Are feedback systems superior to government regulation?

For those who don’t know what I’m referring to, feedback systems are what many internet businesses use to insure that people don’t get ripped off. I first encountered it on Ebay and was struck by how foolproof it seems. I’ve also encountered it when I’ve used an internet moving service(uship I believe?) and tomorrow morning I will use Uber for the first time.

In the case of Uber, local cab companies say these drivers aren’t bonded or licensed. And? How is that a better assurance than the fact that the driver has safely delivered hundreds of people to their destinations without incident? In practice, there’s been zero evidence that Uber, U-ship, or Ebay have been any less reliable than traditional businesses that are licensed and supervised by the government. The feedback system seems to provide much more effective regulation.

Anyone disagree? And if you do agree, what should governments do to adjust to this new reality?

Many years ago, in a Great Debate about legalization of marijuana, someone pointed out that the most effective thing that the government had ever done to fight drug abuse was to require labeling of products. Once people could tell which products had opium, laudanum, and cocaine in them, they started to purchase other products and avoid those.

Similarly, I think that the thing which has resulted in car safety improving so much since the 70s was the standardization of safety ratings. When posted right there on the car, next to the price tag, people are liable to start thinking about just where their money is going.

Overall, I’d agree that it’s likely that the government could do just as well, if not better, and give businesses more freedom with less bureaucracy, by firmly moving into the business of increasing consumer awareness on the important stuff.

A good example would be if the government maintained a cost-benefit (e.g., dollar per year of lifespan increased) breakdown of medical procedures and equipment every year and issued a dollar value ranking of each medical insurance plan based on that. I suspect that you would see medical costs, in the US, half in less than a year.

And of course, no State can say that the Federal government was messing in their territory if the central government is simply publishing information.

Quite true. But is there any reason that private organizations can’t do the same thing? Yelp seems to be revolutionizing the service industry, for example. In medicine it’s tougher, but there are sites like The problem is that those sites aren’t used enough to get a good picture of how useful doctors are. Most doctors only have a few comments and ratings, and that could just be their staff or family.

Of course I disagree. Consumer feedback, and consumer choice based on such information, is a nice feature to have, but it has absolutely nothing to do with critical safety, environmental, and financial regulation and it’s absurd to think of it as some sort of “alternative” to regulation.

Is it your assertion that a passenger satisfaction survey on Shoestring Airlines would render the FAA obsolete, or that some happy electricity customers means we don’t need the Nuclear Regulatory Commission? Does the fact that I like my can opener mean the company that made it isn’t trashing the environment, or stealing from its employees or shareholders, engaging in insider trading and otherwise screwing the public? So now we don’t need the SEC, or workplace standards? How do I know my breakfast cereal isn’t filled with toxins? Is it enough for the government just to publicize the fact that my child’s toys are painted with lead and leave it at that?

Have you ever seen patient feedback on doctors? They’re usually all over the map and tend to reflect little more than a doctor’s scheduling promptness and bedside manner. Should government enforcement of medical certification cease because we have patient statisfaction surveys?

What about the propensity of some industries to trash the environment everywhere they operate? Should the government just let people know and trust the “free market” to boycott them? What if the “free market” doesn’t care because they like their low-priced polluting crap? How about telephone companies and the like that operate as oligopolies that are in effect pretty much monopolies or nearly so, and have no real competition? Do those not need regulation? Because in reality, without regulation every industry that can do so will tend to consolidate to organize itself into an oligopoly and lock out competition so they can proceed with the good work of totally fleecing the customer who will have no alternative whatsoever. And then your free-market paradise will be complete.

And I’ve barely scratched the surface of what the government does every single day to protect the public.

I realize I’m not always clear, but that wasn’t my argument. I believe feedback systems can replace SOME types of regulation, not all. For example, licensing requirements in professions that don’t actually require much in the way of critical training could be replaced by feedback. the ostensible reason for licensing is so that government can control who does business, and can revoke the license if the person or organization behaves badly. It would seem that feedback could replace that for professions that pretty much anyone can pick up and do without years of schooling.

Actually, upon reflection, maybe my thread title should have been “Can feedback systems replace the need for most licensing?” rather than government regulation in general.

Doctor ratings by patients only tells you how nice/friendly the doctor is. Adding in a critical viewpoint is where the government can help.

OP’s examples are for simple operations run by single entrepreneurs, with the entrepreneurs offering very comparable services. These are cases where “feedback” works well, and where government regulation is seldom proposed, except when special training (e.g. medicine or piloting) is required.

In other words, the solution OP proposes is the solution that already exists. :stuck_out_tongue:

Of course feedback is valuable. People tell each other what they think about auto brands, restaurants, etc. That’s already the case. Is OP offering advice to a a free-enterprise country like U.S.A.? Or to a state-controlled North Korea where people aren’t allowed to comment on things like restaurant quality? :dubious:

Where the hyperlibertarians go too far is thinking that government regulation is unneeded for big corporate interests, e.g. major polluters like Koch Industries. Does OP think people will Tweet “I think Koch killed my grandma. Don’t buy their products, whatever they are.” :smack:

Fair enough. I may have jumped the gun because one hears so much general anti-regulatory rhetoric these days.

