Archive for the ‘regulations’ Category

Wind Turbine Hush Money

Posted August 1, 2010
Filed under: energy, environment, health, protest, regulations |
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In Oregon, the “whoosh, whoosh, whoosh” of wind turbines is being partly drowned out by another sound: “Hush, hush, hush….”

What are we to think when a company starts paying people substantial sums of money not to complain about the effects of their projects? Is that illicit hush money, or is it a company facing up to its impact and paying due compensation?

Here’s the story, by William Yardley, for the New York Times: Turbines Too Loud? Here, Take $5,000.

IONE, Ore. — Residents of the remote high-desert hills near here have had an unusual visitor recently, a fixer working out the kinks in clean energy.

Patricia Pilz of Caithness Energy, a big company from New York that is helping make this part of Eastern Oregon one of the fastest-growing wind power regions in the country, is making a tempting offer: sign a waiver saying you will not complain about excessive noise from the turning turbines — the whoosh, whoosh, whoosh of the future, advocates say — and she will cut you a check for $5,000.

“Shall we call it hush money?” said one longtime farmer, George Griffith, 84. “It was about as easy as easy money can get….”

The effects that a production process (such as a wind farm) has on people other than its paying customers are what are called “externalities” — effects that are external to some voluntary transaction. And in principle, compensating those who suffer externalities is the right thing to do — it means that a company (and its customers) are paying something closer to the full cost of production. Otherwise, externalities amount to a cost foisted on someone else involuntarily.

OK: so far, so good. The company involved here is attempting to (as an economist would put it) internalize its externalities, by compensating those affected by noise from its windmills. But what about the price set? Note that the price was an apparently invariable $5,000. Why? After all, different people are likely to be affected differently, and some will be more noise-tolerant than others.
So, why one price? According to the company, the reason is fairness:

“What we don’t do in general is change the market price for a waiver,” [Caithness Energy’s] Ms. Pilz said. “That’s not fair.”

Of course, equal payment for all is one version of fairness, but it’s not the only one.

One last theme to pick up on is the tension between what’s good for the individual and what’s good for society. The company involved, here, attempted to play the “social good” card:

Some people who did not sign said that Ms. Pilz made them feel uncomfortable, that she talked about how much Shepherd’s Flat would benefit the struggling local economy and the nation’s energy goals, and that she suggested they were not thinking of the greater good if they refused.

It’s a good rhetorical move on the company’s part, not least because there’s more than a grain of truth to it. A project of this size is bound to benefit the local economy (though perhaps not as much as locals might hope). Add to that the fact that this is, after all, clean energy that’s being produced, the kind of energy that most people now figure is essential to weaning us off our collective addiction to petroleum products.

So, let’s put this on the table as a fundamental truth: there are no centralized forms of energy production, clean or otherwise, that will not have a negative impact on anyone, and that hence won’t be subject to someone’s objections. So the question is not whether anyone will be negatively affected (or even merely inconvenienced), but rather who will be negatively affected, and how much, and what to do about it.

Chiropractic Referral Fees & Conflict of Interest

Posted July 13, 2010
Filed under: conflict of interest, health, honesty, professionalism, regulations |
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Sometimes, when consumers need two different, but related, goods or services, they rely on the advice of the provider of one product to select a provider of the second. That often makes sense, because providers in related businesses often have specialized knowledge that lets them give good advice (e.g., the guy who sells you your carpet likely knows who would be good at cleaning that carpet.) In such a case, people in related businesses can be a good source of expert, independent advice.

That is, if the advice is truly independent. And the most obvious way to eliminate independence is to inject a financial interest into the scenario. If the person you’re relying on for advice is financially beholden to the person he or she is recommending, you have every reason to doubt that advice.

And if that advice you’re after isn’t about something mundane, like carpets (something about which a great many non-experts know quite a lot) but is instead about your health, you have every reason to worry — especially when one of the service providers involved is taking active steps to put the person you’re relying on for advice into a Conflict of Interest.

