Who Protects the Consumer?

So some Chinese-made products are unsafe.  That's led to the predictable calls from so-called consumer advocates for more federal oversight into the safety of consumer products.   From the Star Tribune:

"Our children are guinea pigs in these products," said Nancy Cowles of Kids in Danger, a Chicago-based advocacy group. "We need to demand that these Chinese products be improved and made safe."

So if the government doesn't protect consumers, who will?  The companies who sell the goods will, of course.

While the nation's three biggest toy retailers -- Wal-Mart, Toys 'R' Us and Minneapolis-based Target -- hire third-party inspectors in China to test for lead paint and choking hazards, there's no federal law requiring them to do so.

Why would greedy capitalist pigs even think of keeping the helpless lambs safe?

Because of the recalls, retailers are circling the wagons. No company wants to come across as putting profits before children's safety. And recalls are costly to reputations and the bottom line: Mattel is predicting it will lose $30 million over a recall of 83 types of Fisher-Price toys; the manufacturer of Thomas & Friends, RC2, predicts an $8 million hit and is already facing lawsuits.

Even without the threat of lawsuits, these companies are facing serious hits simply based on consumers' freedom of choice.  That's right:  consumers protect themselves.  When they deem a product to be unsafe, they make other choices.  This threat is enough to get Target etc. to make their own investments in product safety.

Toys 'R' Us, meanwhile, has increased its quality-assurance budget by 25 percent in the past seven months to address rising concerns about Chinese-made products, said spokeswoman Kathleen Waugh.

At Toys 'R' Us, even before a toy is mass-produced, a prototype is tested by outside inspectors for such things as loose parts, fire hazards or paint containing more than the federal government's limit of 0.06 percent of lead. Inspectors make unannounced visits to Chinese factories and perform random checks of toys during production and again on the docks before containers are shipped to the United States.

"We flunk toys all the time," Waugh said.

Even after the goods arrive, Toys 'R' Us inspectors routinely pull toys off retailers' shelves and ship them to an independent testing lab.

That, apparently, isn't enough for the so-called consumer advocates - they who don't think that the private sphere is good enough at lowering risks.  Or perhaps it's because they want to "eliminate" risks associated with goods and services, regardless of the cost.  So they want federal oversight and bureaucracy to step in.  But why would we expect the feds to do any better?

Comments

[KipEsquire]

Not to mention Underwriters Laboratories, Good Housekeeping, Consumer Reports -- and moving from safety to general quality: Zagats, TripAdvisor, Netflix, etc.

All of which are strictly private.

[Phil]

That's a good point. Target etc. probably doesn't have a comparative advantage in testing products, but the private firms you mention can certainly do it for them.

[Edward]

There's a toy safety news site at

http://safertoys.org

which is where I found this site.

One thing that gets in the way of mass sharing of information about toy safety is the typically skimpy labels on toys. The plush pineapple I'm looking at right now doesn't even have a model number or SKU or part number or ID or anything on it, just a "distributed by" name. No way for me to look it up anywhere - or even to reorder it if it was a favorite toy that was dog-chewed needing replacement.

[Barry Payne]

After years of drivers in collisions getting shredded to pieces flying through windshields, seat belts became a regulated requirement. After kicking and screaming that the cost of seat belts would put them out of business, car makers have bragged since how safe their cars are, which became a sub-industry in itself.

It didn't start with car drivers. It started with information provided by consumer advocates to car drivers. Transaction costs of understanding danger and safety were reduced. Better decisions were made by rational car buyers and drivers.

If toy makers could get away with it, they'd never make any recalls. One reason they're so responsive is because of trusted watchdog agencies that know the statistics well on these matters and have become the go-to source for the round of public panics seen with these issues.

The general effect is easily explained by game theory. No one wants to appear oblivious to potentially dangerous toys and especially to be collared in public by regulators. They end up doing voluntarily what regulation would have mandated.

Given the problem was one that would have been corrected by an efficient market, the outcome simulates the same.

In some cases it can be demonstrated they prefer regulators to step in because they are stuck in a costly stalemate. For example, when two cigarette companies in a duopoly were spending large amounts of marketing and advertising against each other, they were relieved when it was banned. Both ended up with the same market share for much less cost.

Therefore it is not at all clear that the claimed sequence of events is always flawed regulation followed by market inefficiency. It can easily be the reverse and depends on the situation.