So, can we put this "less regulation for corporations is good for America" nonsense to bed?



http://mystateline.com/content/fulltext/?cid=45861

it is sad when you can't trust a company to do the right thing.

Are you fucking kidding me? Isn't it common sense that you can't trust a company to do the right thing? Jesus, I'm not saying no company does the right thing, but how fucking stupid to assume that they will or to be surprised when they don't?

Fuck. I've had to purge my fucking pantry.

The guys in the economy thread regularely argue those are the minority anyway so in the big picture they don't count.

Isn't there already a regulation against shipping tainted peanut butter?

I guess we'll find out. Of course, with minimal oversight, you could stop tainted peanut butter before 500 people come down with salmonella. It would probably cost less than the cost of treating 500 cases of salmonella.

i certainly don't know the specifics of the peanut butter (or georgia) regulatory apparatus, but i think there may be more to the story than just "evil, unregulated corporation poisons consumers."

to me, the interesting point in the story is that the company was able to retest their peanut butter at more than one lab. in effect, they were able to shop around and find the least rigorous testing agency that would vouch for the peanut butter's safety. my guess (and that's all it is) is that the peanut butter regulating agency - at least in georgia - is government established, operated, and protected. i would also guess that the lab in question is legally protected from being held liable for doing shoddy work. accordingly, one should expect a less than optimal outcome.

not trying to thread hijack (although i'm pretty sure it's about the necessity and nature of regulation in general), but parallels can be drawn between this episode and the subprime meltdown. though much more complex, one of the culprits of the downturn was the ineffectiveness of the ratings agencies. they rated bundles of subprime securities as AAA investments. but how could they not have seen how bad they were? the problem, or so i often hear, is that they were "unregulated."

the truth, however, is different. in 1975, the SEC mandated that debt be rated by the Nationally Recognized Statistical Rating Organization (NRSRO). the regulation had the effect of turning the model upside down. instead of the consumers of debt instruments soliciting the agencies for ratings, it was the companies who had to pay to get their various debt instruments rated by one of the agencies. the companies shopped their products around and payed the company who would give it the highest rating. the regulation also had the effect of cartelizing the ratings agencies, which introduced unnecessary moral hazard into the equation. it would appear as though a similar model is being employed in the world of georgia peanut butter.

yes there are bad companies. yes companies look after the bottom line first. no this will not change with fewer regulations. but i'm not defending the PB company here. far from it. they should be held liable and compensate for damages. they should also bear the costs of their actions in the market (read: go bankrupt). what i'm saying is that government regulation is often a very poor substitute for the discipline and incentives imposed by the market.

one problem, i think, is that corporations are so far removed from what's on the shelf that it's hard for consumers to really put them out of business merely because so many consumers don't realize what companies produce what products. want to boycott the local deli? easy. want to boycott GE? not so.

Here are the regulations specifically for peanut butter:
http://www.cfsan.fda.gov/~lrd/fcf164.html

I would argue that if they have all those regulations, yet don't have one preventing companies from knowingly shipping food with salmonella, the FDA is pretty much not doing its job.

It doesn't have to happen at the supermarket shelf level though, does it? Wouldn't the companies who deal with this PB manufacturer also have an interest in avoiding responsability for salmonella deaths? Supermarkets wouldn't buy the stuff, distributors wouldn't want to handle the stuff, etc.

Only if the sells drop. Most of the people who buy the product would continue buying it assuming it's a one time incident probably.

i would argue that this isn't so much an implicit problem with the corporate model as it is a problem with the fundamental disconnect between producer and consumer created by regulatory bodies. it's also worth noting that issues of quality and availability of information regarding regulation, corporate reputation, and relative product quality depend a great deal on the structure of and extent to which a market is regulated.

additionally, part of the reason that GE is so large is precisely because they have had so few boycotts. that is, when they (or any large corporation) were small and just a start-up, they were only able to outcompete similarly small competitors by producing goods of higher quality or better value. consumers, thru various means, come to know the general quality of a product of a company. which would you rather have: a yugo, or a mercedes?

and again, i'm not against regulation per se. there is undeniable value created by government regulation. nor am i saying that corporations are angels. my contention is merely that government regulation is inferior (and far more costly) to the natural incentives of the market.

Really? You think companies would risk that kind of liability because they trust the manufacturer not to do it again? Not to mention the bad press and the resulting loss of money?

Agreed.

It happens all the time. In EU it's common, well not salmonella. The products (the specific batch) that doesn't fit to EU's regulations is shelved, people are told to bring it back to the store (and get their money back) if they've already bought it. This usually happens so fast that nobodies health manages to be affected.

but can the natural incentives of the market really prevent occurrences like tainted meat and peanut butter getting out to the mass public?

No, as history as shown, it cannot.

it's not like the government is really doing it's job to begin with, though, is it? this stuff is getting out because of the lack of stringent testing, yes? i read once that something like a mere 5 percent of meat gets inspected properly. that's ridiculous.

So, clearly, the answer is more tax dollars.

all very good points.

the PB (or any product, really) passes thru so many hands in the supply chain and subsequent distribution that it would be impossible for every one of them to willingly endorse a tainted product. if incentives were aligned properly, and clear/enforceable liability laws replaced gov't quality assurance, i think you'd see a significant decrease in the instances of dangerous products ending up on the shelves.

would increasing private liability increase production costs? sure. but it doesn't follow that the shelf price would necessarily increase. producers already include in the shelf price the cost of jumping thru existing regulatory hoops. replacing said hoops with the increased possibility of liability gives firms an incentive to produce better products. instead of having a fixed regulatory cost regardless of how good their product is, they would now have an incentive to take extra precautions that their product was of the utmost quality because it would reduce the likelihood of facing a liability lawsuit, which would translate into lower production costs and lower prices.

at the end of the day, you'd have a better product on the shelves. and it'd likely be cheaper, too.

You are clearly not thinking about the hungry children of food inspectors.

Do the companies who make the bad product get fined or anything?