The headline practically screamed: “30 New Orleans area restaurants fail health inspection, some for bugs or dirty kitchens.” Undoubtedly, many people in the Crescent City as a result reduced their take outs from these eateries, several of them world famous, and also decreased eating out in them. If so, they did so in favor of grocery stores, which now seemed relatively more reliable, health-wise. This might be somewhat of an exaggeration, since the story allowed that “… more than 16 … don’t have food safety certificates to ensure their kitchens meet health standards.” As far as we know, they were perfectly clean, but merely lacked proper government certification thereof. Should the local citizenry be worried?
The more discerning of us have to be forgiven for asking: Who do you trust more: the restaurants themselves, or the government health inspectors? The former can lose money from dirtiness, the latter cannot, at least not, personally, for failing to make accurate assessments.
What is the solution to this conundrum? The course of action emanating from this present quarter is to substitute private certification agencies for the ones perpetrated by government. Is this the ravings of a radical free market advocate such as myself? Is this a mirage, something just plain crazy that can never be implemented? Yes and no. As to the former, this appellation certainly fits me. I hold an endowed chair in free enterprise economics at a local university. As to the latter, it is no concoction in my fevered brain. Rather, capitalist certification agencies are to be found all throughout the modern economy. Let us count some of the ways.
But, before I do, let me explain the difference between licensing and certification. In both cases, a test must be passed. But with the former, if you do not pass the exam, you may not legally engage in the industry. For example, if you fail the bar exam, you cannot work as a lawyer. If you do not pass the medical examination, and worked in the capacity of a physician anyway, you are a criminal and can be incarcerated. In sharp contrast, if you do not score high enough in the exam for Certified Public Accountant, you can still keep financial books for your clients; it would only be illegal to pass yourself off as a CPA.
Where else besides accounting is certification, not licensing, in operation? One aspect is brand names. McDonalds, Walmart, Microsoft, Toyota, and thousands of other companies large and small, stand by their wares and offerings. They are in effect insuring their customers that what they purchase from them is of a certain quality.
Another example is testing laboratories. They are not at all well known to the general public, but are widely used in such industries as acoustics and vibration, biological, electrical, forensic services, geotechnical and mechanical testing. The most famous of these is Underwriters Laboratories. Others include Tuv Sud, Enviropass, Intertek, MetLabs, Curtis-Straus, F2Labs, Dayton T. Brown, NCEE Labs and Applied Technical Services. Industrial chemists, engineers, technicians, etc., are fully aware of these and the many more that comprise this industry.
A third subset is far more well known: Consumer Reports, the Better Business Bureau, and more recently, Yelp warn buyers of inferior products. For finance and investments the big three are Moody’s, Fitch and Standard and Poor. The U.S. News and World Report, a private entity, rates, that is, certifies, universities. (There has been of late a bit of a rebellion against this organization; evidently campus leaders do not much appreciate being assessed by a private corporation; they would rather leave the matter to organizations such as the Association to Advance Collegiate Schools of Business).
Milton Friedman, in the brilliant chapter nine of his book Capitalism and Freedom advocated that certification replace licensing all throughout the economy. Courageously, he took on even the sacred cow often bruited about in favor of this form of quality assurance, medicine. The American Medical Association insists that their licensing exams be given in English. All too many doctors who functioned ably abroad are not able to pass, even though their skills would pass muster if tested in their native languages. The AMA reckons in the absence of unconscious patients, those who speak the same foreign language as the doctor, and the possibility of translation. What they are really up to, of course, is restricting entry, reducing competition, and keeping their compensation elevated.
The next time you hear that a private restaurant has not passed the review of a government agency, do not blithely assume there is something wrong with the former. It may well be due to the failure of the latter.
Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans and is co-author of the 2015 book Water Capitalism: The Case for Privatizing Oceans, Rivers, Lakes, and Aquifers. New York City, N.Y.: Lexington Books, Rowman and Littlefield (with Peter Lothian Nelson ).
READER COMMENTS
Peter
Oct 21 2023 at 1:12pm
As a former Federal auditor something that people forget is often these “inspections” aren’t there to certify what they say but simply to establish a floor along the lines employment applications often ask “to not pass go” questions such as “have you ever stolen from your company” in a retail application.
In the area I audited there were no surprises. We scheduled an annual audit the same org the same week every year, we provided them the exact list of questions and specific information when needed six months prior, and one month prior we would tell them exactly who/what/where we would visit down to the specific rooms. And yet they would still fail and not just marginally; you would routinely see things like 80% of mandatory controls not met.
