Sam Stone: *One of the fundamental principles of the market is that if there is a need for something, someone will fulfill that need. So if there is a need for consumer protection, the market is the best thing to do it. And it does this extremely well today. *
Hmm, while I agree with your basic principle about the usefulness of markets, I’m not so sure that consumer protection falls into the category of typical goods and services that market forces are adequate to provide. I think that it’s more prone to market failure.
For example, if a government agency discovers a flaw in a device that might have killed a dozen people, it will be front page news. But at the same time, thousands of companies are making hundreds of thousands of small decisions about the quality of THEIR products, which affect many, many more people.
Decisions which are heavily influenced by government consumer protection laws.
*So back to private markets - if there is a need for safe products, for standards, and for worker and consumer protection in general, how will the market address that? Well, it already has. Look at any electrical device in your home. It almost certainly has a UL sticker on it. UL is Underwriter’s Laboratories, an agency of insurance companies. UL approved appliances are generally necessary to keep your insurance from being voided in case of fire, and the UL standards are much higher than government minimums. *
UL is actually an independent nonprofit agency, not run by insurance companies. Also, a great deal of its work for clients is in providing certification of compliance with national regulatory standards. It’s not at all clear to me that UL would be the consumer-protection powerhouse that it is without the existence of strong government product regulation.
*Two powerful regulating factors in a free market are insurance companies and Tort law. Insurance companies have a very powerful interest in making sure that products have standards, that they are safe, and that they are used responsibly. If Ford makes unsafe cars, insurance companies will respond by charging higher premiums for Ford purchasers. This punishes Ford, and they lose market share. Therefore, they have a vested interest in pleasing the insurance companies. *
This is largely true, but it neglects the fact that government regulation plays a large role here too. If it weren’t for the fact that automobile liability insurance is legally mandatory in many places, and that the provisions and rates for various types of insurance are legally regulated, many people wouldn’t have the insurance coverage they now have and the insurance pressure for product safety would be reduced in practice.
Then there are consumer agencies, magazines like Consumer Reports, private watchdogs and ombudsmen, and the like. Many of these traditional market roles have been marginalized by the encroachment of government, but if government were scaled back they would help fill the gap.
However, they couldn’t fill the gap in regulation and enforcement. I think you may be somewhat overestimating the power of consumer preferences, as informed by nongovernmental watchdog agencies, to discourage producers from cost-saving measures. Consumers may be concerned about a particular safety issue but not feel that they have alternatives available. There has to be a critical mass of people changing their consumption habits in order to eliminate the savings that a producer derives from safety-compromising measures. I can think of maybe five or ten effective, widespread consumer boycotts over the past couple of decades that succeeded in changing product safety standards. I think that government regulatory agencies had a bigger impact.
*Then there is Tort law. This is an extremely powerful regulating force. Build a product with a hidden defect, and the resulting lawsuits will cost you far more than fixing the defect in the first place. *
Sometimes (and of course, so-called “tort reform” legislation seriously hampers this regulating force).
In fact, I would argue that the market is MUCH better at protecting people than is the government. For one thing, it’s a lot easier to buy a politician than it is to recover a damaged reputation.
That assumes that the producer’s safety-compromising procedures really do end up damaging its reputation, which is not always the case. And often it takes a federal investigation really to turn the spotlight on the situation, as in the Ford/Firestone tire recall.
Look at industries that are heavily regulated, vs industries that have almost no regulation, and you’ll usually find that the industry with lower regulation has higher quality products and often safer ones, too.
Can you cite some specific examples? And are you sure you’ve got the cause-and-effect going in the right direction, and that it’s not that the intrinsically dangerous industries inspire heavier regulation? Inherently less dangerous products, after all, don’t need heavy regulation to be safer than dangerous ones.
What about workers? Same thing. […] But the larger point is that the law of supply and demand applies to workers as well. If a company provides an unsafe workplace, it will find that it has to pay workers more in order to get them to work there.
Unless it has the advantage of economic compulsion, that is. Libertaria-scenarios generally seem to assume that the practical range of choices actually available to workers and consumers will be much greater than it often appears in real life.
You may think that these are trivial effects, but they make up the VAST majority of worker-employee relations. Very few workers are ever on the ‘margins’, making minimum wage, working on the threshold of legal safety, etc. Most workers get FAR more from their employers than the mandated minimum requirements, because the market forces their employers into it.
How many do you consider “very few”? According to this report, in 1999 there were 10.3 million workers, or 8.7% of the total workforce, making minimum wage or up to $1/hour more than that. (And over 70% were 20 or older, and nearly 80% worked more than 20 hours per week, so we are not looking primarily at burger-flipping middle-class teenagers here). I don’t consider that as getting “FAR more from their employers than the mandated minimum requirements.” As for worker safety, according to this report, “every year over 6,000 Americans die from workplace injuries, an estimated 50,000 people die from illnesses caused by workplace chemical exposures, and 6 million people suffer non-fatal workplace injuries.” That sounds like quite a few people “working on the threshold of legal safety”. Moreover, there seems to be a strong correlation between improved safety in the course of recent decades and OSHA/NIOSH supervision.
So again, I don’t think you can simply assume that the fact that most private regulatory standards are higher than the government-imposed minimum isn’t significantly influenced by the government’s imposition of that minimum. If it weren’t for government regulation, the private standards might very well seriously deteriorate, and I for one do not feel enough confidence in Libertaria-scenarios to remove the government regulation in order to find out.