Tuesday, May 22, 2007

E. coli conservatives

Paul Krugman blames Milton Friedman for promulgating the foolish libertarian precept that nothing should be regulated - not even the quality of the foods we eat. Why regulate food quality asked Friedman - firms will have sufficient incentives based on self-interest not to poison their customers.

That is generally a false claim - the incentives may be inadequate. Food providers may be ignorant rather than maliciously and myopically greedy.

Failure to regulate means that consumers are dependent on the quality protection services of foreign governments which might be asking quite a lot.

Some recent food imports into the US from China have made a lot of people very sick. The gains-from-trade in this case have taken the form of profits to the vendors and food poisoning of the unfortunate customers.
The Washington Post, reviewing F.D.A. documents, found that last month the
agency detained shipments from China that included dried apples treated with
carcinogenic chemicals and seafood “coated with putrefying bacteria.
The same has occurred recently with toothpaste and pet food exports from China, some of which ended up in Australia.

Of course there should be careful monitoring and regulation of the food trade.

We should also carefully monitor the views of libertarian fanatics who see the free operation of markets as the answer to everything. They are not. Information problems, ignorance, externalities and public good issues provide a host of reasons for intervening in real economies.

Conservative ideologues who advance arguments for minimal government are a deluded lot who have done much damage to contemporary America. They are catching on in Australia.


conrad said...

I think you need to distinguish at what levels the laws are applied. At least at the level of the resteraunts/food stalls and what can and can't be sold/displayed, I agree with Friedman -- I don't see any need for any restrictions. Poisoned customers don't come back. Many parts of rich Asia work like this, and I don't see or hear of great problems (quite the opposite actually -- small unregulated food stalls generally work on high turnover, which solves many hygene problems).

Alternatively, crappy poisonous products from China seem pretty common (especially in HK!), and it appears the big food chains don't always stop these. Some laws at these levels are evidentally helpful, although one can imagine them being pretty minimal.

Matt Canavan said...

Relative to government bureaucrats who aren't ignorant, Harry?

Anonymous said...


Why do you immediately assume that quality control would not exist without government regulations and inspection?

Quality control could just as easily be achieved through the private market by branding, audits and associations being formed.

Look, my family is in the food game and to be honest the only time they are concerned with food inspectors is once a year, when the food inspector calls a week ahead of time to arrange a time. . However they are fastidious with cleanliness.

Some control that is, Fred!

Did those precious government agencies stop the bad food from being eaten in the US? Could our courageous and intrepid food poison battlers stop it here?

You got to pull both legs; Harry otherwise one will be longer than the other.

Mike said...

Well said Harry.

Anonymous; you start by saying the market can handle quality control, but then concede that your own business is poorly regulated and that your own fastidiousness is the main source of quality in your business.

Doesn't this support Harry's point, that even when producers are benevolent and careful, without adequate regulation problems can occur?

If consumers have to rely on the decency and fastidiousness of all producers, and one finds a way to cut costs which has (unbeknownst to them) undesirable effects on the quality of their food, with long-term health consequences for consumers, wouldn't it be better to have the regulation in place?

hc said...

Matt, If the case for intervention is based on public authorities having better information them, yes, they must have it. It is more likely they will have better information than some private operators.

Anonymous, There has been a substantial rollback of protectyive legislation in the US. That is Krugman's complaint. I am pleased to hear that your firm is fastidious and assume most are - it might not be lack of care that matters however it might be lack of knowledge.

And yes, as you know, there are shonky operators out there who cut corners on food handling and preparation standards so that poisonings do occur.

davidp said...

For some light rather than anecdotes and heat, it would be worthwhile looking at the work of Phillip Leslie at Stanford Business School
who has a set of papers on restaurant regulation and hygiene:

Ginger Jin & Phillip Leslie (2005): "The Case in Support of Restaurant Hygiene Grade Cards," Choices, 20(2), 97-102.

Paul Simon, Phillip Leslie, Grace Run, Ginger Jin, Roshan Reporter, Arturo Aguirre & Jonathon Fielding (2005): "Impact of Restaurant Hygiene Grade Cards on Foodborne Disease Hospitalizations in Los Angeles County,"Journal of Environmental Health, 67(7) 32-8.

Ginger Jin & Phillip Leslie (2003): "The Effect of Information on Product Quality: Evidence from Restaurant Hygiene Grade Cards," Quarterly Journal of Economics, 118(2), 409-51.

Ginger Jin & Phillip Leslie (2007): "Reputational Incentives for Restaurant Hygiene"

Anonymous said...


How do you think regulation knocks out bad food producers?

They can't. Nearly all government food control is bogus. It's like airline security- a thin veneer of government regulation is supposed to stop terror. Total nonsense.