Does government regulation make us safe?

First Published: 2015-01-09

When government regulates and licenses daycares, restaurants, taxicabs, banks, other businesses, and physicians, we can rest assured that their operations and products are safe and no harm will come to us. Or so many people believe, as the woman I heard declaring on the radio that she would not get on an airplane unless it was inspected by government.

For example, many municipal governments in Europe and Canada are finding ways to ban the ride-sharing service Uber, in the name of public safety. Only government-licensed taxi drivers can be trusted to drive safely and not to gouge their customers—the government sets “fair” rates, after all. Presumably, private companies like Uber want to maximize profits at the cost of their customers’ safety and by charging them more. (Curiously, Uber has an excellent safety record—it screens its drivers —and the cost of using Uber is 40 to 50% lower for any given ride than using a government-regulated taxicab). Will banning Uber and other ride-sharing businesses make people safer and protect them from unscrupulous drivers? I argue no.

Another example of government’s alleged protection of us is the regulation of workplace safety. There has been a couple of unfortunate deaths due to workplace accidents in my home town Calgary recently. In response, the provincial government has vowed to tighten monitoring of industrial work sites by hiring more inspectors to enforce safety regulations. Will workers be safer when even more government inspectors are enforcing workplace safety regulations? I argue no.

Despite many people’s contrary beliefs, government regulation is not making daycares, restaurant meals, physicians’ services, airlines, construction sites, buildings, food at grocery stores, or any other product or business any safer. Accidents still happen at daycares. People still get food poisoning from restaurant meals or from food purchased at grocery stores. Physicians still misdiagnose and mistreat their patients. Accidents involving airlines or construction sites haven’t ended since government regulation. Shoddily built or unsafe buildings still get erected. Human nature makes errors, willful negligence, and even intentional harming of others possible. Government regulation never ended these problems, and increasing regulation and enforcement is not going to end them, either.

If we can’t depend on the government regulations to keep us safe, what can be done? Accidents and errors can be reduced by proper training and safety precautions. Any employer that does not provide those is to be avoided, and those that neglect their workers’ or customers’ health and safety can be sued. It clearly is not in an employer’s self-interest to be negligent, as it is not in the interest of the daycare owner to neglect the safety of the children, or in the interest of the restaurant owner or the grocer to harm the health of his customers.

Businesses may not recognize their self-interest and they may violate the individual rights of their employees or customers, such as their right to life. It is the role of the government to protect individual rights. However, that is not done by increasing regulations and the number of government inspectors (in fact, these measures violate businesses’ right to liberty). To properly protect our rights to life, liberty, property and the pursuit of happiness, the government must strongly enforce the existing laws that penalize any form of initiation of physical force or fraud. That alone would act as much stronger deterrent to the would-be violators.

Some businesses clearly can benefit from licensing or certification—particularly those that can have a significant impact on their customers’ and employees’ health and well-being: daycares, pharmaceutical companies, medical clinics, purveyors of food, construction companies, and others performing hazardous work, for example. However, it is not the role of the government to impose licensing or certification requirements on companies and run such programs. Licensing and certification programs should be voluntary and privately run. Companies in industries where licensing or certification is deemed necessary or beneficial can jointly establish standards, for example through an industry association. A third-party private licensing and certification agencies (with a clear accountability to the industry association) can be commissioned to issue licenses and certificates to those companies meeting the standards. Customers and employees can decide whether to trade with companies that have been licensed and certified or with those who have not.

Proper protection of individual rights by government and private licensing and certification programs would make us safer (100% safety for fallible and mortal beings is impossible)—no regulations and government inspectors needed.

November 23, 2014

First published at How to be Profitable and Moral: A Rational Egoist Approach to Business and posted here with the kind permission of the author.

Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada. Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.

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