Category: Law
Alternatives to 911
Almost a quarter-billion calls are placed to 911 each year in the United States. A large share of them involve social problems, not crimes or emergencies—yet police are dispatched in response. This review traces how the 911 emergency system’s institutional design shapes demand for police, who is excluded from or ill served by this system, and what alternatives exist, including nonemergency lines (with police response), government hotlines (211, 311, 988), civilian crisis teams, and community-based resources. Among the universe of municipal police departments with at least 100 sworn officers in 2020, covering 107 million US residents, police have absorbed broad social service functions, with the availability of formal alternatives restricted to the largest cities. The evidence suggests that the primacy of police reflects institutional reproduction more than public need. I propose priorities for future research.
That is from a new NBER working paper by Bocar A. Ba.
Why is the USDA Involved in Housing?!
In yesterday’s post, The 21st Century ROAD to Housing Act, I wrote that Trump’s Executive Order “cuts off institutional home investors from FHA insurance, VA guarantees and USDA backing…”. The USDA is of course the United States Department of Agriculture. In the comments, Hazel Meade writes:
USDA? Wait, what????
Why is the USDA in any way involved in housing financing?
Are we humanly capable of organizing anything in a rational way?
It’s a good question. The answer is a great illustration of the March of Dimes syndrome. The USDA got involved with housing in the late 1940s with the Farmers Home Administration. The original rationale was to support farmers, farm workers and agricultural communities with housing assistance on the theory that housing was needed for farming and the purpose of the USDA was to improve farming. Not great economic reasoning but I’ll let it pass.
Well U.S. farm productivity roughly tripled between 1948 and the 1990s as family farms became technologically sophisticated big businesses. So was the program ended? Of course not. Over time the program subtly shifted from farmers to “rural communities”–the shift happened over decades although it was officially recognized in 1994 when the Farmers Home Administration was renamed the Rural Housing Service. Today rural essentially means low population density which no longer has any strong connection to agriculture.
So that’s the story of how the US Department of Agriculture came to run a roughly $10 billion annual housing program for non-farmers in non-agricultural communities. And how does it do this? By supporting no-money-down direct lending and a 90 percent guarantee to approved private lenders. Lovely.
It’s a small program in the national totals, but an amusing example of the US government robbing Peter to pay Paul and then forgetting why Paul needed the money in the first place.
The 21st Century ROAD to Housing Act
The 21st Century ROAD to Housing Act appears likely to pass the Senate. The bill contains some genuinely good ideas alongside some very popular—but bonkers ideas.
Let’s start with the good ideas.
The bill would streamline NEPA review for federally supported housing, primarily by expanding categorical exclusions. Federal environmental review does impose real costs and delays on housing construction, so reducing unnecessary review is a step in the right direction. The gains will probably be modest—most housing regulation occurs at the state and local level—but removing friction is good.
The bill would also deregulate manufactured housing by eliminating the permanent chassis requirement and creating a uniform national construction and safety standard. The United States once built far more factory-produced housing; in the early 1970s, by some accounts a majority of new homes were factory-built (mobile or modular). Long-run productivity growth in housing almost certainly requires greater use of factory construction. Land-use regulation remains the dominant constraint on supply, but enabling scalable manufacturing is still welcome.
Another interesting provision involves Community Development Block Grants (CDBG). The bill allows CDBG funds to be used for building new housing rather than being largely restricted to rehabilitation of existing housing. More federal spending is not automatically appealing, but the bill adds an unusual incentive mechanism.
The bill creates a tournament for CDBG allocations. Localities that exceed the median housing growth improvement rate among eligible CDBG recipients receive bonus funding. Those below the median face a 10 percent reduction. The key feature is that the penalties fund the bonuses, so the system reallocates money rather than expanding spending.
This is a clever design. It creates competition among localities and benchmarks them against peers rather than against a fixed national target. In effect, the program rewards relative improvement rather than absolute performance—a classic tournament structure. (See Modern Principles for an introduction to tournament theory!).
