The Most Dangerous Monopoly: When Caution Kills

Everyone wants the items they buy to be safe to use or consume. When products undergo third-party certification processes to determine their safety, market forces are able to optimize the amount of testing conducted and consumers can use the information provided by certification firms to make their own decisions. It is difficult to say how much testing is enough: another test can always be run on a product, but at some point the benefit of the extra testing outweighs the costs. In a free-market system, competition among certification firms allows the market to work as it should and prevents both under- and over-testing of products. Conversely, when the government holds the monopoly on safety standards, products are likely to be over-tested, delaying their entry into the market and making them more expensive. Sometimes the costs of such delays cannot be quantified; lives can be lost while life-saving medicines are held up in safety-testing processes.


  1. Alex Moscoso

    Good comprehensive video about this subject. Tricky to eliminate product safety policies though!

  2. Carine

    @Alex: I think the tricky part also comes from the fact that people are encouraged not to be responsible for themselves anymore. If the government takes care of it, that means I don’t have to do my own research, I rely on the supposedly omniscient government.
    The more the government intervenes (in any area), the more people feel they do not have to do their homework, and the more they expect the government to care for themselves. Horrendous vicious circle.

  3. GreedyCapitalistPig

    I work in the investment industry, and it is amazing to see how not only risk averse, but security-entitled Americans are. It’s as if, when you tell them that ALL investment is subject to risk, they think you must be some sort of Martian. How dare we have the audacity to suggest that there are no guarentees in life!

  4. Anonymous

    Why don’t people fear government monopoly? 

  5. sarahdlockwood

    Very well said. 

  6. C Myers

    One of the best LearnLiberty videos! Concise, yet comprehensive. Explains the entire argument clearly. More like this, please!

  7. RastaJoe

    Excellent point, unfortunately uncommonly held.

  8. GeF

    freedom better

  9. Levent Soykan

    great video. product safety was one of the areas I thought government involvement should be necessary, but here it seems private certification firms would be much better. 

  10. sid1138

    This video brings up many interesting points, but it forgets an important point about a monopolistic regulatory agency – politics.  While a competitive company must push efficiency in order to be both correct and fast, and thus profitable, a monopoly has no such constraint.  A monopoly need only push correctness to be profitable.  If the testing agency proved to be incorrect often enough, there would be no reason for anyone to use that organization.  So, as the video pointed out, correctness is the only criteria to profitability (from a governmental point of view, profitability is funding for the organization).


    However, a governmental monopoly, especially a mandatory one, has neither correctness nor speed as its mandate.  In stead, that agency has politics as its mandate.  It must do whatever it has to in order to receive funding and to have that funding grow.  If that means being correct (and no politician wants to back an incorrect regulatory group) then it will be correct.  However, those with budgetary power have other concerns, like getting reelected.  Therefore, they will add additional pressures, such as fast-tracking a big donor.  There may be bad publicity about a company that has nothing to do with a product the agency is evaluating, but the agency will be under significant pressure to “punish” the company.

    In short, a mandatory governmental monopoly (what I like to call a coercive monopoly) has additional, non-economic and non-service related goals and pressures that further impair its ability to efficiently evaluate products.  Basically, the political environment may be such that very little, if anything, gets accomplished during a reasonable time period.

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