When the Federal Trade Commission last Wednesday adopted, by a 3-to-1 vote, a rule regulating the funeral industry, it rejected by implication a theory of regulation advanced by the 32- year-old director of the commission's Bureau of Consumer Protection, Timothy J. Muris. We think the Muris theory deserves further examination, however, because it could be applied to all kinds of regulation and because, despite its plausibility, it is fundamentally spurious.
Mr. Muris' theory would impose on regulatory agencies a burden of proof that, in the practical world, is likely almost never to be met. When issuing rules that affect an entire industry, the commission, he says, should act only when there is unambiguous evidence that benefits will exceed costs. It should consider only "hard evidence," such as "methodologically sound" surveys and expert evidence about technical details. Citizen complaints, however numerous, are not enough, he says; they are mere "anecdotal evidence." We refrain from commenting on the irony of such a characterization coming from a follower of a president whose favorite form of argumentation often seems to be the anecdote. In considering evidence, Mr. Muris says, the commission should assume that markets work. In other words, it should assume that consumers have information in sufficient amount and of sufficient reliability to make sound decisions--unless a statistically valid survey proves otherwise.
None of this sounds unreasonable--until you start applying these principles to actual cases. Take the funeral industry, on which Mr. Muris' reasoning proved unpersuasive not only to the single Democratic commissioner but also to two Republicans. Mr. Muris' presumption that "there is a market for information that generally works" runs up against the voluminous evidence the FTC gathered--and against common sense, which tells us that most people who must arrange a funeral know little about what they are buying and are in no position to comparison-shop. Mr. Muris' insistence on statistically valid surveys sounds sensible, too, until one starts thinking about it. Does the FTC really need a statistically valid survey--something that can cost the government several hundred thousand dollars--to conclude that people arranging funerals do not operate like consumers in most transactions? The insistence on unambiguous evidence that benefits will exceed costs sounds sensible, until one understands that Mr. Muris is ready to assume@ there are costs to regulation but demands statistical proof@ that there will be benefits--though no one can forecast the future with certainty.
We have criticized agencies, including the FTC, for acting without sufficient evidence, and we think such criticism often has merit. But if there is such a thing as acting without enough information, there is also such a thing as requiring so much information that one can never act at all. Mr. Muris' theory amounts to a prescription for paralysis, which is not what we think Congress had in mind when it set up regulatory agencies.
Mr. Muris' free-market world, full of perfectly informed consumers and smoothly functioning markets, reminds us in an eerie way of the equally theoretical worlds of some of the liberal regulators who have received in previous administrations appointments similar to his and have used them to impose their own pet solutions on society. None of these theories provides an automatic solution to the difficult practical problems of regulation. For those, there is no substitute for good judgment, wisdom and common sense.