation or dead under questionable circumstances. And the state governments who “regulate” the tobacco companies by taxing them are now revealed as merely in it for the money. They have no interest in discouraging smoking, since it would cut into their profits if smoking were to fall too much. State governments want smoking to remain price-inelastic so that they can continue to raise more revenue by raising taxes on cigarettes.

 

Can Good Intentions Really Be All That Bad? The Cost of Federal-Government Regulation

The old saying “You can’t blame me for trying” suggests that there is no harm in trying to make things better. The economic principle of opportunity cost reminds us that the use of resources for one purpose – in this case, the various ostensibly benevolent and beneficent purposes of regulation – denies the benefits of using them for something else. So how costly is that?

In “A Slow-Motion Collapse” (Regulation, Winter 2014-2015, pp. 12-15, Cato Institute), author Pierre Lemieux cites several studies that attempted to quantify the costs of government regulation. The most comprehensive of these was by academic economists John Dawson and John Seater, who used variations in the annual Code of Federal Regulations as their index for regulatory change. In 1949, the CFR had 19,335 pages; in 2005, this total has risen to 134,261 pages, a seven-fold increase in six-plus decades. (Remember, this includes federal regulation only, excluding state and local government regulation, which might triple that total.)

Naturally, proponents of regulation blandly assert that the growth of real income (also roughly seven-fold over the same period) requires larger government, hence more regulation, to keep pace. This nebulous generalization collapses upon close scrutiny. Freedom and free markets naturally result in more complex forms of goods, services and social interactions, but if regulatory constraints “keep pace” this will restrain the very benefits that freedom creates. The very purpose of freedom itself will be vitiated. We are back at square one, asking the question: What gives regulation the right and the competence to make that sort of decision?

Dawson and Seater developed an econometric model to estimate the size of the bite taken by regulation from economic growth. Their estimate was that it has reduced economic growth on average by about 2 percentage points per year. This is a huge reduction. If we were to apply it to the 2011 GDP, it would work as follows: Starting in 1949, had all subsequent regulation not happened, 2011 GDP would have been 39 trillion dollars higher, or about 54 trillion. As Lemieux put it: “The average American (man, woman and child) would now have about $125,000 more per year to spend, which amounts to more than three times [current] GDP per capita. If this is not an economic collapse, what is?”

Lemieux points out that, while this estimate may strain the credulity of some, it also may actually incorporate the effects of state and local regulation, even though the model itself did not include them in its index. That is because it is reasonable to expect a statistical correlation between the three forms of regulation. When federal regulation rises, it often does so in ways that require corresponding matching or complementary state and local actions. Thus, those forms of regulation are hidden in the model to some considerable degree.

Lemieux also points to Europe, where regulation is even more onerous than in the U.S. – and growth has been even more constipated. We can take this reasoning even further by bringing in the recent example of less-developed countries. The Asian Tigers experienced rapid growth when they espoused market-oriented economics; could their relative lack of regulation supplement this economic-development success story? India and mainland China turned their economies around when they turned away from socialism and Communism, respectively; regulation still hamstrings India while China is dichotomized into a relatively autonomous small-scale competitive sector and a heavily regulated and planned government controlled big-business economy. Signs point to a recent Chinese growth dip tied to the bursting of a bubble created by easy money and credit granted to the regulated sector.

The price tag for regulation is eye-popping. It is long past time to ask ourselves why we are stuck with this lemon.

Government Regulation as Wish-Fulfillment

For millennia, children have cultivated the dream fantasies of magical figures that make their wishes come true. These apparently satisfy a deep-seated longing for security and fulfillment. Freud referred to this need as “wish fulfillment.” Although Freudian psychology has long ago been discredited, the term retains its usefulness.

When we grow into adulthood, we do not shed our childish longings; they merely change form. In the 20th century, motion pictures became the dominant art form in the Western world because they served as fairy tales for adults by providing alternative versions of reality that were preferable to daily life.

