Alex Tabarrok at Marginal Revolution skewers the "stupid mistake" the National Institutes of Health (NIH) made in tightening conflict-of-interest rules for its scientists. But here, respectfully, is the counter-argument. The serious issue is that the food and pharmaceutical industries should not be permitted to provide NIH scientists with valuable stock and consulting fees, which might influence their actions in government. The example of an NIH scientist who was criticized for receiving free parking is a distraction -- don't let it draw your eye away from the serious issue. No NIH rule, old or new, tells scientists they can't own stock. The new rules say they can't own stock in the industries their government decisions could influence.
The Washington Post article cited by Tabarrok sympathizes with the poor mid-level NIH workers -- "secretaries" and "clerks" -- who will lose large sums from selling their industry stock. But wait a minute. Why would mid-level NIH folks be holding large amounts of stock in the industries influenced by NIH decisions? If the NIH public servants have no insider knowledge, they are unharmed by the new rules to hold other stocks instead. On the other hand, if there were a culture at NIH of passing around valuable stock tips, one would expect staff to oppose the new rules vehemently. We shouldn't permit even the appearance of such a thing.
The Post article describes NIH scientists who were found blameless on further investigation, but it also mentions NIH scientists who seemed to have conflicts of interest: "One scientist allegedly collected hundreds of thousands of dollars in fees and travel reimbursements over five years as a result of largely undisclosed activities."
I am sympathetic to intelligent articulate economists who tend to be suspicious of regulation tightening when it comes to the private market economy. But, when it comes to government officials, the smart economist's case favors strict rules against conflict of interest.