Banning a risky product cannot improve any consumer's welfare (properly understood), with applications to FDA testing requirements

Conclusion

Banning a product can never improve the well-being of consumers properly understood, that is, understood as individual consumers' prospective and subjective utility. This proposition remains valid even when risk is incorporated into the analysis. Risk of inefficacy or adverse side effects is simply another dimension of each good, like taste, size, or location, about which the consumer has preferences. Government restrictions have the same effect on consumer welfare regardless of the dimension of the good that is restricted; in this regard there is nothing special about risk.

A simple model incorporating this approach to thinking about risky consumers' goods allows us to establish that the FDA's regulation of drugs (and likewise its regulation of medical devices), both in general and in several of its specific forms, has detrimental effects on consumers' welfare. Nothing in economic theory, correctly understood, supports the imposition of product bans such as those enforced by the FDA through its testing requirements. The bans help no consumer; they definitely hurt some consumers.