Free market response to peanut butter salmonella scare?

[jmag]

FDA has zero credibility. They just outlawed a form of vitamin b6 because of a petition from a pharma entity. B6 is in a lot of our natural food source. What a f'ing joke they are. The list goes on. Talk about sh1t that needs to be flushed down the toilet.

 

[xyz123]

Obviously, the members of the company need a little jail time. But really, this has little to do with the market, free or not, does it? It's really more a question of law and defining the crime and punishment.

 

[Knighted]

In a free market, demand from both self-interested consumers and workers compels companies to have safe and sanitary conditions, thereby preventing regular outbreak incidents, etc

You made a good argument with your post, and i've changed my thinking slightly on the issue. But I firmly do not believe the idea that competition and self interest alone in a free market would prevent companies from producing in shoddy conditions or adding harmful additives to their products. I think recent evidence demonstrates that with the number of scares from both the US and in China. None of these indicted companies held monopolies - there was ample competition in their industry, but that did nothing to prevent them from polluting their products. In fact, it was profit motivation that drove these actions in many of the cases.

What I do find plausible is the suggestion that, absent any government regulatory agency such as the FDA, private for-profit companies might arise that would provide similar services. However, I find it hard to believe that they would be much more effective in protecting consumers than the FDA has been, and I see a few serious problems arising if such a change was implemented at this point in time.

In a free market, private companies providing regulatory services would need a strong profit incentive in order to come into existence. If consumers do not care if their food carries this regulatory company's "seal of approval" or not, this company will never be profitable, because food producing companies will have no desire to employ their services if it won't improve their own sales any. This is the main problem as I see it - the public at large would have to endure some serious and regular health scares with the absence of the FDA before they began checking the labels on everything they bought. What would be the cost of this in human lives to prompt the market into providing the desired services, and what would be the time lapse before these services could be provided? Consumers won't decide suddenly overnight that one regulatory company is trustworthy. If one major producer decided to put harmful but cheaper substitutes into their products when the FDA stepped out of the picture (possibly as a response to an economic decline like we are now experiencing), hundreds of thousands of consumers could become sick or die in the meantime. Is that a price worth paying in order to simply reduce the cost spent on the FDA's budget by introducing competition, considering that the US FDA has historically had a decent track record of preventing the kind of catastrophes that have occurred in such a short time period in China?

 

[Truth Warrior]

Caveat Emptor!

 

[lucius]

concerned, don't eat peanut butter...

 

[theoakman]

You could try explaining that to the parents of 300,000 sick babies in China from melamine that was added to their milk. But wait, you say! If it was a free market, the producers would never commit those crimes, because then they would lose customers or face the prospect of being thrown in jail. How's this instead? The ones responsible not only had their businesses shut down, but they were executed. I don't think you'll find a more persuasive argument than that to set an example of the repercussions of polluting products. So by your logic, everything should be safe from China now given the utmost severe punishments delt out to those responsible. Yet China still continues to have incident after incident of dangerous products being freely sold domestically and abroad, ranging from lead to anti-freeze in products because of poor regulation. I don't see how you can argue with a straight face that if what little regulation exists in China were to step aside, all of these problems would magically disappear.

Oh you sound so righteous. This isn't China, and I got news for you, China is taking the right steps by executing those people. This isn't going to happen when the penalty is death. You still haven't grasped the fact that despite the FDA's increase in power, there have been more outbreaks of Salmonella in this country. You don't seem to understand that there is NO WAY for them to stop this crap before it happens and the worst thing you can do is create some bullshit agency to make people like you feel they are being protected.

 

[Dark_Horse_Rider]

Wow, Lots of great thoughts and insights here.

One thing that a few have mentioned that I think is essential, is that, we haven't really seen a free market here, and certainly not in China, IMHO.

And if it were a free market, wouldn't a media entity exist ( not like the MSM we now enjoy ) that would play a crucial role in safeguarding the people's interests, seemingly much greater than the interests of businesses ?

 

[RonPaulR3VOLUTION]

Wow, Lots of great thoughts and insights here.

One thing that a few have mentioned that I think is essential, is that, we haven't really seen a free market here, and certainly not in China, IMHO.

And if it were a free market, wouldn't a media entity exist ( not like the MSM we now enjoy ) that would play a crucial role in safeguarding the people's interests, seemingly much greater than the interests of businesses ?

Yeah, calling some place in China a free market gives free markets a bad name. Doesn't seem like such a good idea.

And a free-market based media would put an end to a lot of our current problems. Just compare TV media to Internet media.

 

[Mini-Me]

You made a good argument with your post, and i've changed my thinking slightly on the issue. But I firmly do not believe the idea that competition and self interest alone in a free market would prevent companies from producing in shoddy conditions or adding harmful additives to their products. I think recent evidence demonstrates that with the number of scares from both the US and in China. None of these indicted companies held monopolies - there was ample competition in their industry, but that did nothing to prevent them from polluting their products. In fact, it was profit motivation that drove these actions in many of the cases.

