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Chow Down, Folks!

Some like to argue that regulation is always needlessly inhibiting, that we don’t need more government, but less. Clearly, though, in some areas we don’t have enough. From the Washington Post:

The company at the heart of a growing recall of processed foods knew that its plant was contaminated with salmonella but continued to make a flavoring and sell it to foodmakers around the country, according to inspectors at the Food and Drug Administration.

The whole “smaller government” thing is a neat bit of propaganda to throw about if you’re talking to an audience that isn’t exactly clear on what it is that government does. By percentage of the budget, it actually does three things: (A) defense, (B) entitlements like Social Security and Medicare, (C) a whole bunch of other things that scrap for the money left over from (A) and (B). One area that gets short shrift is regulation, inspection, and enforcement in food. Yet, all we hear is that we need less government. As this latest salmonella story shows, as well as Toyota’s scoffing attitude towards their customers’ safety is further evidence that in the absence of regulation and enforcement what you would get is the right to have your wife, your children, yourself, murdered by shoddily made products and poisoned food.

Oddly enough, it was these kinds of deaths, real ones, not hypothetical, that inspired government regulation in the first place. I’m pretty sure that the human race hasn’t evolved past selfishness and greed in the last 100 years, so the reasons to police those that would pass of the odd murder in pursuit of profit doesn’t seem to have gone away. All rise and join me in a snack of hepatitis hamburger and bovine growth hormone milk before we give the baby her bisphenol bottle and lay her down in her radioactive crib.

This entry was posted on Wednesday, March 10th, 2010 at 7:20 pm and is filed under The Political Mindscape. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “Chow Down, Folks!”

David in Cal Says:
March 11th, 2010 at 12:48 am
The blogger shows his naivety by claiming that corporate greed and selfishness result in bad products. The truth is the exact opposite. Greed and selfishness lead manufacturers to produce quality products. That way, they will remain in business and continue to make money.

This principle might seem odd to our blogger, but I think he would understand it as applied in his own field. Would selfishness and greed lead a sportswriter to write lousy articles? Of course not. Lousy articles wouldn’t make money for the writer; they would get him fired. Greed would motivate him to write the best possible articles, thus justifying the highest possible salary.

Or, look at it from the POV of the publication’s owners. Do greed and selfishness encourage the owners of Sports Illustrated to produce a lousy magazine? Of course not. If their magazine stunk, people would stop buying it. Greed and selfishness motivate the owners to produce a high quality magazine, so they can continue to sell lots of them.

Incidentally, regulation undoubtedly does good, but it also can lead to corruption. Building inspectors, for example, are notoriously corrupt in many areas. Regulation of zoning and building permits is another area where regulators commonly abuse their power, in order to solicit bribes or to force the builder to spend money on some project the regulator likes.
Mike K Says:
March 11th, 2010 at 3:41 pm
@David: One difference is, if I read a lousy (or, more applicably, plagiarized) article, I don’t get sick, hurt, or die. There are writers out there cranking out terrible product–we don’t regulate them because the market can sort them out without harming anyone. But to let the market sort out something like food safety, you have to concede that some unlucky number have to die before the market can react.

Another problem is, the incentive of the corporation as an entity and that of the individuals employed within are often at odds. If some employee can meet his quota by ignoring some problem, and knows it won’t be traced back to him in particular, it’s in his self-interest to ignore it. Or if some executive knows he’ll be two jobs (and two pay raises) down the road before a problem becomes evident, again his self-interest conflicts with that of his company.
David in Cal Says:
March 11th, 2010 at 5:15 pm
Mike — I agree with you that government regulation is useful in some areas, particularly those where the customer cannot easily tell whether he’s getting quality care, such as medicine. Here’s where you and I perhaps differ:

1. I believe that the forces of competion generally move businesses to higher and higher quality, although there are exceptions. In other words, it in NOT the case that private businesses are mostly seeking ways to screw their customers.

2. Regulation has costs, in terms of the salaries of the regulators as well as the burdens on business to cope with the regulations. Much regulation is inept. Many regulators use their power to demand bribes. This is more of a problem in some foreign countries, where “baksheesh” is a normal part of doing business, but there are plenty of areas in the US where regulators demand payoffs in exchange for their approvals.

3. No approach will prevent all harm. So, pointing to a single bad event is not sufficient justification for additional regulation IMHO. Consider speed limits, a regulation we’re all familiar with. Tens of thousands of deaths a year could be prevented by regulating the speed limit down to, say, 20 MPH. We don’t do that, because the inconvenience would be worse than the tens of thousands of deaths.
Shaun P. Says:
March 12th, 2010 at 9:04 pm
David, starting with your No. 3 first:

“No approach will prevent all harm.”

