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Disclosure Regulations: Good or Bad?

There are usually two minds in the debate on regulation of markets:

• The liberal point of view, which says that consumers are two stupid to make decisions for themselves, and wind up being duped by much smarter, and intensely evil, corporations into making poor choices.  If people were only smarter, they would choose mom & pop stores over superstores, locally grown over distantly grown, organic over artificial.  And they would NEVER eat fast food.  But because they aren't that smart, they need a government to force them into these wise choices.

• The free-market point of view, on the other hand, feels that consumers are plenty wise, at least as wise as the average liberal would-be benevolent dictator, and that there is nothing wrong with superstores, food shipped over long distances, inorganic food, or especially fast food.

I have normally sided with the free-market point of view.  I feel that if the consumer is too stupid to make choices for himself, he will be too stupid to vote wisely to elect a government that will make more intelligent choices for him.  I feel superstores are magnificent, "locally grown" is a crock, as is "organic", and I feel that the date that the first McDonald's opened in Beijing should be an international holiday.

The other advantage of consumers being able to make decisions for themselves is that intelligent consumers are left free to make wise choices, and the less intelligent can learn from their example.  But if everyone has to live their lives, in detail, according to the dictates of some ham-fisted government, then the intelligent may be required to make stupider choices than they otherwise could have, and society has little chance to improve.

An interesting case is childhood vaccines.  We have seen a panic about childhood vaccines in recent years, in spite of scientific unanimity that these vaccines are harmless and extremely beneficial.  But the court of public opinion is failing spectacularly - we have many people choosing not to vaccinate their children.  We are experiencing considerable health problems due to this hysteria.

But one form of regulation that I have felt is benign is consumer information requirements.  Those labels the government makes producers put on all food to indicate the amount of calories, carbohydrate, protein, and sugar in the food are very constructive.  In 2003 I lost 40 lbs, mostly by looking at those labels and seeing how many calories were in everything.  To this day I buy Tropicana orange juice because, according to those labels, it has less sugar in it than any other brand.  And I feel that it is very healthy that when you buy a new car, there is a big sticker in the window showing the EPA estimated gas mileage.
  If some disclosure regulation winds up being misguided, at least it is only a disclosure, not a requirement.  People are still free to make any choice they want, so the potential harm is limited.

We are running into an interesting case with GMO foods.  As far as I can tell, anyone competent at biology agrees that GMO foods are at worst harmless and at best extremely beneficial.  But big corporations are promoting GMO foods, and to many liberals, that settles the issue -- if corporations are promoting something, it must be evil.
  Measures have been proposed to make food sellers disclose whether foods have been genetically modified.  This blog from Scientific American shows a true liberal in agony over this issue.  While he hates corporations and does not have much respect for the consumer, he is against the disclosure regulation because he feels it will influence people to make stupid decisions.

So where should a free market person stand?  Respect for the consumer leads me to side with telling them the whole truth and letting them decide.  But I do anticipate that we could easily wind up with an anti-GMO hysteria as stupid and pervasive as the anti-vaccine hysteria.  Does the end (preventing a stupid hysteria) justify the means (depriving people of information they want to know)?

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  • Yen

    Good meeting everyone. Here is an opportunity tomorrow for those who can make it. "Steven Mandis on What Happened to Goldman Sachs: An Insiders's Story of Organizational Drift and its Unintended Consequences."

    This lecture is offered by the Museum of American Finance. An audience Q/A follows the lecture.

    If interested, please RSVP at

    December 12, 2013

  • Bill

    Normally when I think of "derivatives" I think of things like options, futures, or swaps.

    December 9, 2013

  • Bill

    I asked my ex-boss, who has worked in mortgage bonds for over 20 years, if bond that is a strip of a package is a 'derrivative' or a 'bond'. Here's his answer (he is not a native speaker of English):

    Me; "Hi Sean, Is a mortgage bond that is one strip of a CMO deal a 'derivative', or is it just a 'bond'?"

    Sean: "People intend to call more complicated CMO structures derivatives. It is not a precise way. They are just bonds.".

    December 9, 2013

  • rna2600

    Good conversation! Thanks again for organizing, Bill.

    December 9, 2013

  • rna2600

    It makes no sense to protest things that "could possibly" happen someday. In fact, no GMO food has been shown to be harmful, GMO foods are less expensive, and many are more healthful than the unmodified foods (for example - jasmine rice). It is unclear what information you would like to be conveyed to consumers via QR codes. The technical details on which specific genetic modification was incorporated into the genome of the food in question, perhaps? I wonder if this would be useful or just confusing to most consumers. And details on the GM are available to anyone who is interested by using the primary literature, peer-reviewed journals, or other appropriate, moderated online sources.

    December 7, 2013

  • Nick

    "GMO foods are at worst harmless and at best extremely beneficial". Perhaps thus far. However, there are always new methods developed to produce GMO foods; it is possible/likely that a future GMO food will be harmful, or that we haven't discovered harm in an existing one yet. It took us 100 years to discover asbestos was harmful. From the link "The proposed label system is too vague and contains little useful information". Pretty simple solution to this. Since you can only fit so much on a label, mandate producers to put a QR code on the food to be linked to an app to get detailed info on food purchases. I actually am in favor of GMO foods, but consumers should get accurate info on what they are purchasing.

    December 7, 2013

  • rna2600

    Hi all - just as a quick response to Bill's meeting preamble, my answer to the question would be absolutely not! The reason there is GMO hysteria, IMHO, is a secondary effect of an overly liberal public stance. INformation may lead to a backlash against these products, but I'm sure some consumers will purchase them - and as their use catches on, and as savings passes to the consumers, more will try them. I think after a while - and with education, which is necessary but a separate probem - consumers will come to trust the diversity, safety and reduced cost of GMO's. Prtotecting them by withholding information doesn't allow a healthy learning process and continues the travesty of regulations and more regulations, and their harmful consuquences.

    December 2, 2013

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