February, 2013

Fruits of Thought

A 'Public Choice' Perspective On Food Safety

Nobody is opposed to improving food safety. Indeed there is unanimity in both the supply chain and the public policy community that food safety is not only desirable but imperative. Yet, despite this being so, and having been so for many years, there are an estimated 48 million cases of foodborne illness in the United States each year.

On the supply chain side, the problem is obvious.  Producers have to produce food that buyers will buy.  Even though there is great emphasis on it, food safety is simply one of many elements — including good prices — that buyers demand.  Since food safety is a continuum — we can test the water monthly, weekly, daily, hourly or every five minutes — lines have to be drawn. So though every buying organization has standards, no organization says it will always buy the safest product human ingenuity can produce and totally disregard flavor, price, etc.

On the public policy front, we are now confronted by rules proposed to implement the Food Safety Modernization Act. Yet, oddly, even by the standards of the advocates of this law, the impact on food safety will be negligible. The FDA estimates that the law could prevent nearly two million illnesses annually. That is a big number, but in the context of the incidence of foodborne illness, it is in the area of 4 percent, and that is assuming the Act is fully funded, a far-from-certain proposition in these times of budget strain.

The truth is that the whole law represents a kind of triumph of assertion over evidence.  The heart of the law is a requirement that all “high-risk domestic facilities must be inspected within five years of enactment and no less than every three years, thereafter.” Now being that inspectors are very expensive and the FDA estimates it needs 2,000 new ones to fulfill this task, and that inspections are very distracting and expensive for businesses and thus add costs that consumers must ultimately pay, one would think we had lots of evidence that inspections of this type enhance food safety. One would suppose there had been conducted a series of large scale pilot projects done over many years in which one group of facilities was inspected on this schedule and a control group was not inspected and that the results showed inspected facilities had significantly lower rates of food safety problems.

Indeed, not only would one think we carefully determined that these inspections help but, more, that this schedule — five years followed by three years — is the “sweet spot,” the carefully calibrated moment to maximize the reduction in foodborne illnesses or at least to most efficiently reduce foodborne illnesses.

Unfortunately, none of this is true. We have no evidence that this helps at all, certainly not that we have somehow identified an optimal strategy. In fact, there is evidence to the contrary.  The allegation is that over the George W. Bush administration, the FDA was gutted and underfunded.  Indeed advocacy groups such as The Center for Science in the Public Interest point out that FDA food safety inspections tumbled by almost 50 percent between 2003 and 2006 alone. 

If federal inspections were the key to food safety, one would have expected problems to boom, but The Centers for Disease Control and Prevention report that, despite media-riled public perception to the contrary, the trend has shown a reduction of incidence of food safety problems:  “For individual pathogens, the incidence of infection was significantly lower in 2011 compared with 1996-1998 for Shigella (65% decrease), Yersinia (52% decrease), E. coli O157 (42% decrease), Listeria (35% decrease) and Campylobacter (22% decrease) but was higher for Vibrio (76% increase). It did not change significantly for Salmonella or Cryptosporidium.”

So why do we wind up with public policies so unlikely to be optimal? James Buchanan died early this year at the age of 93. He was a Nobel Laureate in economics and won that prize for his contributions to Public Choice theory. This theory rejects an older model that viewed government officials as somehow outside the realm of economics, always acting in the public interest. If you want to know why things happen in government, Public Choice theory teaches that one should look to the incentives of individual players.

A Libertarian might argue — and may even be correct — that the public policy most likely to enhance food safety would be to close the FDA! Right now, people assume all the food is safe because politicians and bureaucrats promise that. As a result, it is very hard to get a return on investment when a producer spends money to enhance food safety. If the government was to announce a policy of “caveat emptor” — let the buyer beware — then individuals would likely be more concerned about food safety. They would be more brand loyal and only purchase from producers they trust, or they may evaluate supermarkets based on their trust that the supermarkets vet suppliers for food safety. Investments in food safety would garner an ROI.

Yet such a policy, viewed through a Public Choice lens, has zero chance of enactment. Why? Well, it would reduce the power and influence of all the decision-makers. In this sense, the 2,000 additional inspectors make the bureaucrats at the FDA more important and the politicians in the government more important, which is exactly the outcome that Public Choice theorists would predict. It is not necessarily the outcome optimal for food safety. pb