Beyond permissionless innovation: exciting things happen outside the reach of regulators.

Authorde Rugy, Veronique
PositionColumns

PAUL MCCARTHY is the father of a boy born without fingers on one hand. A few years ago, McCarthy found that a $30,000 prosthesis--the only option then available--was not a perfect match for his 12-year-old son's needs, so he went online to find a better, less pricey alternative. McCarthy's search led to the assembly of an unlikely team: a South African woodworker, an American puppeteer, and another father in a similar situation. Thanks to the power of the Internet, the men were able to collaborate from thousands of miles apart to make an inexpensive but workable prosthetic appendage using 3D printers.

Such "permissionless" innovation, in which people with big ideas for how to make the world better act on them without first jumping through regulatory hoops, is remarkable. It's also extremely fragile. The entire enterprise could crumble overnight with a stroke of a regulator's pen, a change in an insurance company's policy, or a lawsuit filed by entrenched manufacturing interests. It hasn't so far in this case. But due to pressure from competitors that make traditional prosthetics, the company McCarthy and his partners created has already had to agree to define its product as a "training" prosthetic, thus opening the door to future regulatory limitations on its business model.

Consider how the Food and Drug Administration

(FDA), in the name of safety at any cost, quashed the genomics company 23 and Me by ordering it to stop marketing its cheap, at-home genetic testing kits. According to the agency, 23 and Me should have obtained permission from regulators before selling its product to American consumers who were interested in learning more about their own personal genetic information.

Driving these actions is the "precautionary principle" norm to which most public officials subscribe. Unfortunately, the principle allows regulators' imaginations to run away with them. Any perceived threat, even from a low-probability worst-case scenario, is reason enough to slow, stifle, or stop a technological development from moving forward. The mere possibility that something might go wrong if innovations aren't held up for years of testing is usually cited as the justification, but the real upshot is that the incumbents in a marketplace are protected from unexpected competition. It's cronyism in the name of safety.

Take the FDA's decision to encourage testing of medicines that have been around so long they never had to receive government approval. The...

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