When asked by pollsters to list or confirm the functions regulation should perform, citizens repeatedly compose “wish lists” that are either platitudes or, alternatively, duplicate the functions actually approximated by competitive markets. It seems even more significant that researchers and policymakers do exactly the same thing. Returning to Lewis Grossman’s evaluation of the public’s view of FDA: “Americans’ distrust of major institutions has led them to the following position: On the one hand, they believe the FDA has an important role to play in ensuring the basic safety of products and the accuracy and completeness of labeling and advertising. On the other hand, they generally do not want the FDA to inhibit the transmission of truthful information from manufacturers to consumers, and – except in cases in which risk very clearly outweighs benefit – they prefer that the government allow consumers to make their own decisions regarding what to put in their own bodies.”

This is a masterpiece of self-contradiction. Just exactly what is an “important role to play,” anyway? Allowing an agency that previously denied the right to label and advertise to play any role is playing with fire; it means that genuine consumer advocates have to fight a constant battle with the government to hold onto the territory they have won. If consumers really don’t want the FDA to “inhibit the transmission of truthful information from manufacturers to consumers,” they should abolish the FDA, because free markets do the job consumers want done by definitionand the laws alreadyprohibit fraud and deception.

The real whopper in Grossman’s summary is the caveat about risk and benefit. Government agencies in general and the FDA in particular have traditionally shunned cost/benefit and risk/benefit analysis like the plague; when they have attempted it they have done it badly. Just exactly who is going to decide when risk “very clearly” outweighs benefit in a regulatory context, then? Grossman, a professional policy analyst who should know better, is treating the FDA exactly as the general public does. He is assuming that a government agency is a wish-fulfillment entity that will do exactly what he wants done – or, in this case, what he claims the public wants done – rather than what it actually does.

Every member of the general public would scornfully deny that he or she believes in a man called Santa Claus who lives at the North Pole and flies around the world on Christmas Eve distributing presents to children. But for an apparent majority of the public, government in general and regulation in particular plays a similar role because people ascribe quasi-magical powers to them to fulfill psychological needs. For these people, it might be more apropos to view government as “Mommy” or “Daddy” because of the strength and dependent nature of the relationship.

Can Government Control Consumer Risk? The Emerging Scientific Answer: No 

The comments of Grossman, assorted researchers and countless other commentators and onlookers over the years imply that government regulation is supposed to act as a sort of stern, but benevolent parent, protecting us from our worst impulses by regulating the risks we take. This is reflected not only in cigarette taxes but also in the draconian warnings on the cigarette packages and in numerous other measures taken by regulators. Mandatory seat belt laws, adopted by state legislatures in 49 states since the mid-1980s at the urging of the federal government, promised the near-elimination of automobile fatalities. Government bureaucracies like Occupational Safety and Health Administration have covered the workplace with a raft of safety regulations. The Consumer Product Safety Commission presides with an eagle eye over the safety of the products that fill our market baskets.

In 1975, University of Chicago economist Sam Peltzman published a landmark study in the Journal of Political Economy. In it, Peltzman revealed that the various devices and measures mandated by government and introduced by the big auto companies in the 1960s had not actually produced statistically significant improvements in safety, as measured by auto fatalities and injuries. In particular, use of the new three-point seat belts seemed to show a slight improvement in driver fatalities that was more than offset by a rise in fatalities to others – pedestrians, cyclists and possibly occupants of victim vehicles. Over the years, subsequent research confirmed Peltzman’s results so repeatedly that former Chairman of the Council of Economic Advisors’ N. Gregory Mankiw dubbed this the “Peltzman Effect.”

A similar kind of result emerged throughout the social sciences. Innovations in safety continually failed to produce the kind of safety results that experts anticipated and predicted, often failing to provide any improved safety performance at all. It seems that people respond to improved safety by taking more risk, thwarting the expectations of the experts. Needless to say, this same logic applies also to rules passed by government to force people to behave more safely. People simply thwart the rules by finding ways to take risk outside the rules. When forced to wear seat belts, for example, they drive less carefully. Instead of endangering only themselves by going beltless, now they endanger others, too.

Today, this principle is well-established in scientific circles. It is called risk compensation. The idea that people strike to maintain, or “purchase,” a particular level of risk and hold it constant in the face of outside efforts to change it is called risk homeostasis.

