The Inherent Tensions of Regulation

None of us are angels. Government regulatory and inspection programs are a crucial way of making up for that.
by | March 15, 2012 AT 11:00 AM

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. —The Federalist, Number 51

Last June, my wife and were looking for a place to live in the D.C. area. After checking in to a hotel in Alexandria, we went in search of dinner. Right up the street was a charming little restaurant, and so in we went. By morning I was quite sick with food poisoning. I spent the day riding around with a real-estate agent, occasionally asking him to pull over so that I could lose a little more of that expensive food.

My experience was not unique. The Centers for Disease Control and Prevention estimates that each year roughly 48 million Americans—one in six—get sick with food-borne diseases, 128,000 are hospitalized and 3,000 die.

Of the known food-borne pathogens contributing to illness requiring hospitalization, salmonella is number one. New York Mayor Michael Bloomberg's program, begun in July 2010, of giving letter grades to the city's thousands of restaurants has apparently resulted in a 13.5 percent drop in reported salmonella in the city. This is good news, right?

One would think so, but that doesn't mean that everybody is happy with the program. Andrew Rigie, a spokesman for the New York Restaurant Association, says the grading system is punitive and a financial burden on small-business owners. City Council Speaker Christine Quinn, who supports the system, was reported to be nonetheless critical of it, saying in a statement that the city's data show "a wide variability" in grades from "inspector to inspector in the same restaurant and an enormous increase in fines."

I have done more than a hundred audits of government inspection programs, and, because those programs were not run by angels, most of my audits uncovered problems with them, nearly all of which favored the regulated industry.

In most regulatory programs, there is an inherent tension between promoting the industry in question and protecting the public. There is no doubt that Mayor Bloomberg wants restaurants in his city to thrive. Further, there is an asymmetrical balance of power between a given industry and government's inspectors and bureaucrats. The industry has the power of political access through campaign contributions, corporate officers who rub shoulders with politicians at elite events, and the power of high-priced legal help.

One of the few times I had my personal safety threatened as an auditor was when, in the early 1980s, I told an official of the Tennessee Restaurant Association that yes, it was true, my audit was going to recommend that restaurant inspections be moved from the Department of Tourism to the Department of Health. I stuck to my guns. But just before the legislative hearing on the audit, I saw the head of the Department of Tourism and the chair of my committee hugging each other warmly. My recommendation was not enacted. (Today, however, restaurant inspection in Tennessee is done by a division of the Department of Health.)

In another audit in Tennessee, focusing on the Department of Conservation and acting on a tip by a citizens' group called Save Our Cumberland Mountains, we found a case in which a strip mine that supposedly had been reclaimed—we had records showing payment for reseeding and an approved sign-off by the inspector—actually had a 40-foot-high wall remaining on the site. My auditor took a picture of it for our report.

And in an audit of a milk-inspection program run by Kansas City for the state of Missouri, we found that the inspectors sometimes gave advance notice of inspections and let distributors decide which milk samples would be sent to the city's laboratory, and that a lab employee had falsified test results to make them look better. Instead of joining us in condemning these practices, the city's health director bitterly opposed our publishing our findings, saying that doing so would jeopardize the state's milk industry.

Men (and women) are not angels, and neither are those who govern them. No doubt the vast majority of restaurateurs run clean kitchens and eating at their establishments is safe. And there is no doubt, as well, that those who run inspection and regulatory programs make errors and that their systems can be improved. But the purpose of government includes carrying out regulatory programs required to protect public health. New York City's system of giving letter grades to restaurants is a simple and effective way of communicating important information to the public—one that has resulted in improving the health of the community. That really should be good news to everybody.