The New York Times reported that the FDA was holding a hearing to scrutinize the

Question

The New York Times reported that the FDA was holding a hearing to scrutinize the way prescription drugs are marketed to consumers in advertisements. Critics, lik then Senator John Edwards, claimed that's misleading for an ad to show a woman running through a field while the fine print says "may cause serious side effects," said Michael Briggs, the senator's press secretary. "The F.D.A. should require drug manufacturers to provide fair and balanced information about a drug's risks as well as the potential benefits." (Ives, Nat, "F.D.A. ponders pros and cons of the ways prescription drugs are promoted to consumers." New York Times September 29, 2003, late Ed.). The hearing which lasted for two days, was held in Washington, D.C. All comers were permitted to present original research at the hearings.

Consumers stand to benefit from more accurate and informative advertising. Accept, for the sake of argument, that the advertisements do create a false impression. Pharmaceutical companies, publishers, and broadcasters have an interest in maintaining the status quo. Imagine these groups (consumers and the relevant industries) as opposing armies.

Based on the theory of public choice and political equilibrium presented in Chapter 14 (Parkin Microeconomics, 12th Ed), which side of this issue is likely to assemble the stronger force? Explain.

Explanation / Answer

According to the public choice theory of political equilibrium, the relevant industries (pharmaceutical companies, publishers, and broadcasters) are likely to gather stronger force as compared to consumers. This is because the government is inclined to keep the verdict on their side as the government knows that voters are concerned about their net benefit. The net benefit of a voter depends more on the voter's interest as a producer than on the voter's interest as a consumer. Therefore, if the government keeps its verdict on the producers' side, it is not likely to lose as many votes as it would in case it keeps its verdict on the consumer's side.

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