Ok, now for the popular but bonkers ideas. Section 901 (“Homes are for People, Not Corporations”) restricts the purchase of new single-family homes by large institutional investors. Elizabeth Warren is a sponsor of the bill but this section was driven almost entirely by President Trump. Trump passed an Executive Order, Stopping Wall Street from Competing With Main Street Home Buyers, that cuts off institutional home investors from FHA insurance, VA guarantees, USDA backing, Fannie/Freddie securitization and so forth. The bill goes further by imposing a seven-year mandatory divestiture rule, forcing institutional investors to convert rental homes to owner-occupied units after seven years.
No one objects to institutional investors owning apartment buildings. But when the same investors own single-family homes, it breaks people’s brains. Consider how strange the logic sounds if applied elsewhere:
…a growing share of apartments, often concentrated in certain communities, have been purchased by large Wall Street investors, crowding out families seeking to buy condominiums.
Apartments are fine, hotels are fine, but somehow a corporation owning a single family home is un-American. In fact, the US could do with more rental housing of all kinds! Why take the risk of owning when you can rent? Rental housing improves worker mobility. When foreclosures surged after 2008 and traditional buyers disappeared, institutional investors stepped in and absorbed distressed supply — helping stabilize markets. Who plays that role next time?
Institutional investors own only a tiny number of homes, so even if this were a good idea it wouldn’t be effective. But it’s not a good idea, it’s just rage bait driven by Warren/Trump anti-corporate rhetoric.
What does “Homes are for People, Not Corporations” even mean?–this is a slogan for the Idiocracy era. “Food is for People, Not Corporations,” so we should ban Perdue Farms and McDonald’s?
The Hidden Cost of Hard-to-Fire Labor Laws: Why European Firms Don’t Take Risks
In our textbook, Modern Principles, Tyler and I write:
Imagine how difficult it would be to get a date if every date required marriage? In the same way, it’s more difficult to find a job when every job requires a long-term commitment from the employer.
In two new excellent pieces, Brian Albrecht and Pieter Garicano extend this partial equilibrium aphorism with some general equilibrium reasoning. Here’s Albrecht:
[I]magine there is a surge for Siemens products. Do you hire a ton of workers to fill that demand? No, you’re worried about having to fire them in the future but being stuck until they retire.
But it’s even worse than that…..[suppose Siemens does want to hire] where is Siemens getting those workers from?…Not only is it a problem for Siemens that they won’t be able to fire people down the road, the fact that BMW doesn’t fire anyone means you can’t hire people.
Garicano has an excellent piece, Why Europe doesn’t have a Tesla, with lots of detail on European labor law:
Under the [German] Protection Against Dismissal Act, the Kündigungsschutzgesetz, redundancies over ten employees must pass a social selection test (Sozialauswahl). Employers cannot choose who leaves: they must rank employees by age, years of service, family maintenance obligations, and degree of disability, and then prioritize dismissing those with the weakest social claim to the job. If someone is dismissed for operational reasons but the company posts a similar job elsewhere, the dismissal is usually invalid.
Disabled employees can be dismissed only with the approval of the Integration Office (Integrationsamt), a public body. The office will weigh the employer’s reasons, whether they have taken sufficient steps to integrate the employee, and whether they could be redeployed elsewhere in the organization. Workers who also become caregivers cannot be dismissed at all for up to two full years after they tell their bosses they fulfill that role.
As a company becomes larger and tries to let more workers go at once these difficulties increase. In many European countries, companies with more than a certain number of workers – 50 in the Netherlands, 5 in Germany – are obliged to create a works council, which represents employees and, in some countries, must give its approval to decisions the employer wants to make regarding its employees, including layoffs or pay rises or cuts.
…Companies that are allowed to fire someone and can afford to pay the severance costs have to wait and pay additional fees. Collective dismissal procedures in Germany start after 30 departures within a month; once triggered they require further negotiations with the works council, a waiting period, and the creation of a ‘social plan’ with more compensation for departing workers. When Opel shut down its Bochum factory in Germany, it reached a deal with the works council to spend €552 million on severance for the 3,300 affected employees. This included individual payments of up to €250,000 and a €60 million plan to help workers find new jobs.