These concepts make the entire project of government regulation of consumer risk absurd and counterproductive. Previously it was merely wrong in principle, an abuse of human freedom. Now it is also wrong in practice because it cannot possibly work.

Dropping the Façade: the Reality of Government Regulation

If the results of government regulation do not comport with its stated purposes, what are its actual purposes? Are the politicians, bureaucrats and employees who comprise the legislative and executive branches and the regulatory establishment really unconscious of the effects of regulation? No, for the most part the beneficiaries of regulation are all too cynically aware of the façade that covers it.

Politicians support regulation to court votes from the government-dependent segment of the voting public and to avoid being pilloried as killers and haters or – worst of all – a “tool of the big corporations.” Bureaucrats tacitly do the bidding of politicians in their role as administrators. In return, politicians do the bidding of bureaucrats by increasing their budgets and staffs. Employees vote for politicians who support regulation; in return, politicians vote to increase budgets. Employees follow the orders of bureaucrats; in return, bureaucrats hire bigger staffs that earn them bigger salaries.

This self-reinforcing and self-supporting network constitutes the metastatic cancer of big government. The purpose of regulation is not to benefit the public. It is to milk the public for the benefit of politicians, bureaucrats and government employees. Regulation drains resources away from and hamstrings the productive private economy.

Even now, as we speak, this process – aided, abetted and drastically accelerated by rapid money creation – is bringing down the economies of the Western world around our ears by simultaneously wreaking havoc on the monetary order with easy money, burdening the financial sector with debt and eviscerating the real economy with regulations that steadily erode its productive potential.

DRI-324 for week of 7-14-13: The Short Lives of Truck Drivers and Other Lies Our Government Tells Us

An Access Advertising EconBrief:

The Short Lives of Truck Drivers and Other Lies Our Government Tells Us

Many of us are old enough to remember when the veracity of government was generally taken for granted. This applied particularly to statistics gathered by government or quoted by Presidents, cabinet members and heads of government departments. At worst, we might suspect that statistics were being chosen selectively. Never did we dream that politicians made up numbers out of whole cloth, quoted them in a completely misleading and unjustified way or carefully picked and chose statistics from dubious sources to buttress unjustifiable policies.

Perhaps we were inexcusably complacent. But it is certain that today’s politicians not only lie to us with statistics, but do so with shocking insouciance. The author of the website “Zero Hedge” chided the Bureau of Labor Statistics for failing to correlate two different time series, the monthly release of net new jobs created and the Job Openings and Labor Turnover Survey (JOLTS) series. His point was that when two results that should yield the same result consistently differ by 40% or thereabouts, it becomes all too obvious that one or the other is wrong. This, in turn, suggests that the BLS is cooking the books on its net new job creation numbers to make the Obama administration look good.

Another ongoing whopper has been the government’s straight-faced insistence that the life expectancy of U.S. commercial truck drivers is 61, at least 16years lower than the general population. Not content to strain public credulity, they insisted on hearing it snap when they maintained that this conclusion was the outcome of new research.

The perpetrators of the truck-driver life-expectancy hoax are government regulators. Accordingly, it comes as no surprise that regulatory incentives are behind the hoax.

Ray the Hood Gets Blogged Down in Traffic

On September 2, 2010, Department of Transportation Secretary Ray LaHood made a history-making entry in his blog, “Fast Lane.” LaHood claimed that the average life expectancy of a commercial truck driver is 61 years, some 16 years below the U.S. average. LaHood cited data from the U.S. government’s Centers for Disease Control as the source for his claim. “I think you’ll agree that gap is startling,” LaHood wrote.

“Startling” is certainly the right word for LaHood’s claim about truck-driver life expectancy. Two things happened more or less simultaneously. First, use of the claim that “truck driver life expectancy is 61 years” spread like a contagious virus. Second, industry observers demanded to know the basis for that claim.

The reaction of website findtruckingjobs.com was typical: “According to recent driver health studies, the average lifespan of a professional truck driver is 61 years of age.” LaHood had actually cited no studies, merely referring to CDC as the source of his claim. Notice the weight of authority carried by LaHood’s comments. He was a Cabinet Secretary, an important Government official. He invoked the authority of a prestigious government agency, repository of medical data. Surely there must be studies supporting this statistic. He spoke recently; therefore his information must up-to-the-minute and timely.

