more complicated. As discussed in chapter 4, those perspectives focus either on increasing citizens’ happiness (rather than their health) or on respecting their right to choose whatever they want in the marketplace. From either of those points of view, why not just let citizens buy what they want? We believe that one argument for regulating pharmaceutical product quality that should appeal even to free market advocates lies in the twin issues of mistake costs and transaction costs. Mistake costs are the losses that citizens suffer when their purchases turn out to be unsatisfactory. Transaction costs are the time and effort that citizens devote to purchasing decisions to try to minimize mistake costs. Regulations that bar unsafe or ineffective products, which few or no citizens would knowingly choose, allow everyone to select from what is available with less concern. Buyers then expend less effort in guarding against mistakes, lowering total transaction costs. Buyers also make fewer mistakes—despite their reduced effort—thereby lowering mistake costs. When regulators eliminate contaminated insulin or understrength antibiotics, it is hard to see how anyone is made worse off, and many are saved the largely impossible task of checking product quality on their own. (Indeed, the difficulty of doing that gives rise to consumers’ reliance on brand names as a purchasing guide.) But not all regulation to limit product variety in the pharmaceutical sector is so straightforward. First, it may not be clear which strategy will maximize health status gains. For example, suppose a country raises educational requirements for medicine sellers. That may improve the quality of the advice given to buyers. But it also could lead to fewer sellers and decrease access. Just how should the balance be struck, in any particular case, between the two effects? Moreover, tensions may arise between policies directed at health status and those aimed at citizen satisfaction. Some consumers—even with full knowledge of what they are buying—may desire items that regulators would prefer to exclude from the market, such as traditional herbal medicines. In such cases, should government give people what they want (subjective utilitarianism) or what experts believe will best contribute to their health (objective utilitarianism)? The tension between wants and needs, between the view of economics and the public health view, is a continuing source of disagreement in the field of pharmaceutical regulation. At the same time, purchasers of lower-priced options generally want effective quality regulation for the products they buy, especially if it can be done in a way that does not significantly raise prices. They are hardly looking to spend their money on medicines contaminated with harmful substances, or counterfeits with little or no active ingredients. Indeed, from an Improving Pharmaceutical Sector Performance through Regulation
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