Now what is the effect of regulations like this? Well obviously the partial equilibrium effect is to reduce hiring but in addition Garicano notes that it changes what sorts of firms are created in the first place. If you are worried about being burdened by expensive dismissal procedures, build a regulated utility with captive government contracts, not a radical startup with a high probability of failure.
Rather than reduce hiring in response to more expensive firing, companies in Europe have shifted activity away from areas where layoffs are likely. European workers are for sure, solid work only. This works well in periods of little innovation, or when innovation is gradual. The continent, however, is poorly equipped for moments of great experimentation.
…Europe’s companies have immense, specialized knowledge [due to retained workforces, AT]. The problems happen when radical innovation is needed, as in the shift from gasoline to electric vehicles. The great makers of electric cars have either been new entrants, like Tesla and BYD, or old ones who have had their insides stripped, like MG.
..If Europe wants a Tesla, or whatever the Tesla of the next decade will turn out to be, it will need a new approach to hiring and firing.
Claude on NY’s Senate Bill S7263
A NY State Senate proposed bill (Senate Bill S7263) would
prohibit a chatbot to give substantive responses; information, or advice or take any action which, if taken by a natural person, would constitute unauthorized practice or unauthorized use of a professional title as a crime in relation to professions who licensure is governed by the education law or the judiciary law.
Claude, what do you think of the legal logic of this bill?
The legal logic is shaky. The bill’s operative test asks whether a chatbot’s output, “if taken by a natural person, would constitute a crime” under New York’s unauthorized practice statutes. But those statutes set a high bar — mere advice-giving by a layperson is not criminal; what’s prohibited is holding yourself out as a licensed professional while charging fees. Your neighbor who happens to be a doctor can tell you what he thinks your rash is. A retired lawyer can walk you through a lease. None of that is a crime. So either the bill is mostly toothless — most AI responses wouldn’t meet the criminal threshold — or courts will interpret “substantive advice” far more expansively than the underlying statutes warrant, effectively creating a new and harsher legal standard for AI that applies to no human equivalent. Neither outcome reflects good lawmaking, and the ambiguity will systematically over-deter, pushing operators to sanitize outputs well beyond what the statute actually requires.
Claude, who will be hurt by this bill?
The deepest problem is who gets hurt. The populations with the most to gain from AI-assisted professional guidance are precisely those who cannot afford lawyers, doctors, or therapists — the tenant trying to understand an eviction notice, the rural patient triaging symptoms, the small business owner reviewing a contract. For these users, the choice the bill actually creates is not “AI advice versus licensed professional advice”; it’s “AI advice versus no advice at all.” A watered-down chatbot that responds to every medical or legal question with a referral to a licensed professional is not a safety feature — it’s a luxury tax on information, paid disproportionately by people with the fewest alternatives. New York should be asking how to ensure AI advice is accurate and clearly disclosed, not how to suppress it on behalf of incumbents who’d prefer less competition.
Thanks Claude. Where did you learn this excellent analysis?
Public choice theory is part of my general training on economics and political science literature — Buchanan, Tullock, Olson, and the broader tradition are well-represented in the texts I was trained on.
But I’d be remiss not to note that you’re at the home institution of public choice. The Buchanan House is literally on your campus, and the tradition Buchanan and Tullock built at GMU is probably the most direct intellectual ancestor of the kind of analysis I was applying to this bill — concentrated benefits, diffuse costs, regulatory capture, rent-seeking by incumbent professionals. That framework is so natural for analyzing occupational licensing legislation that it almost applies itself.
If anything, my read of S7263 is pretty much a straightforward public choice story: organized professional associations with strong lobbying presence get statutory protection written in the language of consumer welfare, while the costs fall on millions of unorganized users who will never know what information they didn’t receive. Buchanan would have recognized it immediately.
What the recent dust-up means for AI regulation
From my new Free Press column, I see these as the most important facts:
Congress has not passed explicit regulation of AI foundation models, and an executive order from President Trump limited regulation at the state level. But do not think that laissez-faire reigns. In addition to existing (largely pre-AI) laws, which lay out general principles of liability, and laws from a few states, the United States is engaged in a kind of “off the books” soft regulation.
