ROBIN HANSON's contribution to a New York Times discussion of what to cut in Medicare, and quick, includes this clever suggestion:

My solution: admit we are cost-control wimps, and outsource our treatment evaluation to the U.K. Pass a simple law saying Medicare (and Medicaid) won't cover treatments considered but not positively appraised by Britain's national health institute. Even better, use clinical evidence evaluations of the British Medical Journal. They've classified more than 3,000 treatments as either unknown effectiveness (51 percent), beneficial (11 percent), likely to be beneficial (23 percent), trade-off between benefits and harms (7 percent), unlikely to be beneficial (5 percent) and likely to be ineffective or harmful (3 percent). Let's at least stop paying for these last two categories of treatments! And to put pressure on doctors to collect evidence, let's stop paying for “unknown effectiveness” treatments after 10 years of use.

This reminds me of another proposal, similar in spirit, to de-nationalise the drug-approval process. This is the brainchild of Daniel Klein, another against-the-current George Mason economics professor:

One idea is to recognize the drug approvals of, say, 15 other governments. That is, we reform the U.S. system so that if the drug-approval agency of even one of those 15 countries approves a drug for that country, then the drug is automatically approved in the United States. So, for example, if Health Canada, that country's counterpart to the FDA, approves a drug for Canada, then the drug would automatically gain approval in the United States. This 15 countries recognized would be, say, Britain, France, Sweden, Germany, Australia, New Zealand, Japan, South Korea, Switzerland, Spain, the Netherlands, Norway, Finland, Denmark, and Austria. Under this system, drug makers such as Pfizer, Lilly, or Merck could then go to the national agency that is most likely to be efficient, friendly, and swift. If Health Canada is approval-friendly, then drug companies might tend to go there. Maybe the agencies will specialize by type of drugs. The drug companies would, then, no longer be captive to a monopoly permitter. Now, in the United States, the FDA has a monopoly in giving permission. Under the proposal, the FDA would have to compete in giving permission.

Both of these proposals are, at this point in time, exceedingly improbable. But they raise a fascinating general question about the rationale for so much regulatory redundancy. Why so little use of international institutional specialisation and division of labour?

This sort of thing is not entirely unknown. Just as Americans are, as Mr Hanson puts it, "cost-control wimps", some countries are inflation-control wimps. Acknowledging the ugly truth has led a number of countries either to peg the value of their national currency to that of a country with a better central bank, or to just outright adopt a stable foreign currency as its own, as Ecuador has adopted the dollar. Why not have more of this? If this or that country has developed excellent institutions, why shouldn't we piggyback on that excellence as far as possible. There is little reason to believe Americans would be endangered by simply following the lead of any of the 15 countries Mr Klein mentions, and there is plenty of reason to believe many thousands of lives would be saved by speeding the access of Americans to duly vetted drugs. Likewise, there is little reason to believe that simply copying the British national health institute would endanger Americans lives, and plenty of reason to believe doing so would significantly cut costs.

I can imagine the following objection to regulatory outsourcing: shifting regulatory responsibilities to foreign governments reduces precious democratic accountability. But in the case of Medicare cost-control, for example, responsiveness to democratic preference seems to be a good part of the problem. The loss of accountability in this sense is a feature, not a bug, of outsourcing. And insofar as the choice to outsource is itself a revocable democratic decision, it seems that the policy overall remains duly democratic. Of course, it's hard to imagine Americans deciding democratically to abide by another country's regulatory decisions, though it's somewhat amusing to imagine America's most strident conservative exceptionalists defending the exceptional quality of America's otherwise hated regulatory bodies.

If America tomorrow elected slavishly to mirror Canada's financial regulatory scheme, how long would it take American financial firms to ruin Canadian financial regulation?