Marginal Revolution covers food safety

Alex Tabarrok at Marginal Revolution gives Paul Krugman a hard rap on the knuckles for criticizing federal food safety regulators without noting the relevant data. Krugman's recent column describes a crisis of foodborne illness outbreaks, while Tabarrok points out CDC statistics showing that at least some kinds of outbreaks haven't increased. Still, the CDC data aren't the whole story. Here is my comment:

Interesting post and thread, Alex.

On food safety issues, I try to ignore the ideologues.

On the one hand, Grover Norquist and Milton Friedman have hopes for market incentives that are not only unrealistic, they are very far from the current state of good contemporary economic thought on food safety.

On the other hand, I give little weight to critics who hold out unrealistic expectations for government prevention of all food safety risks, not so much because they care about food safety, but because they just have large ambitions for government interventions in the economy.

Current economic thought draws on a fairly specific diagnosis of different kinds of imperfect information, each of which calls for a different policy response, which can range from laissez faire to labeling to testing to regulation.

A standard mainstream -- or even somewhat conservative -- text on the economics of food safety is John Antle's book on food safety. It acknowledges market failures in food safety, and particularly recognizes the need for strong government regulation of food-borne pathogens, because in many cases consumers cannot recognize the safety of the food even after purchase, and hence cannot defend their own interests in the marketplace. In my reading, Antle is a strong critic of food safety activists on other topics, such as pesticides (where he believes there is over regulation disproportionate to risk), but on foodborne disease he seems to me closer to Krugman than Friedman.

There are some exciting private market innovations in food safety recently. For example, the buyers for major supermarket chains are getting more sophisticated in demanding safety from their suppliers, which allows the market to achieve good outcomes that individual consumers could not command on their own.

At the same time, it is fair to say USDA and FDA oversight of food safety have fallen far short of a balanced position. The CDC stats on outbreaks have a number of shortcomings, and don't suffice to make me think otherwise. Take something like the USDA's refusal to let Creekstone beef voluntarily test its own product for BSE. It is so outrageous that the J. Thomas in his comments even presumes it to be untrue (it's true). The so-called "regulators" are way out of step with the public interest position of economists, even market economists who appreciate the market's accomplishments on its good days.

[Update 6/15/2008: Lively continuing discussion of this topic at the Economist's View, including comments from Mark Thoma, Tyler Cowen, and Alex Tabarrok.]