Why Encourage Discrimination? The Case of Mandatory National Origin Labels
You’ve probably noticed that imports are labeled by national origin. This is usually required. The most obvious effect of such regulation is to slightly disadvantage foreign producers by raising their cost of production. But the only slightly less obvious effect is to reduce consumers’ cost of discrimination. If you have to do your own homework to discover products’ national origin, you’ll probably accept your ignorance and decide based on price and apparent quality. If regulation imposes national origin labels, you might play favorites instead.
Once you start throwing around the charge of “discrimination,” however, it’s easy to see that there are two distinct kinds of national origin discrimination that consumers might commit.
One is standard taste-based discrimination – tipping your personal scales against products from countries you don’t like. When I was a kid, crusty American war veterans kept the fire of World War II glowing by refusing to buy goods from wicked Japan.
The other, however, is statistical discrimination – rationally using national origin as a signal of product quality. Plenty of people still aren’t fond of the Germans, but still eagerly buy products with the “Made in Germany” label because they correctly identify German manufacturing with quality.
Given Americans’ near-religious objections to both taste-based and statistical discrimination, it’s puzzling that the law doesn’t merely allow, but actively facilitates them. Most Americans, I suspect, would defend these laws with arguments that would make them cringe in other contexts. E.g. “Consumers have a right not to support countries of which they don’t approve,” or “Knowing what country a product comes from helps consumers make a wise choice.”
Challenge: Is anyone willing to often even a semi-plausible economic argument in defense of mandatory national origin labels?
The post appeared first on Econlib.
Canada does not allow Bovine Growth Hormone (BGH) for dairy cows. The US does. This is one of the excuses Canadians use for restricting US access to the Canadian dairy market, through quotas and import permits held by the Canadian dairy industry!
It would be better to just slap a label on it and let it in tariff and quota free. Preferably a label saying hwhether or not it has BGH, but failing that, a label saying it was made in the USA so it prolly has BGH. Personally, I don't care, but some do. Labels are a less bad alternative to outright bans or quotas.
As for statistical discrimination, personally I like to know if products I buy are made in China as they are more likely than products made elsewhere to use Uighur slave-labour in their production and more likely to prop up the Chinese Communist Party and its human-rights abuses. I try to avoid Chinese-made products but it's kinda impossible, these days. I am glad Product of Origin labels are there, if I ever decide to fully boycott the so-called "People's Republic" of China.
I like to buy British and Irish beef because I can be fairly confident that it comes from cows that have lived outdoors and eaten grass with reasonable animal welfare standards and laws against using hormones and antibiotics as growth promoters. But I will buy any RSPCA labelled beef in preference, because if it's alright by the RSPCA it's probably alright by me, and anything from Waitrose because they appear to actually take animal welfare seriously.
I like to buy French food not made from animals because their agriculture is usually small-scale and traditional, which usually means high quality.
I like to buy German beer because they have strong laws about the purity of their beers.
I will not buy any food made in America because the great majority of your food is so degraded, immoral, cruel, chemical-ridden, and tasteless that it strikes me as a sin to collaborate with your food production system in any way.
I cannot imagine that putting 'country of origin' labels on packets is significantly expensive.
My model of you thinks that any extra information is utility maximizing for fairly general reasons. Is that not the case?