Lastly many of these programs are simply make work or make gaft programs to address some political need by a special interest. They are never there at execution time to benefit the public.
steve
Oct 21 2023 at 9:53pm
So someone fails their exam and I should hire them anyway and let them practice? I think our corporate lawyer would either quit or die of laughter if I suggested this. Our accountant would point out that the insurance companies won’t pay us. That and the tests just aren’t that hard so really have to worry about the quality of training of someone who fails.
“What they are really up to, of course, is restricting entry, reducing competition, and keeping their compensation elevated.”
Last I looked about 25% of US docs are FMGs. Those who have English problems, noting that for most people communicating in writing is easier than language, already cause issues.
As an aside, I know you are an. Econ professor but didn’t it cross your mind that if a doc cannot accurately communicate with pts it would create problems? The idea of the cartel cutting competition to make more money fits your ideological model but in the real world I can. tell you at 2:00 in the morning being unable to communicate well causes problems.
Steve
Matthias
Oct 21 2023 at 11:53pm
The article doesn’t argue that you should hire a doctor you can’t communicate with.
Rather that communication ability is that employers of doctors can figure out for themselves, and then pass their own judgement. (Or voluntarily outsource that judgment to a third party.)
Similar for other tests. For this argument it doesn’t matter too much whether those tests are simple or hard to pass.
Jon Murphy
Oct 22 2023 at 9:03am
Steve,
With respect, I think you’ve misunderstood Walter’s argument. For example, he doesn’t say that if “someone fails their exam and [you] should hire them anyway and let them practice.” What he does say is that if someone fails their test, one should be able to hire them, if one so chooses. Now, you may not wish to hire that individual (and for good reason). But, if you should want to, you should be able to.
To give an example relating back to restaurants: Where I was last living had a very strict health inspector. They did an inspection of a local Waffle House and it failed. Now, I don’t know if you’ve ever been to a Waffle House, but they have something of a repuation. As one of my MBA students said: “You can make 6 figures as a Waffle House manager. You just need to be prepared to throw an elbow at 2AM.”
Back to the story: Waffle House failed the inspection. Dirty counters, etc. It is quite literally a greasy spoon. The local newspaper tried to make a big deal out of it and the general response from the public was: “yeah, we know.” Even though it had failed its inspection, people were choosing to eat there. Even a (short-lived) attempt to close the Waffle House down met with resistance. As one Letter to the Editor against the shutdown said: “You’re not eating at Waffle House because your life is going in the right direction.”
So, people have the choice to eat there or not. That’s what we are talking about: choice. It has nothing to do with whether one should eat there but rather that one has the choice to. You may not choose to patronize Waffle House, just like one may choose to not hire a doctor who doesn’t pass some test. The benefits and risks of that choice are entirely up to you.
Jon Murphy
Oct 22 2023 at 9:17am
This is an unusually uncharitable interpretation from you. He’s not making an ideological point; the regulation model is fairly uncontroversial (you’ll find it in almost any intro economics textbook and George Stigler won his Nobel Prize partly for work there).
The question, rather, is one of trade-offs: is the reduced competition (and, consequently, higher prices) worth it? Maybe, maybe not.
I tend to think not because I think you’re overstating the communication problem. It’s going to be highly subjective and situational. For example, the area where I live has a relatively high population of Vietnamese immigrants. For many of them, English is not their first language. Having a doctor who can communicate in Vietnamese will be helpful for them. Consequently, a doctor who can only speak Vietnamese can reasonably open up a Vietnamese-language practice to service that niche community. No English required.
The local hospital, on the other hand, who services a larger, more diverse, community may not choose to hire that doctor who can only speak Vietnamese. They may require English as a language as they need to communicate with many different people.
The communication problem gets solved. I think you’ll find that people are amazingly good at solving problems.
Further, there is more competition and more health care available. If the Vietnamese doctor can pass the test in their native language, then the community has two sources of medical care: the hospital and the Vietnamese clinic. If only English is allowed, then there is no second clinc: just the hospital. And the Vietnamese doctor will be unable to get a job in the medical field.
So, again, the point is about choice. When people have freedom of choice, they tend to make the decisions that are best for them. People are amazing at solving problems. We really should trust them to do so.
Jon Murphy
Oct 22 2023 at 9:59am
Let me clarify my “choice” point because I don’t think I explained it well.
