The Flaw in Heyne, Boettke, and Prychitko
By David Henderson
In a post on Tuesday, “Find the Flaw,” I asked readers to find and evaluate the implicit assumption in the following passage from an economics textbook:
When physicians must be licensed and new drugs approved by the Food and Drug Administration (FDA) before they can be marketed, buyers are spared the cost of evaluating goods whose quality most of them would be unable to assess for themselves, except at prohibitive costs. By compelling sellers to obtain certification, government agencies can enable us all to make satisfactory exchanges at lower cost.
A number of people did so successfully. First was Fred Foldvary, who wrote:
The statement assumes there is no demand for information that can be supplied by consumers reports, Angies list, WebMD, and other sources. Also FDA could approve drugs without banning non-approved drugs.
Moreover, it’s not just that private organizations could do this certifying. It’s better than that. Private sources of information, such as U.S. Pharmacopeia and the Physicians’ Desk Reference, already do do this certifying.
Brad D asks:
First, why would a passage like this come from your favorite economics textbook?
My simple answer is that it does.
The textbook from which this passage is taken is The Economic Way of Thinking, 12th ed., by Paul Heyne, Peter Boettke, and David Prychitko.