Doubtless emboldened by the fact that LaHood seemed to have escaped unscathed, Anne Ferro drew water from the same well the following year. Ms. Ferro, Chief Administrator of the Federal Motor Carrier Safety Administration (FMCSA), delivered a speech in which she repeated LaHood’s claim. “It [the 61-year old life expectancy] is a startling, frightening and frankly untenable figure,” she announced. Virtually everybody agreed with her characterization, but for completely different reasons. Those who took her statement on faith found its content shocking, while those who recognized its utter implausibility found it shocking coming from occupants of high government office.

A month after Ferro’s speech, Bloomberg website reporter Jeff Plungis referred to both LaHood’s and Ferro’s comments in an article on the government’s resolution of the long-simmering debate over the hours-of-service (HOS) regulation. In support of the statistic, Plungis reminded his readers that “trucking is the most dangerous profession in on-the-job fatalities and the eighth-most dangerous in deaths per worker, according to the Bureau of Labor Statistics.” It apparently didn’t occur to him to wonder whether there could be seven other professions with even lower life expectancies than 61 years.

Stewart Levy of corporatewellnessmagazine.com apparently brought the epidemic of imitative citation to an end in his February, 2012 piece entitled “America Crisis: Health of Our Nation’s Truck Drivers.” Levy not only cited both LaHood and Ferro, but also speculated at length on the dietary, nutritional and behavioral shortcomings of the average truck driver. He offered gratuitous advice on improvement – not surprising in view of his professional status as a wellness consultant. The unique datum here, though, was the source he cited for the 61-year life expectancy – not CDC, but a 2005 study by the well-known consulting firm Global Insight.

Pushback

Sources friendly to truck drivers, including Truckinginfo.com (the website of Heavy Duty Trucking Magazine) and Land Line Magazine, the organ of the Owner Operator Independent Drivers’ Association, were openly skeptical of the LaHood/Ferro life expectancy claim. They wanted to see an actual study that reported a 61-year life expectancy for truckers. After long and diligent search, they found one – sort of.

A document called the Roemer Report quoted a scientist named Charles Moore-Ede, described as a “Toronto researcher,” who supposedly performed a “new study” showing “that truck drivers have a 10-15 year lower life expectancy than the average American male, who lives to age 76.” (The quotation is from an article by Land Line editor Sandi Soendker.) The word “supposedly” is the tipoff; when located, Mr. Moore-Ede identified this information as an online hoax. He is not even from Toronto.

The closest thing investigators could find to a study actually reaching a conclusion involving a 61-year age was a study published in 2007 in Environmental Health Perspectives. But the study followed 54,000 employees of four national trucking companies during the years 1985-2000. The employees were hired at varying points going back to the 1960s. Not surprisingly, the study calculated the mean and median age of death of the subjects, not their life expectancy. Surprisingly, drivers had longer longevity (61.9 years) than non-driver employees (59.9 years).

Apparently, one or more studies of commercial truck-driver mortality are now underway. Pending these results, the best chance to learn something cogent on the subject is probably insurance-company actuarial tables, which should seemingly yield useful occupational data on this subject.

We can safely rest content, then, that the 61-year-old life expectancy claimed for commercial truck drivers has no credible support and is wildly unlikely on its face.

How Do We Know That the 61-Year Life Expectancy Claim Was Not Merely An Honest Mistake?

Anybody can make a mistake. How do we know that LaHood, Ferro, et al were cynically trying playing politics rather than honestly trying to improve the health and well-being of American truck drivers, as well as safeguarding the safety of the nation’s highways?

We can tell. There are ways.

An honest mistake is made up of two components – error and good faith. Honesty implies the absence of deliberate prevarication and incompetence. Alas, both are evident in the composition of LaHood’s original statement.

The incompetence arises from the use of the term “life expectancy.” The word “expectancy” invokes the notion of relative frequency probability and an expected-value or mean outcome – what an ordinary person would call an “average.” A “life” denotes an entire lifespan, from birth to death. Sometimes the concept is modified by starting the clock later in life; “life expectancy at age x” is a common modification. But the elements of the concept always include numerical starting and ending points, whether birth- and death-year or otherwise.