The hospital, who has to deal with people at 2AM and across multiple languages will hire people that fit those roles. They’ll advertise and pay for doctors who can speak multiple languages on top of English. They face the communication problem and have an incentive to solve it.
The medical clinic doesn’t face that same communication problem. In this example, the doctor is setting up a clinic to serve a particular population. If they need English speakers, they will hire them.
Requiring a test in English is not necessary to solve the communication problem.
Firms face communication problems all the time. Communication issues can be significant. Major firms like Google and small stores like the local butcher all have solved these problems. I see no reason why a hospital cannot solve them as well.
steve
Oct 22 2023 at 1:51pm
jon- When I can I hire people with good second language skills. It is helpful when communicating with pts who dont have good English skills, but they still have to have good English. The majority of our pts speak English. If the doctor needs an interpreter to speak to the majority of our pts we have a problem. Then there is the other side, the hospital side. All of our communications are in English. EPIC, all EMRs, are in English. Who would want to hire someone who couldn’t pass the written exams, the easy part, in English and then have them chart and do orders in Epic? It’s a theoretical argument that doesnt hold up when you realize how things function in real life.
” What he does say is that if someone fails their test, one should be able to hire them, if one so chooses. Now, you may not wish to hire that individual (and for good reason). But, if you should want to, you should be able to.”
The upside of this is what? Not much i can see. The downsides are obvious. Few would be willing to hire such a person. We took over an awful place where all of the docs in my area had been fired from other places several times and a couple had lost malpractice cases that made the national news. They were awful. Fired them all. However, the insurance companies wont pay for their work. The insurance companies have figured out that these docs are trouble. More likely they go into solo private practice taking cash. We eventually find out the harm they have caused and they get sued but a lot fo people are harmed in the process and the harm was predictable. And what do we gain?
Steve
Jon Murphy
Oct 22 2023 at 2:33pm
Steve-
If all of what you say is true and generalization (ie, your specific condition is the same situation every single person faces), then there is still no case for the test to have to be in English. The incentive remains only for people to hire with the desired skill set. The test in English only adds an additional cost with no benefit.
Jon Murphy
Oct 22 2023 at 2:47pm
Let me rephrase the point slightly:
It seems to me the test is irrelevant in determining how well a person can communicate in English (or whatever language). That’s neither what it is designed to test or a signal of such. As you say, you already have various practices in place to solve the communication problem. So, it’s not clear what role the test being in English plays. It’s an extra marginal cost with no marginal benefit.
Sal
Oct 23 2023 at 5:17am
Hospitals are not analogous to other institutions. Hospitals deal with life and death on a daily basis. And situations where minutes, even seconds, are critical. Maybe, just maybe, not everything is a conspiracy and there’s a valid reason for requiring consistent language capabilities for doctors. By the way, this is the exact same reason air traffic controllers have to speak English. And that’s an international standard, not a domestic one.
Jon Murphy
Oct 23 2023 at 2:44pm
Agreed. In which case, the exam being in English is irrelevant. The hospital, as you note, already has the incentive to hire the right people.
So, why then, do non-hospitals have to follow the same standard? What is the purpose of compelling a niche supplier (like the Vietnamese doctor in my example above) to take a test in English?
In other words what purpose does that restriction serve?
Jon Murphy
Oct 22 2023 at 8:42am
I don’t understand this point. Isn’t the AACSB a private corporation?
Dane
Oct 22 2023 at 9:05am
First, I get the distinct impression that this article was written by ChatGPT.
Second, to trust that a profit seeking entity has my best interests, health and safety in mind is laughable. The fact that Yelp was included as an example, a company that has already been proven to drop bad reviews from their platform for a fee, proves that when profit is a “regulators” prime motive, human well being always comes second, or last.
Third, $11trillion in failed, Triple-A rated mortgage-backed securities and CDOs “certified” by Moody’s, Fitch, and Standard & Poors is a fantastically poor example of the efficacy and impartiality of a private profit-motivated certification agency.
Last, water is a human right.
Jon Murphy
Oct 23 2023 at 2:40pm
They don’t. No entity (including regulators) have your best interests, health, and safety in mind. They don’t know you from Adam.
Rather, the the argument is that they act as if they have your best interests in mind because they are profit-seekers.
Jon Murphy
Oct 23 2023 at 3:54pm
I should clarify because what I said strictly speaking isn’t correct.
Profit-seeking entities don’t have your best interests, health, safety in mind. Rather, they act as if they value your interests, safety, etc the same as you. They exist to serve you. If your interests are corrupted (say, you really want that cheeseburger topped with mozzarella sticks), they’re going to serve those interests.
