Ep. 117: John Cochrane on Rethinking Healthcare, Markets, Regulation & the FDA

Infinita (0:01)

Welcome to the Stranded Technologies Podcast, where we explore how to accelerate the future. Imagine a world of abundance, longer lives, clean energy, transparent markets, robots and AI doing the toiling labor. Why don't we have those things yet? Join us as we explore the biggest problem that holds back frontier tech over regulation. Now we have real solutions, startup cities, network states and on-claims finance. Please find ways to support us in the show notes. Now enjoy this episode.

All right. Today is August 25th, in 2026 and my guest is John Cochrane. John is an economist, professor of finance and economics at the Stanford Graduate School of Business and now fellow at the Hoover Institution. I've been wanting to have John on for a long time, probably since the early days of the podcast, since his views on free market vaccines and free market health care have influenced me a lot. What I most appreciate about John is the candor and clarity, which he dispels myths about health care.

Although health care isn't even besides health care, he's also widely writing about or is a specialist in financial economics and macroeconomics. Today, we're going to talk about his views primarily on free market health care and applying first principles in economics to the real world. Welcome John.

John Cochrane (1:18)

Thank you. It's a pleasure to be here.

Infinita (1:20)

So John, why don't we get started? Why does Moore's Law not apply to medical devices?

John Cochrane (1:30)

It doesn't. Tell me about that.

Existing devices get cheaper and cheaper over time until the government regulates their prices. And I guess like insulin, I found it hilarious when insulin was going way up in price, because of course, you know, the regulatory snafu there, it ought to be churned out like candy. But I think the technological law applies, and then the iron law of regulation applies in the other direction.

Infinita (2:02)

So the iron law of regulation is that regulation makes things more expensive.

John Cochrane (2:07)

Yeah. Regulation protects from competition. In return for regulatory approval, and increasingly these days in return for political support for whoever's in power.

But you know, some things do get cheaper. So Moore's law, you caught me off guard, there was such a great question. Moore's law applies to LASIK surgery beautifully. Plastic surgery is nice and cheap. You know, even though those are regulated, but they are not paid for by government-regulated insurance. Paid for, you know what I mean by paid for.

They are, you pay for what you want. And there are most important things, there are competitive suppliers and the price goes down like crazy.

Infinita (2:54)

Yeah. So what would you say to someone that says, well, in health care, there are inherent safety risks.

And those safety risks require at least some baseline regulation.

John Cochrane (3:07)

Yeah.

You know, health care is so supremely screwed up. There is a question for all of us, I'm going to say us libertarians, of just how much purity do you want to hold out for.

My joke version of it is, yes, pilot's license probably should be provided by the free market. But you look at the dumpster fire of the US federal government, maybe we don't need to start there.

So, you know, and we all think that safety issues are better handled by tort systems, by regulations, by privately provided information disclosures, you know, certification, privately, private competitive certification, the underwriters labs model, not the food and drug association model. But that's not the first and most important problem of the regulation. The first and most important problems, of course, is the who pays for it and the you can't compete parts of regulation. So sensible safety regulation, I think, is something that we libertarians can learn to live with and fight that one another day. Now, I do want to emphasize sensible. The safety regulations that we have are all screwed up in many ways. So, you know, let's work for better safety regulations before we insist on the total free market, the federal government approach. What I have in mind is the Food and Drug Administration, who oversees the regulation of drugs. So right now in the US, unless the Food and Drug Administration has said this drug is okay, you're not allowed. You go to jail for taking it, and you certainly go to jail for selling it to somebody else. So you can still have some regulation while fixing that system, while turning the FDA, for example, into only saying this is safe and not judging effective, while forcing the FDA to do retrospective research, not just we've run the one-time clinical trial, now it's fine, go. Well, why don't human knowledge accumulate slowly? Even the Federal Aviation Administration, for all of their many faults, doesn't presume that we blessed the perfect airplane and you never have to look at it again. The airplane comes in and the landing gear buckles, and they say, oh, there's an airworthiness directive, we got to fix up that landing gear. So we could do regulation a whole lot better. I admit, two in the morning when we're drinking beers in the back office of the Cato Institute, we should think about a totally unregulated system, it's certainly possible. But there are far better regulated systems that we can envision, and maybe let's work on that first.