The major AI companies keep the national security establishment apprised of the progress they are making, as has been the case with Anthropic. There is a general sense within the AI industry that if the national security authorities saw anything in the new products that was very concerning or that might undermine the national interest, they would inform the president and Congress. That would likely lead to more formal and more restrictive kinds of regulation, so the major AI companies want to show relatively safe demos and products. An informal back and forth enforces implied safety standards, without the involvement of formal legislation.
That may sound like an unusual way to do regulation, but to date the system has worked relatively well. For one thing, I believe our national security establishment has a better and more sophisticated understanding of the issues than does Congress. Congress right now simply isn’t up to the job, as indeed the institution has been failing more generally. Most representatives seem to know little about the core issues behind AI regulation.
As it stands, AI progress has been allowed to proceed, and the United States has stayed ahead of China, without major catastrophes. The burden on the companies has been manageable, and the system, at least until last week, was flexible.
Another advantage of this system is that both Congress and the administrative state can be very slow to act. The AI landscape can change in just weeks, yet our federal government is used to taking years to issue laws and directives. Had we passed AI legislation in, say, 2024, today it would be badly out of date, no matter what your point of view on what such regulation should accomplish. For instance, in 2024 few outsiders were much concerned with the properties of, or risks from, autonomous AI “agents.” Today that is the number-one topic of concern.
Though it is not driven by legislation, the status quo AI regulatory system is not anti-democratic, as it operates well within the rules passed by Congress and the administrative state. It is more correct to say the current AI guardrails rely on the threat of regulation, rather than regulation itself, with the national security state as the watchdog. The system sticks to a kind of creative ambiguity. The national security state offers no official imprimatur for the new advances, but they proceed nonetheless. Nevertheless, the various components of the national security state reserve the right to object in the future.
It is also correct, however, to believe that such a system cannot last forever. At some point creative ambiguity collapses. Someone or some institution demands a more formal answer as to what is allowed or what is not allowed. At that point a more directly legalistic system of adjudication enters the picture, and Congress likely starts paying more attention.
With the recent dispute between Hegseth and Anthropic, we have taken a step away from the previous regulatory mode of quiet cooperation. Instead, the relationship between the military and the AI companies has become a matter of public concern. Now everyone has an opinion on Hegseth, Anthropic, and OpenAI, and social media is full of debate.
No matter “whose side you take,” it would have been better to have resolved all this behind closed doors.
Chaos and Misallocation under Price Controls
My latest paper, Chaos and Misallocation under Price Controls, (with Brian Albrecht and Mark Whitmeyer) has a new take on price controls:
Price controls kill the incentive for arbitrage. We prove a Chaos Theorem: under a binding price ceiling, suppliers are indifferent across destinations, so arbitrarily small cost differences can determine the entire allocation. The economy tips to corner outcomes in which some markets are fully served while others are starved; small parameter changes flip the identity of the corners, generating discontinuous welfare jumps. These corner allocations create a distinct source of cross-market misallocation, separate from the aggregate quantity loss (the Harberger triangle) and from within-market misallocation emphasized in prior work. They also create an identification problem: welfare depends on demand far from the observed equilibrium. We derive sharp bounds on misallocation that require no parametric assumptions. In an efficient allocation, shadow prices are equalized across markets; combined with the adding-up constraint, this collapses the infinite-dimensional welfare problem to a one-dimensional search over a common shadow price, with extremal losses achieved by piecewise-linear demand schedules. Calibrating the bounds to stationlevel AAA survey data from the 1973–74 U.S. gasoline crisis, misallocation losses range from roughly 1 to 9 times the Harberger triangle.
Brian has a superb write up that makes the paper very accessible. Unfortunately, the paper is timely and relevant.
Stand with free speech and the Constitution
A landmark law that limits children under the age of 16 to one hour per day on social media apps has been blocked by a US court, in a blow to child safety campaigners seeking to limit exposure to sites such as Instagram and YouTube.