No firm has your best interests in mind. But that is wholly irrelevant.
robc
Oct 23 2023 at 3:22pm
And who is going to provide you with that right when you are lost in the Sahara?
There are no positive rights. Or at least, acknowledge that the word has two meanings and only one of them falls into the “human rights” category.
Water is not a right for the same reason that health care is not a right. Unless you are going to enslave doctors or water providers, there is no way for them to be a right. And not being enslaved IS a human right.
Jon Murphy
Oct 23 2023 at 3:50pm
Is it? How do I sue Mother Nature, then? Where I live, we’re having a very severe drought. If water is a human right, then Mother Nature is depriving me of that right. How do I sue her?
A
Oct 22 2023 at 10:59am
I am one of those government surveyors you want to replace with private inspectors. We survey healthcare facilities. Recently I was at a facility where I found some vey minor problems. As I was talking to the CFO and assuring him the deficiencies were only to keep staff “on their toes,” he agreed. He told me about how. In the past, they were accredited by a nationally recognized agency. It was always the same guy, he showed up, the owner took him to some nice restaurants and plyed a round of golf if the weather was good. The next day he passed them on the certification and was on his way. When the current CFO took over, he decided the accrediation was too expensive and that is when one of our surveyors went in and did a real survey. It was an eye opener for him, and adimtted the facility had fallen below the standard of care because of the”sham” surveys. He appreciated a really tough survey, because it actually validates his staff is doing a very good job.
john hare
Oct 22 2023 at 4:29pm
This discussion to me is a clear example of incentives. Ones that benefit from the rulebook have different incentives from those that are harmed by the rulebook. Even when both sides are honest and being as accommodating as they can. The ones that have their livelihood based on the dues they have paid and the rules they have to follow, will normally be against loosening of those rules and allowing in people with lower qualifications.
I am strongly biased towards allowing choice as advocated by Jon and look for justifications against Steve. My incentive is to pile on about the awful place that Steve helped reform, noting that is was awful under the existing rules. I think a lot of the people that are not allowed to practice would likely have been better than those awful doctors. I wouldn’t know how to set up a system differentiate though, as top down decisions often make matters worse.
Carolyn Timmons
Oct 22 2023 at 6:58pm
I believe you are missing an opportunity with your journalism to ask the question who suffers the most from a dirty restaurant the owner or government inspector? Wouldn’t the answer be the consumer who eats there?
Seems you missed the point.
Jason
Oct 22 2023 at 8:26pm
Really ridiculous reasoning if you believe for one minute that all restaurant owners have high standards when it comes to cleaning and sanitation. I’ve been a GM in the French Quarter market for over a decade and I can say that’s absolutely not true. I’d trust the inspectors. And honestly if you don’t have your paperwork together to have your establishment be properly open then it shouldn’t be open. Everyone has to follow the same steps and dfolow the procedures set forth by the City. Sucks but is what it is.
Jon Murphy
Oct 23 2023 at 5:01pm
They don’t need to for the story Walter tells to be correct. They just need customers who do.
andy weintraub
Oct 22 2023 at 8:37pm
As the son of a restauranteur in New Jersey, I grew up in the business, starting to work there when I was around 11 years old. I loved it. And I got paid fifty cents a day for helping the dishwasher in the kitchen wash dishes and pots and pans – except when the health department inspector stopped in for a visit. Then one of the “outside” employees would rush into the kitchen and make sure I was removed and seated in one of the booths, reading a book.
But as the inspector left the store and said “Good-bye” to my dad, I never failing to notice the folded greenbacks in the palm of my dad’s hand as he shook hands with the inspector. And that was after his free meal.
David Henderson
Oct 22 2023 at 11:26pm
Great story.
Chad
Oct 23 2023 at 5:23pm
Let me get this straight. The author is advocating for self regulation in the private sector? The banks wanted the same thing in the early 2000s and we ended up with a handout of over a trillion dollars to save their asses. I’m with the government inspections. Besides, I believe there is always an appeals process.
Jon Murphy
Oct 25 2023 at 6:36am
The financial industry is the most inspected and regulated industry in the country. It was not self regulated in the 2000s.
Jamie Donovan
Oct 24 2023 at 1:54pm
You should note that the article comes from the “Biloxi Sun-Herald” newspaper, which runs the same sort of article in every edition. It is an attempt to bolster tourism on the Mississippi Gulf Coast by running-down New Orleans as a food destination.
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