What I do find plausible is the suggestion that, absent any government regulatory agency such as the FDA, private for-profit companies might arise that would provide similar services. However, I find it hard to believe that they would be much more effective in protecting consumers than the FDA has been, and I see a few serious problems arising if such a change was implemented at this point in time.

In a free market, private companies providing regulatory services would need a strong profit incentive in order to come into existence. If consumers do not care if their food carries this regulatory company's "seal of approval" or not, this company will never be profitable, because food producing companies will have no desire to employ their services if it won't improve their own sales any. This is the main problem as I see it - the public at large would have to endure some serious and regular health scares with the absence of the FDA before they began checking the labels on everything they bought. What would be the cost of this in human lives to prompt the market into providing the desired services, and what would be the time lapse before these services could be provided? Consumers won't decide suddenly overnight that one regulatory company is trustworthy. If one major producer decided to put harmful but cheaper substitutes into their products when the FDA stepped out of the picture (possibly as a response to an economic decline like we are now experiencing), hundreds of thousands of consumers could become sick or die in the meantime. Is that a price worth paying in order to simply reduce the cost spent on the FDA's budget by introducing competition, considering that the US FDA has historically had a decent track record of preventing the kind of catastrophes that have occurred in such a short time period in China?

On one hand, I partially agree with you that there are a lot of unknown variables in the transition period, and I have to admit that I don't have a perfectly convincing rebuttal on that point, or at least I don't have one that comes from an outright abolitionist standpoint. On the other hand, I don't think you should entirely discount the fact that stern after-the-fact consequences can be a pretty good deterrent by themselves, China example notwithstanding. * Anyway, I DO think there is a pretty decent solution from a gradualist standpoint, though: Barring the existence of a workable abolitionist solution, I think the wise thing to do would be to loudly and publicly phase out the FDA over the course of several years, making it clear that private health inspection/certification/liability-assuming agencies are the way of the future. The very first phase of this would be: FDA certification would no longer protect any company from liability. * This would give private agencies time to start up, get financial backing, and get customers. I believe the liability-assuming business model would probably be the most successful, since paying for certification and indemnification would give food and drug manufacturers an extra incentive to be inspected. Plus, inspection agencies would certainly want to make regular checkups, knowing it's their head if something goes wrong. Based on the preexisting UL and kosher certification agency examples, I strongly believe that the inspections and certifications of competing agencies would be more rigorous and with higher standards than those of unaccountable regulating agencies. Sure, you can argue, "What if consumers don't care about certification and buy unsafe products like lemmings?" However - aside from the fact that allowing people to freely make their own decisions also means they're allowed to make stupid decisions - I think that scenario is pretty unlikely. First of all, as Dark_Horse_Rider wrote, deregulation also goes hand in hand with a more unregulated media, would give rise to more media outlets jumping at the chance to dig up dirt on their competitors' sponsors. At the very least, they wouldn't have to be so afraid of alienating potential future sponsors by doing so, since less regulation would result in more companies on the market vying for advertising space. Since the media is the subject of an entirely different conversation, I'll leave that there, but anyway, here's another reason why I believe the "ignorant lemmings" scenario is pretty unlikely: The success of private kosher certification (which so few people care about) gives me the impression that health and safety certification would be widely sought by most consumers. I'd certainly care, I'll tell you that. Plus, without regulations limiting the kinds of (true) information food and drug manufacturers are allowed to disclose on the packaging, consumers would be able to make much better choices about competing products. Currently, regulatory agencies working at the behest of major food and pharma corporations prohibit companies from revealing certain information on their packaging. You can't exactly write a warning about all of the dangerous things present in your competitor's product - even if it's true - because the government censors you to protect these companies.** If you could, consumer awareness about dangerous and unsafe products would skyrocket, and any companies putting questionable things in their products would quickly find themselves at a competitive disadvantage. This particular example hasn't actually become law, but to give you an idea of just how far this censorship can go: Monsanto has been trying to make it illegal for competitors to label their milk rBGH free (because it would give consumers the "false idea" that rGBH might be disadvantageous, and we can't have that! ) - and sooner or later, I imagine they'll succeed, considering just how powerful they are (for instance: Tom Vilsack, a Monsanto guy, is now Secretary of Agriculture). This is the kind of corruption that is inevitable whenever government is allowed to create arbitrary regulations, and it only gets worse as time goes on, contributing to industry consolidation which compounds the issue.

I've written on this many times before, but I can't say it too many times, because it's the single most important practical argument against arbitrary regulation by government: Sure, it costs taxpayer money. Sure, it violates the property rights and liberty of business owners. Sure, it ultimately sets the bar lower than it should be (for large companies at least), lulls consumers into a false sense of security, and often protects companies from liability when they should be facing consequences. Worse, it costs them so much time and money to get through the lawyers, red tape, and proof - from the very start of their business on a street corner - that it "inadvertantly" undermines competition and creates a market that favors large companies. However, the strongest and most important argument about regulation is the point that well-meaning people do not usually understand: Regulators are not only largely incapable of understanding the adverse consequences of their decisions (i.e. stupid), but they are not always benevolent, either. In reality, as time goes on, more and more become corrupt and ill-intentioned anyway. A lot of regulations are literally only introduced because they raise the cost of doing business, and for no other reason (consider the regulations given in this post here). By giving the government, a coercive authority, any power to decide the winners and losers in a market, we inevitably pave the way for ever-increasing corruption, malevolent regulation, and our own demise...because the larger companies become, the more advantageous it is to use the government as a club against their competitors instead of legitimately competing for customers, and it's a self-perpetuating cycle.