In an opinion released on Friday, a federal judge in Virginia halted the enforcement of a bill passed by the state last year, under which social media companies could be fined $7,500 per violation.
The state “does not have the legal authority to block minors’ access to constitutionally protected speech until their parents give their consent by overriding a government-imposed default limit”, Judge Patricia Tolliver Giles wrote of the measure, implementing a preliminary injunction.
Giles concluded the law was “over-inclusive”. Under it, “a minor would be barred from watching an online church service if it exceeded an hour on YouTube . . . yet, that same minor is allowed to watch provider-selected religious programming exceeding an hour in length on a streaming platform,” she wrote. “This treats functionally equivalent speech differently.”
Here is more from the FT.
If you have the right to die, you should have the right to try!
Ruxandra Teslo asks a good question:
I have a curiosity: why is it the case that it is easier to get MAID in Canada than it is to access experimental treatments which carry a higher risk? In the past, I used to think ppl do not like “deaths caused by the medical system”, but for MAID the prob of death is 100%…
The Canadians may be somewhat inconsistent on this point. Unfortunately, the Supreme Court has been consistent and has rejected medical self-defense arguments for physician assisted suicide and let stand an appeals court ruling that patients do not have a right to access drugs which have not yet been permitted for sale by the FDA (fyi, I was part of an Amici Curiae brief for this case).
Hat tip for the post title to Jason Crawford.
Think through the situation one step further
Many of you got upset when I mentioned the possibility that parents use smart phone software to control the social media usage of their kids. There was an outcry about how badly those systems work (is that endogenous?). But that is missing the point.
If you wish to limit social media usage, mandate that the phone companies install such software and make it more effective. Or better yet commission or produce a public sector app to do the same, a “public option” so to speak. Parents can then download such an app on the phone of their children, or purchase the phone with the app, and manipulate it as they see fit.
If you do not think government is capable of doing that, why think they are capable of running an effective ban for users under the age of sixteen? Maybe those apps can be hacked but we all know the “no fifteen year olds” solution can be hacked too, for instance by VPNs or by having older friends set up the account.
My proposal has several big advantages:
1. It keeps social media policy in the hands of the parents and away from the government.
2. It does not run the risk of requiring age verification for all users, thus possibly banishing anonymous writing from the internet.
3. The government does not have to decide what constitutes a “social media site.”
Just have the government commission a software app that can give parents the control they really might want to have. I am not myself convinced by the market failure charges here, but I am very willing to allow a public option to enter the market.
The fact that this option occasions so little interest from the banners I find highly indicative.
“Tough on crime” is good for young men
Using data from hundreds of closely contested partisan elections from 2010 to 2019 and a vote share regression discontinuity design, we find that narrow election of a Republican prosecutor reduces all-cause mortality rates among young men ages 20 to 29 by 6.6%. This decline is driven predominantly by reductions in firearm-related deaths, including a large reduction in firearm homicide among Black men and a smaller reduction in firearm suicides and accidents primarily among White men. Mechanism analyses indicate that increased prison-based incapactation explains about one third of the effect among Black men and none of the effect among White men. Instead, the primary channel appears to be substantial increases in criminal conviction rates across racial groups and crime types, which then reduce firearm access through legal restrictions on gun ownership for the convicted.
That is from a new paper by Panka Bencsik and Tyler Giles. Via M.
I guess Mexico is solving for the equilibrium?
For some while I have wondered what would happen if the U.S. military sought to assist Mexico in taking out one of the top drug lords. I suppose now we are finding out. A few points:
1. There is a good chance a few more drug lords will be hit. It makes no sense to get involved just to take out one guy (supply is elastic!). Sheinbaum is doing this, so it is not just the oddities of Trumpland at work here. Presumaby the goal is to shift the entire equilibrium.
2. The cartels would do better to lay low for a while, rather than making this a big public issue. The virulence of their response indicates they are probably pretty scared. Of course the actual decisions here are being taken by (threatened) individuals, not by the (persisting) “cartels.”
3. “Cartels” is an overused word here. They are more like loose syndicates, and by no means are they always colluding with each other.
