Protection: Let the Consumer Beware

...Social, political, and economic pressures largely determine the performance of regulatory agencies...

...When one analyzes the effects of past and current regulatory activities ostensibly designed to protect the consumer, such as occupational licensing by the state (barbers, lawyers, etc...

...There is a legitimate and potentially useful role in providing additional consumer information in such cases...

...So he switched to Schlitz, and the name of Anheuser-Busch became anathema...

...Similarly, the Federal Aviation Agency now imposes minimum safety standards which make air travel safer than auto travel...

...The cries of aesthetic arguments often rose shrilly above the thundering of Beethoven's Ninth (an evergreen in university bars...

...It was not uncommon to see abartender drinking himself into oblivion after finishing his shift...

...For example, a power company is Pennsylvania spent two million dollars on a facility to remove 98% of the pollutants...

...As a result, the consumer will face increased costs and a further limitation on his ability to choose freely among competing products...

...But I, on the whole, am not impressed with saloons as great cultural centers...

...Jimmy's was really, in the fifties and sixties, the University of Chicago bar...

...1049-1091...

...Competition doesn't always protect the consumer as much as many would like...

...But in today's atmosphere of manslaughter and muggings, these rooms seem an afterthought...

...These examples illustrate the fact that organizations functioning as self-appointed consumer advocates cannot represent the interests of all consumers...

...It would also curtail or eliminate many recreational activities where people consciously seek or willingly accept high levels of risk, such as skiing, parachuting, mountain climbing, etc...

...That is, it is more likely to give consumers what they want instead of what vocal consumer spokesmen feel they should want...

...Pasour, Jr...

...Past experience gives little promise that the basic nature of regulatory agencies can be changed by making them stronger or by putting better men or a better regulatory agency in charge...

...The aim of government- intervention in such cases should be to achieve an optimal level of pollution...

...Yet the gulf between us, student and professor, was as wide as the Royal Gorge, and I happened to be a terribly shy young man, always somewhat in awe of the faculty (with one exception, the genial and sympathetic David Riesman...

...As the years passed, Jimmy made some additions to the bar, adding a University Room for the college clientele, where, supposedly, one was supposed to show an ID to gain entrance...

...If consumers were allowed the choice of a somewhat less safe but less costly flight, different people would make different decisions in the tradeoff between risk and cost just as they now do in auto travel...

...Though the theory of economic regulation is not now well developed, it seems fairly clear that shortcomings of regulatory agencies do not result from defects of the men in charge...

...A final reason why consumer protection will not necessarily be improved by creating a new government regulatory agency hinges on the nature of the regulatory process...

...In truth, one hated Jimmy's...

...But when I recall UT, or Freddy's, or Jimmy's, it is not with nostalgia but with curiosity...

...Sponsors have revived the bill, and this issue continues to be a lively topic of legislative debate in 1975...

...An analysis of the potential effects of "consumer-oriented" legislation shows that the effects are often quite different from those envisaged by its proponents...

...Many observers viewed the defeat of the consumer agency bill last year as a setback for consumers and a victory for such groups as the U.S...

...In reality, however, the issue of consumer protection is not so simple...

...But after UT and Freddy's passed into history,- there was no other place...

...Since consumers have a multitude of interests, representation of all consumers is impossible...

...Jimmy's atmosphere was of unimproved property put to highly profitable use, like a saloon in the Klondike...

...One can always contend with justification that consumer information is incomplete...

...When compared with protection through regulation, however, market competition is much more likely to accurately reflect a diversity of consumer interests...

...16 The Alternative: An American Spectator June/ July 1975 The same principle of comparing benefits and costs is applicable to areas of "consumerism" where spillover effects are not involved...

...Like Freddy, Jimmy had his run-in with the Mob and the Cop...

...That is, additional information is socially desirable only as long as the expected benefits exceed the costs...

...Had I been in Paris in the Twenties, and entered Lipp's to find Ernest Hemingway busily scribbling in his notebook, I probably would have gone to the other side of the room...

...It also attracted citizens of the vie boheme...

...That is, since increases in safety or purity can only be achieved at anincrease in cost, we should not expect everyone to desire the same amount of risk (or be willing to pay for the same amount of safety...

...I have no intention of leaving the taste of sour grapes in the mouth...

...The cost of attaining a standard of 100% removal (zero pollution), even if technically possible, would typically be astronomical...

...For example, the Senate originally passed by a vote of 86 to 0 the Muskie Bill which requires a zero level of discharge of pollutants into the nation's waterways by 1985...

...Any proposed change is beneficial to society only if the benefits exceed the costs...

...Senator Kefauver's 1962 amendments to the Food, Drug and Cosmetic Act provide a good example of the point being made...

...can only be achieved by cost increases, and there is an optimal amount of safety from the consumer's standpoint...

...For example, since many auto passengers will not freely use seat belts and Other auto safety devices such as air cushion bags, many Congressmen have favored making the use of these devices mandatory...

...One advantage of the market is that it responds to the wishes of people of varying tastes...

...The cost of removing an additional unit of pollutant, as the above example illustrates, becomes more and more costly as the environment becomes cleaner and cleaner...

...Protection: Let the Consumer Beware • • In the fall of 1974 a proposal to establish an agency to intervene as a consumer advocate in the affairs of other federal agencies was narrowly defeated in the Senate...