Here’s an article (in which I’m quoted) about just such a situation. It’s by Yoni Freedhoff, MD, writing for the Canadian Medical Association Journal, Chiropractic clinic offered referral kickbacks

A chiropractic clinic with locations in Ontario, Nova Scotia and Manitoba offered lucrative kickbacks to physicians for referring clients to its five outlets until the College of Physicians and Surgeons of Ontario (CPSO) apparently stepped in to scuttle the payments as a result of CMAJ inquiries.

The offer of kickbacks, which were in the form of financial compensation, arising out of referrals from doctors, came to light as a result of a CMAJ request for a “doctor’s information kit” in accordance with instructions from an advertisement placed in the journal by the Low Back Clinic.

The kit included a document detailing appropriate patient referral criteria, which was followed by the proclamation: “In compliance with the C.P.S.O. standards, a $300 documentations fee will be provided once the patient completes care….”

Summary of problems:

  • The payments put referring physicians into a conflict of interest;
  • The payments, which are based on completion of a course of care, induce physicians to encourage patients to complete a course of care independent of whether that’s in the patient’s best interests;
  • The payments risk jeopardizing patients’ trust in their physicians;
  • The payments risk the professional reputation of the medical profession quite generally;
  • Referring to the payments as being “In compliance with the C.P.S.O. standards” falsely implies that the payments are required by the C.P.S.O.

All in all, this scheme was a pretty bad idea. Perhaps the clinic offering the fee could be excused for not knowing that doing so was contrary to regulation. But health professionals certainly ought to know enough about conflict of interest to recognize that such a scheme is seriously ethically problematic.

The BP Disaster: Regulating (and Managing) Complexity

Posted June 5, 2010
Filed under: complexity, disaster, environment, management, product safety, regulations, technology |
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In my previous blog posting on the BP oil-rig disaster, I pointed to the disaster’s ethical complexity, measured in the sheer number of relevant ethically-interesting questions that we might be interested in.

But the issue of complexity arises in a much more straightforward way in the BP disaster, namely in the fact that the oil rig on which the disaster took place was itself a terrifically complex piece of technology.

See this nice piece by Harvard economist Kenneth Rogoff, The BP Oil Spill’s Lessons for Regulation.

The accelerating speed of innovation seems to be outstripping government regulators’ capacity to deal with risks, much less anticipate them.

The parallels between the oil spill and the recent financial crisis are all too painful: the promise of innovation, unfathomable complexity, and lack of transparency (scientists estimate that we know only a very small fraction of what goes on at the oceans’ depths.) Wealthy and politically powerful lobbies put enormous pressure on even the most robust governance structures….

Rogoff’s point is about regulation, but it could just as easily be about management, and/or the relationship between the two. And to Rogoff’s examples of complexity-driven disasters, you can add Enron and a couple of NASA shuttle explosions. Now, none of these cases can be explained entirely in terms of the difficulty of managing complex systems; each of those cases include at least some element of bad judgment and probably unethical behaviour. But in each of them one of the core problems was indeed complexity — either for those inside the relevant organizations or for those outside trying to understand what was going on inside. When systems (financial or mechanical) are mind-numbingly complex, it becomes all the easier for poor judgment to produce catastrophic results. It also makes for good places to hide unethical behaviour.

So, if we’re going to build fantastically complex systems, we also need to learn how to manage those systems in highly-reliable ways. In other words, we need management systems — effectively, social technologies — that are as sophisticated as the physical and economic technologies they are intended to govern. We already know a fair bit about error-reduction and the design of high reliability organizations. Aircraft carriers are a standard example of one type of seriously complex organization that, through careful design of management systems, has managed to achieve incredibly high levels of reliability — i.e., incredibly low levels of error, despite their complexity. Similar thinking, and similar design principles, could presumably be applied pretty directly to the design and management of oil rigs. Presumably, that’s already the case to at least some extent, though as BP has proven, more needs to be done. The bigger question is whether business firms are ready and able to apply those principles to the design of all of their complex systems — whether mechanical or financial — such that we can continue to reap their benefits, without suffering catastrophic losses.