4. Perhaps there is a new “Trump doctrine,” namely to focus on going after lead individuals, rather than governments or institutional structures. We already did that in Venezuela, and there is talk of that being the approach in Iran. If so, that is a change in the nature of warfare, and of course others may copy it too, including against us. Is there a chance they have tried already?
5. With this action, which seems to have U.S: involvement at least on the intelligence side (possibly more), we are also sending a message to Iran.
6. I believe my post from this morning is holding up pretty well. What the U.S. is supplying here is “more decisive action,” rather than some new, detailed understanding of the Mexican dilemma. See also my Free Press Latin America column from October.
7. In its most extreme instantiation, today’s action represents a willingness of the U.S. to get involved in a Mexican civil war of sorts. I do not expect matters to take that path, as the last time U.S. troops had direct involvement in Mexico was 1916-1919. “Convergence to some warning shots” is a more likely equilibrium outcome here. Nonetheless such an escalatory scenario is not off the table, do note that American foreign policy has been returning to much earlier eras in a number of regards.
8. This story is not over.
Why the “Lesser Included Action” Argument for IEEPA Tariffs Fails
The Supreme Court yesterday struck down Trump’s IEEPA tariffs, holding that the statute’s authorization to “regulate… importation” doesn’t include the power to impose tariffs. The majority’s strongest argument is simple: every time Congress actually delegates tariff authority, it uses the word “duty,” caps the rate, sets a time limit, and requires procedural prerequisites. IEEPA has none of these.
The dissent pushes back with an intuitively appealing argument: IEEPA authorizes the President to prohibit imports entirely, so surely it authorizes the lesser action of merely taxing them. If Congress handed over the nuclear option, why would it withhold the conventional weapon? Indeed in his press conference Trump, in his rambling manner, made exactly this argument:
“I am allowed to cut off any and all trade…I can destroy the trade, I can destroy the country, I’m even allowed to impose a foreign country destroying embargo…I can do anything I want to do to them…I’m allowed to destroy the country, but I can’t charge a little fee.”
The argument is superficially appealing but it fails due to a standard result in principal-agent theory.
Congress wants the President to move fast in a real emergency, but it doesn’t want to hand over routine control of trade policy. The right delegation design is therefore a screening device: give the President authority he will exercise only when the situation is truly an emergency.
An import ban works as a screening device precisely because it is very disruptive. A ban creates immediate and substantial harm. It is a “costly signal.” A President who invokes it is credibly saying: this is serious enough that I am willing to absorb a large cost. Tariffs, in contrast, are cheaper–especially to the President. Tariffs raise revenue, which offsets political pain. Tariff incidence is diffuse and easy to misattribute—prices creep, intermediaries take blame, consumers don’t observe the policy lever directly. Most importantly tariffs are adjustable, which makes them a weapon useful for bargaining, exemptions, and targeted favors. Tariffs under executive authority implicitly carry the message–I am the king; give me a gold bar and I will reduce your tariffs. Tariff flexibility is more politically appealing than a ban and thus a less credible signal of an emergency. The “lesser-included” argument gets the logic backwards. The asymmetry is the point.
Not surprisingly, the same structure appears in real emergency services. A fire chief may have the authority to close roads during an emergency but that doesn’t imply that the fire chief has the authority to impose road tolls. Road closure is costly and self-limiting — it disrupts traffic, generates immediate complaints, and the chief has every incentive to lift it as soon as possible. Tolls are cheap, adjustable, and once in place tend to persist; they generate revenue that can fund the agency and create constituencies for their continuation. Nobody thinks granting a fire chief emergency closure authority implicitly grants them taxing authority, even if the latter is a lesser authority. The closure and toll instruments have completely different political economy properties despite operating on the same roads.
The majority reaches the right conclusion by noting that tariffs are a tax over which Congress, not the President, has authority. That is constitutionally correct but the deeper question is why the Framers lodged the taxing power in Congress — and the answer is political economy. Revenue instruments are especially easy for an executive to exploit because they can be targeted. The constitutional rule exists to solve that incentive problem.