However, I would question what professions are required to be licensed where it isn’t really necessary and could be effectively replaced by some sort of “reputation” index that everyone has access to. Sure it works well on eBay but I think that’s an exceptional case. There shouldn’t be any argument about airline pilots, doctors, engineers, lawyers, and other obviously skilled and trusted professions needing to be licensed. Trades like plumbers, gas fitters, electricians and others are all licensed for obvious reasons of public safety. I’m not sure there’s a very large cohort left that would be affected by this “deregulation” or who it would really benefit. Maybe what we really need is just more feedback capabilities on top of existing regulations, although as already mentioned for some highly skilled professions like doctors public feedback is pretty much useless.

How many such professions could you name? I wouldn’t be surprised if there were quite a few, I get the impression the decentralized democracy of the land of the free elects a lot of busybodies, but how many are licensed almost everywhere, and not in a minority of states/municipalities?

Not so. The regulation vs. feedback war is a big deal with Uber. Uber and its fans point out that it’s totally unregulated model is just as safe as taxi service and government has produced zero data to demonstrate that the licensing and bonding system works better from a safety standpoint.

You’d be amazed at how occupational licensing has gotten out of control. Hair stylists, interior designers, boat salesmen, cosmetologists, real estate agents, florists, even fortune tellers!

Of course, a lot of this is just good old fashioned corruption. Some occupational licenses require more classroom time than becoming a doctor or lawyer. The purpose of these regulations isn’t public safety, but to create a professional cartel that can keep prices artificially high, with a portion of the profits going to politicians’ campaigns.

In the case of taxi service, it’s less about the public interest than the interests of the taxi companies and drivers. Consumers can rot.

I’ve lived in areas where there effectively isn’t licensing. I’ve had a LOT of food poisoning. Not dangerous for me, but could kill a kid. I’m lucky I never caught Hep C from a nail salon and the worst a cab driver ever did was expose himself.

I’m happy to be back in the US, where everyday tasks lack that deadly potential.

Feedback systems only work when the feedback is immediate. But a lot of harm that can befall consumers takes a while to manifest. By the time the word of mouth about a product has gotten to you, you may have already consumed that product and now you’re sick. Then what do you do?

It also only works when there is feedback. Not every consumer will read or write product reviews. Sometimes you don’t have time to go through all the Yelp reviews. Sometimes consumers don’t live long enough to say “Buyer beware.”

Businesses benefit from government regulation doing the some of the consumers’ due deligence for them. Imagine how stressed out the restaurant dining experience would be if every diner had to worry about which establishments require employees to wash their hands and which ones don’t. Diners would demand to have access to the kitchen to do their own surprise inspections, and restaurants would be rated on cleaniness a million, arbitrary different ways ("Don’t eat at this place! They wash the counters down with a generic brand of disinfectant instead of Lysol!! My gawd, who’ll think of the children!!!) I prefer having the government do this kind of stuff for me so that I don’t have to worry.

You say occupational licensing has gotten out of hand, then you give some example of groups you seem to think don’t need to be licensed: Hair stylists, interior designers, boat salesmen, cosmetologists, real estate agents, florists, and fortune tellers. I’m not sure all of these require licenses, but I can see why you would want to keep strict control on people that put chemicals in your hair or on your face, or people that sell big ticket items that have to be safe enough to operate on our waterways, or people that work on other peoples homes that later have to pass inspections. As far as your comment about

, I sure would like to see some evidence that city or state licensing fees get distributed into political campaigns.

For example…?

So Uber and its fans point something out and that means it is fact? Are there actual statistics that support this? Are the statistics validly compared, meaning do we have the same types of information on the safety of cabs versus Uber?

You are also forgetting that Uber is externalizing some costs. Their drivers may not by required by Uber (or Lyft) to get insurance that covers drivers for hire. Private car insurance will not necessarily cover driving for hire, so if the driver is in an accident the cost will be passed on to someone other than the company and driver who are at fault. I believe taxi companies or drivers are required to be properly covered.

How do customer ratings do anything about that problem? They don’t, and in fact they will favor the company that is passing the cost to others because it makes the service cheaper than a company that is prevented from externalizing that same cost.

I guess if I checked out a restaurant on Yelp and saw 50 one star reviews that basically read “Don’t eat here, my kid died of cholera afterwards” I wouldn’t go there, but I’d also think that there must be a better way.

No, because there will always be a business or trend or force that throws the feedback out of proportion. This is the huge flaw in “free market” and “libertarian” thinking, which is why it’s promoted by the powerless-but-idealistic and the powerful-and-stealthy.

Systems need an agreed framework - of law, regulation, limits - to work with reality in the mix. (Anything can work on paper, or in theory, or in a very controlled situation - and it’s examples of the latter that woo the idealistic and the naive into thinking it can work on an unlimited scale. They may even be right… for a time.)

Personally, as much as I seek out reviews before buying something, I find them more confusing than helpful. For everyone person who raves about about a particular business, there’s another person who had an unpleasant experience there. Reviews tend to fall on the extremes. The person who feels just “okay” isn’t likely to care enough to write anything.

I also wouldn’t trust reviews to inform me about safety. A person who doesn’t care about germs may not be alarmed if they saw a rat scurrying in the corner of a restaurant’s kitchen, and thus may not feel compelled to share this information with anyone. A person may not mind if their Uber driver speeds and runs through red lights, especially if it means getting to their destination faster. So they may write a review that says, “He’s a great driver! He takes some risks on the road, but I’ve never felt like my life was in danger!” You get enough reviews like that, and suddenly no one knows what they’re getting into.