It is easy to see that the term “life expectancy” does not adapt to professional or occupation categories, where there is no common start date corresponding with “birth (0)” or (say) “age 65 (retirement).” That is why professional and occupational studies usually substitute terms like “mean (or median) age at death” for life expectancy.

There may be a very superficial resemblance between the two terms, but concentrated thought demonstrates the unbridgeable gulf between them. Life expectancy deliberately incorporates all influences on longevity over the course of a lifetime – those operating at birth, in infancy, childhood, adulthood and old age. When we investigate “life expectancy of a commercial truck driver,” we are still incorporating all those influences in our study – but we almost certainly have no interest in anything that happened before our subjects began their professional careers as commercial drivers. Do we care that a truck driver smoked cocaine in high school, thereby damaging his heart and shortening his lifespan? No, not unless truck drivers are occupationally prone to have done this – and they aren’t.

The category of “life expectancy” is crucially affected by deaths at birth and in childhood; indeed, one of the major components of the increase in 20th-century life expectancy is the reduction in stillbirths and childhood mortality. These factors will affect a true “life expectancy” calculation for truck drivers (or any other profession or occupation), despite the fact that they are not what we want to get at when we probe the matter. What we really want to know is how commercial truck-driving per se affects longevity. What happened before the driver’s career is almost completely irrelevant, although post-career events are relevant since they are affected by the driver’s behavior and environment during his career.

It is now clear why the B.S. detector of every thoughtful and numerate person within earshot should have redlined the moment Ray LaHood opened his mouth on truck-driver “life expectancy.” He compared the alleged truck-driver life expectancy of 61 years with the 77-year life expectancy of the general population. But the category called “general population” counts everybody, including a fair number of people who died in childbirth, youth and adolescence. Because the United States encourages heroic measures to preserve the life of premature babies, deaths of “preemies” artificially lower our life expectancy number (and raise our infant mortality number) compared to that of other countries. This insures that, ceteris paribus (all other things equal), all professional and occupational categories will tend to reflect higher longevities than the general population. After all, a profession includes zero people who died at birth, in childhood and in adolescence – otherwise how could they have attained professional status? Yet Ray LaHood expects us to believe that truck drivers’ lives average 16 years shorter than those of the general population?

To be sure, all other things are decidedly not equal for truck drivers, who suffer relatively high rates of accidental death. (Similarly, taxi-cab drivers fall prey to the bullets of armed robbers and coal miners succumb to black-lung disease.) And this tends to offset the bias introduced in comparisons with the general population. As a first approximation, whether commercial truck drivers actually live shorter or longer lives than ordinary people will depend on the relative strength of these two effects on the truck-driver result – the average-shortening effect of accidental deaths vs. the average-lengthening caused by removing early deaths from the calculation. When we examine the paucity of genuine research on the subject, we will see that the issue remains an open one.

Recall also that LaHood cited the CDC as his source. Medical professionals for whom statistical data and analysis are life’s blood would never commit the amateur blunder of applying life expectancy to professional or occupational longevity. And they would not compare truck-driver longevity to that of the general population without qualifying the comparison as was done above.

No, Ray LaHood has carelessly let his mask slip, revealing Ray the Hood, dedicated to untruth, injustice and the un-American way. What were the ulterior motives that underlay this crude deception? Before proceeding to the answer, we must glance in the rear-view mirror at the original truck-driver health scare ginned up by Obama Administration regulators: sleep apnea.

The First Truck-Driver Health Deception: Sleep Apnea

Since 2009, the Obama Administration has consistently supported mandatory sleep studies for truck drivers to test for the presence of sleep apnea. Based on one study of fewer than 1,400 truck drivers located within a 50-mile radius of the University of Pennsylvania, the Administration claimed that 28% of truck drivers have sleep apnea. Not only was the study extremely narrow in design and scope, the government had to distort the study’s procedures in order to obtain the vaunted 28% figure.