Once you see that, the dissent’s “greater includes the lesser” inference collapses on its own terms. A principal can rationally authorize an agent to take a dramatic emergency action while withholding the cheaper, revenue-lever not despite the fact that it seems milder, but because of it. The blunt instrument is self-limiting. The revenue instrument is not. That asymmetry is what the Constitution’s categorical division of powers preserves — and what an open-ended emergency delegation would destroy.
A Republic, if you can keep it
The conclusion of Justice Gorsuch’s concurrence in the tariff case:
For those who think it important for the Nation to impose more tariffs, I understand that today’s decision will be disappointing. All I can offer them is that most major decisions affecting the rights and responsibilities of the American people (including the duty to pay taxes and tariffs) are funneled through the legislative process for a reason. Yes, legislating can be hard and take time. And, yes, it can be tempting to bypass Congress when some pressing problem
arises. But the deliberative nature of the legislative process was the whole point of its design. Through that process, the Nation can tap the combined wisdom of the people’s elected representatives, not just that of one faction or man. There, deliberation tempers impulse, and compromise hammers
disagreements into workable solutions. And because laws must earn such broad support to survive the legislative process, they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day. In all, the legislative process helps ensure each of us has a stake in the laws that govern us and in the Nation’s future. For some today, the weight of those virtues is apparent. For others, it may not seem so obvious. But if history is any guide, the tables will turn and the day will come when those disappointed by today’s result will appreciate the legislative process for the bulwark of liberty it is.
The Cassidy Report on the FDA
Senator Bill Cassidy (R-La.) released a new report on how to modernize the FDA. It has some good material.
… FDA’s process for reviewing new products can be an unpredictable “black box.” FDA teams can differ greatly in the extent to which they require testing or impose standards that are not calibrated to the relevant risks. The perceived disconnect between the forward leaning rhetoric and thought leadership of senior FDA officials and cautious reviewer practice creates further unpredictability. This uncertainty dampens investment and increases the time it takes for patients to receive new therapies.
Companies report that they face a “reviewer lottery,” where critical questions hinge on the approach of a small number of individuals at FDA. Some FDA review teams are creative and forward-leaning, helping developers design programs and overcome obstacles to get needed products to patients, without cutting corners. FDA’s Oncology Center of Excellence (OCE), for example, is repeatedly identified as a model for providing predictable yet flexible options for bringing new drugs to cancer patients. OCE is now a dialogue-based regulatory paradigm that has facilitated efforts by academia, industry, the National Institutes of Health (NIH), and others to develop new cancer therapies and launch innovative programs and pilots like Project Orbis, RealTime Oncology Review.
That’s quite right. In my report with DiMasi and Milne, we show that review times vary markedly within the FDA, across divisions, without clear cause. Put aside the big questions of FDA or no FDA–scaling the practices of the better-performing divisions would likely yield large gains.
Mike Doherty further asks the AI what Alex Tabarrok would think of the Cassidy report. It replies:
Strongest features: It correctly diagnoses FDA as a bottleneck to innovation, emphasizes “least burdensome” evidence, calls for streamlined pathways (505(b)(2)-style for biologics, biosimilar simplification), and worries about U.S. losing early-phase trials to other countries. This is very much in Tabarrok’s wheelhouse: regulation as a hidden tax on innovation and growth.
Weakest features: It rarely quantifies tradeoffs, almost never confronts the “invisible graveyard” of patients who never see therapies because of delay, and treats reforms as marginal tweaks rather than testing fundamentally different regulatory models (e.g., insurance-based approval, private certification, or sunset/experimentation with parallel regimes).
If you imagine this as a draft memo handed to Tabarrok, he’d likely say: “Good directionally; now add 50% more economics, 50% more quantification, and 100% more willingness to experiment with institutional competition.”
Yeah, pretty good.
Addendum: In other FDA news see also Adam Kroetsch on Will Bayesian Statistics Transform Trials?
Addendum 2: FDA has now agreed to review Moderna’s flu vaccine which is good although the course reversal obviously speaks to the unpredictability of the FDA.