Anyway, I think you're confusing correlation with causation when you say "the US FDA has historically had a decent track record of preventing the kind of catastrophes that have occurred in such a short time period in China." While we do not have a free market by any means (especially when it comes to major industries like food and pharma), US consumers still have a lot more leverage than Chinese consumers (still not enough, but more nonetheless). Why are you so confident that the FDA in particular has kept those catastrophes to a minimum, rather than the market itself? You're basing this on an empirical observation of correlation, but we can't really make any valid comparisons with other countries, since countries without regulating agencies also have vastly different types of markets, levels of industrialization, etc. This makes empirical comparisons between countries rather difficult, since we can't isolate the variable in question (existence of the FDA).

Plus, I think you're misunderstanding my problem with the FDA. Sure, I don't like the idea that we're being taxed for the FDA, but as far as my practical arguments go, that's a secondary concern. My primary concern is that the impact I've seen from the FDA has been almost entirely detrimental to people's health and the functioning of the market. The FDA regularly prohibits - doesn't put a warning on, but prohibits - alternative and competing medicines and additives, and these decisions are typically much more political (read: corrupt) than based on a serious evaluation of health effects. As someone else just mentioned, they reclassified a form of Vitamin B6 as a drug based on a petition from a big pharma company...what legitimate justification can any regulating agency have for this action? As well as undermining competition by prohibiting legitimate products, the FDA regularly protects - doesn't just permit to do business, but protects - companies that market dangerous drugs and additives. You want to sue Monsanto for the negative health effects of aspartame? Think again...by being approved by the invincible FDA, Monsanto is pretty much indemnified from all liability. The FDA's favorites are nearly untouchable, courtesy of the FDA...and obviously, because the FDA is the FDA, they're entirely unaccountable to consumers themselves. They aren't going to go out of business when they make horrible calls and consumers lose faith in them, because there are no competing agencies for any manufacturers to use to differentiate their product from the competition...plus, because people have such an unwarranted trust in government and the idea that it's there to "protect" them, the status of the FDA as a government agency (rather than a for-profit company) turns most people's blinders on and prevents them from ever examining the agency or its approved products with a critical eye. The bottom line is: Regulation from any entity with coercive powers is doomed to hurt the market, and it's doomed to hurt consumers.

* By the way, here's another crucial thing: Limited liability corporations, which are illegitimate government constructs, should be abolished. Joint-stock companies would still exist, but shareholders would not be able to consider the company a "separate legal person," thereby protecting themselves from personal liability...the current state of things subsidizes greed and risky/unsafe choices on the part of shareholders and executives, and that needs to be taken care of.
** Keep in mind, I'm not saying companies should be able to get away with false advertising. Advertising on product packaging is a form of implicit contract with the buyer, which makes false advertising a fraudulent violation of contract.

 

[AcidReign]

Here is the free market response

http://news.yahoo.com/s/ap/20090214/ap_on_bi_ge/salmonella_outbreak_bankruptcy

 

[gaazn]

The peanut butter scare would not happen in a free market. There would be no scare because there would be no recall. There would be no recall because no one would gather the information and it would be swept under the rug by the businesses to avoid lawsuits. No scare but the people would still get sick. That's why a free market and pure libertarianism will never work.

 

[Josh_LA]

The peanut butter scare would not happen in a free market. There would be no scare because there would be no recall. There would be no recall because no one would gather the information and it would be swept under the rug by the businesses to avoid lawsuits. No scare but the people would still get sick. That's why a free market and pure libertarianism will never work.

I agree, scare would not happen, when people die, we just say "aww that sucks, none of our business, move on".

I don't agree that it "won't work" because whatever people want, is what works.

 

[rancher89]

I'm coming into this discussion a little late, I like the idea of a UL/FM (Factory Mutual) standard system for the food industry, independent of the government or the food industry with food safety as the #1 concern.

Factory Mutual handles a lot of material specifications (a particular type of pipe shall be of this quality of metal, shall be this thick, have this internal/exterior diameter and withstand a pressure of such and such--that sort of thing) It makes absolutely no difference who makes it or what it's used for, except that you don't want to use the wrong pipe for a higher pressure system. We work in fire protection and you don't use a pipe or a sprinkler head unless it is UL AND FM listed for that use......

Anyway, I think that's an awesome idea, maybe UL will branch out? Think of the sales ---- a company could say they have a 4 star rating by UL (or whoever)--you can buy with confidence! Consumer Reports would be a good way to go as well...I see a great idea for a new industry---independent testing of food processing plants for food safety.

Great thread