Consumer Protection: Compassion that Kills

by Mary J. Ruwart, Ph.D.

How would the consumer be protected without licensing laws? Without the FDA, who will keep greedy corporations from poisoning people for easy profits? Without government-mandated product recalls, who will make corporations repair their defective products? Who will test the water to make sure it is pure?

Do licensing laws really protect us from unscrupulous business people? Surprisingly, Sidney Carroll and Robert Gaston found that licensing laws actually hurt us. Thy found that states with the most rigorous licensing laws for electricians, dentists, and optometrists have the greatest incidence of accidental electrocutions, poor dental hygiene, and blindness respectively!

How do licensing laws hurt the very consumers that they were designed to protect? Apparently, as requirements go up, fewer practitioners are able to obtain licenses, so they charge more for their services and make consumers wait for service. More people are tempted to risk their health by making their own electrical repairs, skipping their eye check-ups, and delaying visits to their dentists. Licensing lowers the amount of quality service that is actually delivered-especially to the poor.

If licensing laws hurt more than they help, can the marketplace do better? The answer is a resounding "Yes!" Voluntary certification does what compulsory government licensing can not.

Certification is a "Seal of Approval," usually given by a professional association or independent laboratory to qualified products or service providers. The "UL" symbol found on electrical appliances is the certification from Underwriters Laboratories. Unlike licensing, certification is voluntary, not compulsory. Although electronics manufacturers are not required by law to get UL certification, retailers prefer to carry only products that meet the UL standard.

Carroll and Gaston noted that "certification (voluntary licensing) seems to increase the number of licenses compared to both no licensing and compulsory licensing" (emphasis mine). By increasing the number of service providers, certification decreases costs and increases the amount of quality service delivered. Certification gives consumers guidelines, but unlike licensing, leaves the final choice in their hands.

This freedom of choice can become critical in life-threatening situations. For example, the FDA currently sets such high standards for approval that the average drug takes 12 years and $300 million to develop. During this time, terminally ill patients are forbidden, by law, to try new therapies that might be under development. Even if they are lucky enough to be enrolled in a test study, they may get placebo instead of an active drug.

The FDA's tardy approval of propranolol, the first beta blocker for heart disease, needlessly killed an estimated 30,000 Americans during the three years it was available in Europe. The FDA probably killed more people, by delaying this single drug, than it saved during its entire existence. Licensing laws are a cure worse than the disease.

Because of FDA "licensing" regulations, black market chemists do a brisk business supplying AIDS and cancer victims with underground versions of new, but unapproved, drugs. Certification is the more compassionate approach and doesn't make criminals of people fighting for their lives. Professional pharmaceutical organizations, or even the FDA itself, could certify drugs as "untested," "safe in animal testing," "effective in humans," etc. Consumers, with the help of trusted medical professionals, could make an informed choice that took into account their personal situation.

Indeed, before the FDA became so pervasive, the American Medical Association and Consumers Research tested new drugs themselves and gave good ones their "Seal of Approval." The FDA, on the other hand, does no drug testing at all, but simply mandates that the drug companies do it. Third-party testing by multiple certifying organizations would be much more objective. Greedy corporations intent on defrauding consumers wouldn't be able to falsify data, as they are sometimes accused of doing today. Medications without any certification data at all would likely be shunned by both physicians and patients, effectively putting bogus companies out of business.

Of course, certification is not an iron-clad guarantee. Testing cannot always predict the side effects of drugs nor can it predict every mechanical vulnerability. When defects do become apparent, however, the certification rating of a product is likely to be downgraded. To prevent losing customers, smart businesses will correct the defect through a recall or other suitable means so that their certification stays high. Businesses that won't stand by their products will most likely go under, as consumers protect themselves by turning to reputable "brand name" manufacturers instead. Since certification increases the number of service providers, consumers would have more choices than ever.

Certification promotes consumer confidence and encourages expansion. Bottled water, for example, successfully competes with the tap water supplied by many local municipalities. Many consumers are dissatisfied with the taste of water that they get from public utilities or object to the health hazards of added chlorine or fluoride. Vendors obtain third-party inspections to certify that their bottled product is superior to tap water or that supplied by the competition. Reports are usually available on request so that consumers can comparison shop. If we woke up tomorrow to find ourselves in a libertarian world, we'd find a great deal of consumer protection already in place via voluntary certification.

Of course, if we wake up tomorrow to the status quo, we need to be very wary of compulsory government licensing. If we're not careful, Big Brother will protect us to death!


Sidney L. Carroll and Robert J. Gaston. "Occupational Restrictions and the Quality of Service Received: Some Evidence." Southern Economic Journal 47: 959-976, 1981.

Mary J. Ruwart, "Protecting Ourselves to Death," Healing Our World: The Other Piece of the Puzzle (Kalamazoo, MI: SunStar Press, 1993), pp. 85-96.