Thalidomide, GPS, and safety: At what point does excessive regulation lose its purpose?

Certain regulations have been shown to protect consumers, but it is well known they also stifle innovation.

The jury is still out on whether Congress will regulate artificial intelligence (AI). Regulatory advocates claimed that technology was too dangerous, and the government needed to step in before people were harmed. While the European Union (EU) Commission ended up regulating AI, Congress failed to pass any new laws and the only legal action was the President’s executive order. Techno optimists agree - had we regulated AI, innovation would have stalled.

Perhaps we should use this episode to question past regulatory efforts and the reasons/results of those actions. A starting point would be establishing regulatory-light areas in the United States where technologists would be able to deploy products/technologies without requiring burdensome regulatory approvals. Such areas would accelerate innovation and ensure continued technological dominance of the United States in the 21^st century.

Safety Regulations Can Stifle Innovation

Thalidomide, initially developed as a sedative by a German pharmaceutical company, was found to alleviate anxiety, insomnia, and morning sickness, quickly gaining popularity among women experiencing morning sickness in the late-1950s. However, during that time researchers started to find that some newborns whose mothers took the drug had abnormalities. Although the percentage of newborns affected by the drug worldwide was relatively small (we estimate less than 0.09%), the FDA subsequently denied the drug's approval. This episode led to the passing of the Kefauver-Harris Amendment by Congress, which strengthened drug regulations.

Despite being banned, the drug remained available in developing countries. In 1964, an Israeli physician discovered Thalidomide helped treat a patient's erythema nodosum leprosum (ENL), a complication of leprosy. After increasing success, more countries began using Thalidomide for this purpose, most notably in Brazil in 1965. However, the FDA did not approve the drug for ENL treatment until 1998.

Had an Israeli physician not stumbled on the success of Thalidomide, millions of people would not have an effective remedy for their condition -  the World Health Organization recorded 215,656 cases of ENL in 2013 alone. Furthermore, today Thalidomide is included on the World Health Organization’s list of essential medicines.

Reduced Safety Amidst Safety Regulations

In 2012, the Loss of Control Working Group's (LCWG) report by the General Aviation Joint Safety Committee identified GPS technology as contributing to a 60% reduction in fatal accidents resulting from controlled flights into terrain. Pilots who used GPS devices had real-time awareness of their position and the terrain around the aircraft, resulting in safer operations. Notably, GPS devices on aircraft were not certified by the FAA for aircraft operation, but since they were handheld, the FAA could not prevent pilots from using them. LCWG’s report estimated that FAA-approved devices were between 5 and 10 times more expensive. Pilots voted with their wallets and bought cheaper non-FAA-approved devices. Overall safety improved despite the FAA's safety regulations.

The Aircraft Owners and Pilots Association Air Safety Institute reports that night loss of control incidents would decrease by 50% if autopilots were installed on general aviation aircraft. However, certified autopilots are expensive, with costs ranging between $10,000 and $15,000, while the average value of an airplane is between $20,000 and $100,000. The cost of certified autopilots is prohibitively high for airplane owners. On the other hand, uncertified autopilots can be purchased for $2,500. FAA's safety regulatory standards are not only standing in the way of technological innovation but also are reducing the safety of general aviation.

Charting the Path Forward

A wholesale revision and change of the FAA's standards, policies, and procedures may be unrealistic. Even if a working group were formed to audit, the results would be influenced by the personal preferences and convictions of a small group.

What's necessary is a way to gain more comprehensive input into the process, and we can do that by designating specific zones in the country as free from FAA regulations. Within these areas, passengers would have the ability to fly in airplanes that do not meet FAA's certification standards. Passengers would provide informed consent and companies would be free from class action lawsuits and FAA mandates. These zones would provide a space for companies to experiment with different technologies, allowing entrepreneurs to develop and deploy drone deliveries, passenger eVTOLs, low-cost autopilots, rocket launches, and other technologies without the hindrance of expensive and burdensome FAA mandates.

The introduction of these zones in aviation would offer safety-conscious members of the public the option to continue flying in FAA-certified equipment. But more importantly, zones would also provide a choice to those eager to explore new technology.

Harking back to our pharmaceutical example, Congress recognized the benefits of innovation. Thanks to the 2018 Right to Try Act signed into law, health care and pharmaceuticals have a regulatory-light "area" where patients with terminal illnesses have more rights to try experimental treatments that aren't necessarily FDA-approved. Free from liability and with patient consent, physicians can embark on human trials without the burdensome framework required of a typical FDA approval.

Drawing from History

Major historical advancements are often linked with significant risk-taking. Columbus' expedition to discover new trade routes was not without risk, yet it led to the discovery of America, a historic event. Similarly, going to the Moon involved risks but propelled humanity forward, leading to numerous technological spin-offs, such as improved kidney dialysis machines, flame-resistant textiles, freeze-dried food, and more, all developed for the Apollo program.

Opening the door to innovation and the adoption of new technologies could unlock a world of possibilities. Hypersonic rockets could connect New York to Singapore in under an hour, eVTOLs could address road infrastructure congestion, and new industries could create millions of jobs and opportunities. The biggest obstacle standing in the way of an exciting future is the regulatory environment that hinders market alternatives to customers.

Our economy functions on competition, markets (or millions of consumers) select winners, and markets make America strong. Similarly, the lack of markets in centrally planned economies, like the USSR, makes them weak. Our regulatory regime is closer to the USSR’s way of running the economy – a committee decides what is good for the public without allowing for alternatives--than a truly free market. The time has come to change.