The website askthetrucker.com (written by Allen and Donna Smith) examined the Pennsylvania study in some detail. While the study drew upon 1,391 truck drivers located close to the university, the actual sleep apnea examinations were conducted upon a smaller subset of this population. The original sample was screened to determine the most promising candidates for sleep apnea diagnosis. The sub-sample of 406 candidates was then tested. In and of itself, this procedure is unexceptional, because testing the original sample would have tripled the cost of the study.

The problems of interpretation came from what happened next. Some 36% of this sample was diagnosed with sleep apnea. Most of these drivers had mile or moderate disease; only a tiny fraction was considered to be severe sufferers. Another sample of 778 was developed from a second screening, of which 28% were diagnosed as apnea-positive. Once again, the overwhelming bulk of these were mild or moderate sufferers, not severely afflicted.

The Smiths rightly questioned the propriety of calculating the percentage of apnea sufferers using the screened sample as the base rather than the original sample of 1,391 drivers, in which case the calculated percentages would have been much lower. Really, no national extrapolation of the incidence of sleep apnea should have been made on the basis of this single, highly flawed study. At least one other study has found no difference between the incidence of sleep apnea among truck drivers and the general population.

Even more pertinent is the fact that no studies have found a correlation, let alone causation, between sleep apnea incidence and automobile crash incidence. And it is highway safety, after all, that is the supposed pretext justifying truck-driver regulation.

Businessmen Maximize Profit; Regulators Maximize Regulation

For far too long, government regulation has gotten a free pass from academic economists and the general public. The inherent regulating forces of free markets have gone unnoticed and unstressed. Meanwhile, the practice of regulation has been presumed to be benign at worst and highly beneficial at best.

One of the culprits in this litany of oversight has been the practice of what Nobel laureate Ronald Coase has called “blackboard economics.” When drawing diagrams on the classroom blackboard, academic economists have anointed themselves omniscient philosopher kings, with infallible knowledge of business costs and consumer benefits and unlimited power to enact regulatory changes that fine-tune away market failure and deliver optimal outcomes.

In real life, it is regulators who administer the programs ostensibly charged with achieving these blackboard results. The regulators know little or nothing about the actual costs and benefits and lack the power to make the changes necessary to produce the outcomes called for. Since the costs and benefits are not known anyway – by regulators or economists – we can’t even be sure that the blackboard results would work the way they do on the blackboard.

The blackboard only serves to provide cover for what regulators are really up to – which is achieving their own aims and those of their political sponsors. The academic economics is what justifies setting up the regulatory apparatus in the first place. Once securely in place, the regulatory agencies then proceed to get markets in a stranglehold by forcing businesses to comply with an unending regime of rules.

Economists have rightfully emphasized the deregulation of price and entry in trucking starting in 1978. But safety regulation has remained in place, allowing the Department of Transportation and its subsidiary agencies like FMCSA to hold trucking companies and drivers under the regulatory thumb.

Readers may object to such a pejorative take on the regulatory function. How do we know that regulation isn’t exactly what it purports to be – the diversion of selfish private actions toward the public interest? How do we know that regulators aren’t what they seem to be – noble public servants sacrificing their incomes and egos to the greater glory of social welfare and social justice?

When the goals of regulation are defined in terms of grandiloquent holisms like social welfare and social justice, it becomes impossibly nebulous. There is no “social” welfare apart from the individual welfares that comprise a nation; any specification simply substitutes the designer’s own concept for the welfare of “society.” Society is not an organic unity with its own independent existence, the protestations of socialists down through the centuries notwithstanding.

When the definition becomes specific – regulators should keep businessmen from raising prices “too high;” keep profits from growing “too large;” keep product quality from growing “too poor,” “too coarse” or “too fine;” keep technology improving steadily or stop it from going too fast – it turns out that people want regulators to do what only markets can do and, for the most part, already do.

And if it should turn out that markets aren’t doing such a good job of those things, after all? Anybody who thinks a regulator heading up a government agency can run an industry from the outside better than businessmen can from the inside is smoking illicit substances. Markets process a staggering flow of information about prices, costs, inputs and technology. Regulators have no way to obtain all that information and no incentive to pass it along to society even if they could get it.