(Thanks to Kimberly Krawiec for showing me Rogoff’s article.)

Business Ethics & Alternative Medicine

Posted June 3, 2010
Filed under: health, natural, pharma, product safety, regulations, retail, Uncategorized |
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This is a “meta” blog posting, bringing together the various blog entries of mine over the last couple of years on the single topic of business ethics and alternative medicine.

Alternative medicine (includes things like homeopathy, herbal supplements, Traditional Chinese Medicine, acupuncture, therapeutic touch, and so on) raises some interesting ethical issues. On one hand, most of it doesn’t work (or to be more accurate, most of it is unproven, and much of it is disproven), and we tend to think people should only sell products that work as advertised. But on the other hand, alternative medicine has many fans, and we generally think consumers ought to be able to choose for themselves what products are good for them.

Two other factors make alternative medicine interesting, from a business-ethics point of view.

One factor is that both the safety and efficacy of alternative therapies varies. Some therapies (e.g., homeopathy) are entirely implausible, whereas others such as some herbal therapies probably are effective. Not surprisingly, the pattern is reversed for safety: homeopathy is entirely safe (unless the consumer does something foolish like forgoing real medicine in favour of homeopathic remedies for the treatment of a serious illness), while on the other hand some herbal remedies pose significant dangers.

The second important factor is that alternative medicine is generally under-regulated. In Canada, for example, herbal supplements are categorized as “natural health products” and subject to only minimal oversight. The result is that neither consumers nor companies can assume that the law is providing significant oversight. In the absence of strong consumer-protection legislation, there’s a particularly strong obligation for companies to act ethically.

Here are my blog postings on this topic, in reverse-chronological order:

By the way, to the best of my knowledge, there is not a single scholarly paper that looks at the selling of alternative medicines from a business-ethics point of view. If you know of one, please let me know!

Unethical Herbal Supplements

Posted May 29, 2010
Filed under: advertising, health, honesty, labelling, natural, pharma, regulations, science |
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Hey, what’s in that bottle of all-natural herbal supplements on your kitchen counter? Are you sure? What will those supplements do for you? Cure all that ails you? Something? Nothing? One way or the other, how do you know? The truth is, you probably shouldn’t feel so certain.

Here’s the story, from Katherine Harmon, in Scientific American: Herbal Supplement Sellers Dispense Dangerous Advice, False Claims

[The lack of evidence for their effectiveness] …hasn’t stopped many supplement sellers from making the false claims and even recommending potentially dangerous uses of the products to customers, according to a recent investigation conducted by the Government Accountability Office (GAO). To obtain a sample of sales practices, the agency got staff members to call online retailers and to pose undercover as elderly customers at stores selling supplements.

Customers were not only told that supplements were capable of results for which there is no scientific evidence (such as preventing or curing Alzheimer’s disease); the advice and information also was potentially harmful (including a recommendation to replace prescription medicine with garlic)….

Some fans of herbal remedies are liable to complain that the relevant government agencies ought to be directing their efforts at the real culprits, namely Big Pharma. Why pick on people who package and sell “natural” herbal products when major pharmaceutical companies are, on a regular basis, found to have engaged in a whole range of dubious and sometimes deadly behaviours? But that’s roughly like a bank robber, upon his arrest, complaining that the cops ought to be out chasing white-collar criminals instead. The fact that embezzlement is a bad thing does nothing to diminish the badness of robbery. Both are wrong, and both are worthy of punishment.

Essentially, what we’re seeing here is history catching up with the makers of herbal supplements. Over the last decades, we’ve imposed increasingly tough rules on the pharmaceutical industry (though those rules still need to be tightened up in various ways). But herbal products are part of the “natural” products industry, and that industry is woefully under-regulated. Indeed, that industry is probably about as well-regulated today as the pharmaceutical industry was, say, 50 years ago.

(p.s. for information about which herbal supplements are and are not backed by good science, see Scott Gavura’s Science-Based Pharmacy blog.)

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