Correct. We don’t live in a perfect universe, so what we do is either going to be “too much” or “too little”. This leaves us with a choice. We can do “too little”, and accept that the cost of this choice is, while businesses may be less inconvenienced and there may be less corruption than if we did “too much”, more people are going to be hurt/die from harmful products/food than if we did “too much”.

The alternative is to do “too much” and accept that the cost of this choice is that businesses may be more inconvenienced, and there may be more bribes/corruption than if we did “too little”, but that fewer people would get hurt/die from harmful products/food than if we did “too little”.

For me, I’d much rather over-regulate and in the process, save more lives. That’s well-worth the aggravation, added costs, and “extra” bribery (though I’m not sure that bribery is a big issue in the US).

2. Yes, but that’s part of the cost of doing business. Regulators suck when they have no incentive or pressure to actually do their jobs. See, as one of many examples, the SEC during Dubya’s administration; cf. the CPSC right now.

1. Businesses are looking to do one thing - make a profit. How they do so depends on their incentives.

If making a profit involves the business putting out very high quality products - which, of course, tend to be more expensive and thus, in many markets, harder to make a (large) profit off of - the business makes high quality products.

If making a profit involves the business laying off 1000 people and having the rest of the workforce pick up the slack (without any salary increases), the business does so.

If making a profit involves using or doing something illegal because its cheaper than doing it the “right way” - then businesses do it.

Absent strong regulation, what is the incentive for a business to not do this? Because it might negatively affect them down the road, if they are caught, and if they can’t spin the PR their way?

Note too that there’s a big difference between the business and the executives who make these decisions. Yes, “the business” wants to stay around, but who says the executives do? Many with a strong compensation package may be just as likely to make as much cash as they can and then move on to the next job. Indeed, the executives have all sorts of incentives - especially in publicly-traded companies - to do everything they can to drive up profits in the short-term, cash out, and do it somewhere else. They certainly don’t have any negative incentives, outside of perhaps getting caught if they break the law (the Enron guys come to mind). And the success/failure of the business in, say, 10 years, isn’t their concern either - because they won’t be around and so who cares?

Of course not all companies and not all executives are going to behave this way. But I’m all in favor of doing everything we can do prevent and de-incentivize this behavior, instead of relying on the Noblesse Oblige, if you will, of businesses and their executives.
Louis Says:
March 14th, 2010 at 3:09 am
Really well put, Shaun, particularly your response to point #1. Businesses don’t actively “seek” to screw customers - they don’t take glee in disseminating salmonella-infected food - it’s just that the profit motive often doesn’t in and of itself create sufficient motive for them to act ethically and responsibly. Hence the need for regulation.

A blind faith that corporate greed leads to quality products is just that–blind. By its very nature, the concept of greed, which David is willing to acknowledge as a motivating factor, suggests that the person or entity that is greedy will do whatever it takes, however ethically dubious, to get what they want. It also suggests that even when a corporation acts responsibly, ethically speaking, they are doing so out of an acknowledged bad faith: not because they believe it’s the right thing to do but because they believe it’s the best way to make the most amount of money. Which in turn suggests that when acting ethically is no longer the best way to make the most amount of money, they won’t do so. That’s a deep structural problem in capitalism; failure to recognize it is equally problematic, in that in licenses future abuses.

As for David’s initial point about lousy sports journalism, apparently he’s never seen the Post, the Daily News, or a whole host of mainstream sports publications. The internet has changed the landscape of sports journalism, but it’s arguable that, before the advent of the internet, quality was precisely the one thing you couldn’t have in your work in order to become a sports journalist or analyst. I exaggerate, but only a little. Your argument about quality denies the depressing reality that innumerable businesses, in all realms of endeavor, attempt precisely the opposite strategy: to make money by putting out the cheapest, worst quality product, one that cuts corners and appeals to the lowest common denominator in human nature. Manhattan is a gourmand’s paradise and yet, even there, the number of high end, high quality restaurants pales in comparison to the number of fast food chains, mediocre ethnic cuisine, and generic, greasy diners. And yet, according to your logic, quality should be the rule, not the exception, because it’s so good for business. (and I’m far from a gourmand myself)

Chow Down, Folks!

5 Responses to “Chow Down, Folks!”

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