Indeed, incentives are another glaring difference between marketplace competition and regulated industrial life. Competition provides the incentives for consumers to shop carefully to maximize their own well-being and for producers to minimize cost in producing products and adopt technological innovations at a suitable pace. There is no incentive for regulators to improve on the results obtained through unhampered markets even if they knew what they were doing.

Instead, regulators have every incentive to serve the interests of their political patrons, the politicians who appointed them. Regulators are paid according to the size of their agency and its staff, so they have every incentive to grow the size of government. Is it any wonder that government agencies have multiplied in number beyond our power to enumerate them?

Regulators’ Attitude Toward Trucking Regulation: Use It Before They Lose It

From Inauguration Day to date, the Obama Administration has used trucking regulation as a tool for achieving its political aims. For example, industry figures have predicted reductions in capacity and higher freight rates as outcomes of regulatory actions ostensibly intended to improve highway safety and information available to shippers. These would be rewards for political support and contributions.

But the purpose behind the wildly unlikely claims about truck-driver health and longevity made by regulators almost certainly trace to the other category of incentives faced by regulators. Regulation itself constitutes an income-earning, wealth-building asset to regulators. It is the source of their income, wealth and prestige. If that asset is faced with depletion in the future, regulators have an incentive to use it now, before its value vanishes.

That is the case with truck-driver regulation. Today, federal transportation regulators spend a vast amount of time, energy and money regulating truck drivers. But the profession of truck driver is an endangered species. Self-driving vehicles are now a reality. Innovations like this usually come to fruition first in their highest-valued use. Because trucks carry two-thirds of the nation’s freight, including many highly valued cargos, trucking will be the vanguard of self-driving vehicle adoption. While humans may accompany the vehicles, particularly in the early stages of adoption, the profession of truck driver as we know it is in its last years. The only remaining question is how long this period of obsolescence will last.

When human truck driving comes to an end, so will the period of truck-driver regulation as we have known it. Of course, regulation will still exist for the vehicles – regulators have seen to that by preemptively staking their claim and demanding control over the adoption of self-driving vehicles. But vehicles will not present the bonanza for health and safety regulation that now exists.

Meanwhile, regulators must milk the possibilities of truck-driver regulation for all it is worth. The aging population of truck drivers presents intriguing possibilities. Truck drivers smoke more than average. They eat on the go, guaranteeing that their diet will be nutritionally incorrect. They spend long periods sitting down in truck cabs, suggesting that their level of exercise may be less than optimal. All this allows regulators to accuse them of being health scofflaws.

Why isn’t this exclusively the business of truck drivers themselves? What makes it the business of transportation regulators? Regulators must make a connection between poor truck-driver health and public safety. If they do, this will provide the needed pretext for the blizzard of rulemakings, mandates and dictates that are the raison d’être of regulation and the bane of the regulated.

That is the purpose of the manufactured campaign designed to persuade the public – or at least create the necessary breath of suspicion – that truckers disproportionately suffer from sleep apnea. Sleep apnea makes truckers sleepy – so the regulators’ argument goes – which causes them so fall asleep on the road, which leads to accidents.

The more recent round of trash talk about truck-drive life expectancy caters to the popularity of paternalistic government. If we can have ordinances limiting the size of soft drinks sold in restaurants, it’s not much of a stretch to say that we can regulate the health of truck drivers. After all, not only would these regulations protect truck drivers from themselves, they would also protect the motoring public. Fewer truck drivers would suffer heart attacks and strokes on the job, making it safer for other drivers.

Where truck-driver regulation is concerned, the operative maxim among regulators is “use it before you lose it.” Regulators have little to lose from exaggerating their case for regulation, since their regulatory mandate is eventually going away anyway. They might as well grab for all the regulatory gusto they can while the grabbing is good.

Of course, all this desperate striving is inconsistent with scientific objectivity. It is unseemly for high-level government officials to lie and distort statistics like tabloid newspapers or snake-oil salesmen. Then again, government regulation never really had much to do with science or objectivity. The urgency created by the impending demise of truck driving has led to the destruction of regulation’s façade of respectability.