...These comments should not be interpreted to mean that consumer risks cannot be reduced...

...Will the consumer be protected in the sense of having a wider range of choice at lower cost with a formal consumer advocacy agency...

...I grow old, of course, and solitary...

...For example, many people willingly choose to operate a compact car at a lower cost even though they know that the accident rate is higher relative to a larger car...

...Shortly after, Weaver died, to everyone's loss...

...We, as individuals, prefer different amounts of safety or purity in the kind of autos or bicycles we ride, the kind of drugs or food we use, etc...

...Thus, a ban on pollution will seldom be the most appropriate remedy...

...A topical example is the movement to abolish pollution by numerous individuals purporting to protect consumers...

...The Alternative: An American Spectator June/ July 1975 17...

...The legislation ignores the social cost of impeding and delaying the introduction of potentially beneficial new drugs...

...A recent study estimates that the de-regulation of interstate airlines could reduce passenger fares substantially—by from one-third toone-half (William Jordan, Journal of Law and Economics, April 1972, pp...

...Undoubtedly there are many cases where information is inadequate in the sense that an individual would choose differently if he had more information...

...Then Jimmy switched to Budweiser, and the famous quarrel with Bud came about...

...That is not an encouraging sight...

...and various regulatory agencies of the federal government (ICC, CAB, etc...

...An excessively high value is assigned to safety or purity seemingly without regard to the cost...

...The role of information differs, to some extent, from the rules and regulations accompanying the consumer movement...

...The vote was a setback for a coalition of labor unions and consumer organizations seeking a new voice for consumers in proceedings before existing regulatory agencies...

...Only a local historian will care about the family names of these innkeepers, and I do not repeat them for the reader's sake...

...So, oppressed by this dilemma, I drank up and left...

...It was gloomy, its bartenders sullen, it was of a piece...

...151-176...

...Bud gave no kickbacks on quantity, and Jimmy sold a hell of a lot of beer...

...We are also interested in product cost, time and convenience, freedom of choice, etc...

...I have saved for the last the most famous saloon of the era, still functioning, albeit in the midst of urban terror and unsafe streets (how things have not changed...

...Chess was frequently played, but never did I ever see a single plebeian game of cards...

...However, there are sound reasons for expecting that legislation concernedwith information and regulatory aspects of consumer goods and services will increase costs and restrict the choices available to individual consumers...

...And you see, those are not my feathers...

...Indeed, a consumer can only be fully protected in all his actions by abolishing his right to choose...

...Its plusses were the excellent hamburgers served and the astounding selection of beers for sale (including Beamish Irish Porter...

...Why do regulatory agencies ostensibly designed to protect the consumer often end up serving the interest of the industry they are supposed to regulate...

...A public policy designed solely to minimize risk to human life would have profound implications for auto and bicycle speed limits, the introduction of new drugs, the use of bathtubs, etc...

...The cost of removing all pollution to meet a zero tolerance level would almost always far exceed the benefits accruing to society...

...Writers, artists, and failures could be heard boasting about their works in progress...

...There are now two University Rooms,both somewhat a step above the older bar...

...Jimmy's...

...As I have said, the atmosphere of Jimmy's was not genteel, save in the more "friendly confines" of the University Room...

...I too longed, to address the great man and "connect" with this fine educator and finer philosopher...

...Regulations which require that trucks make return trips completely or partially empty and which forbid companies from shipping by the most direct route are prominent examples...

...This brings us to the second reason why consumer legislation will restrict the choices of individual consumers...

...Furthermore, it is often difficult for consumers to determine the amounts of risk associated with the use of various goods and services...

...The results of such an agency, however, are quite predictable...

...Thus, pollution should be reduced but only as long as the expected benefits exceed the costs...

...Socialists, anarchists, and Swedenborgians gathered to enjoy jimmy's lager...

...Their only appeal is to snobs and certified alcoholics...

...Birds of a feather, I suppose, is the last word on this phenomenon...

...Others have nothing but raves about Jimmy's, recalling immemorable arguments over Hobbes or intricate investigations of Joyce's Wake...

...A persuasive case can be made that the alleviation in human suffering due to keeping harmful drugs off the market is more than offset by the suffering which results from not being able to obtain beneficial drugs...

...These amendments were passed largely as a reaction to thalidomide disasters in Europe, but the result has been to attach an extremely high value to safety of new drugs, requiring much stricter standards, including longer testing for approval by the Food and Drug Administration...

...The cost of removing an additional unit of pollutant rises rapidly as the zero pollution level is approached...

...A more appropriate remedy is some measure (such as a tax) to cause polluters to take into account the cost of the undesirable side effects in making production or consumption decisions...

...University bars, like writers' bars, are possibly the worst places in the world to enjoy a beer...

...E.C...

...Others may remember hobnobbing with university scholars, swapping aphorisms with pedants...

...The specific authority of any consumer advocacy agency will vary depending upon the legislation enacted...

...In pollution problems of this kind, where acts by one individual involve spillover effects adversely affecting other individuals, there is often a strong case for government intervention...

...The firm had to spend an additional four million dollars to attain a new standard of 99%removal...

...Proponents of such legislation often contend that quality improvements can be achieved without any increase in cost...

...Chamber of Commerce and the National Association of Manufacturers...

...Thus, a consumer advocacy agency must select those tastes which it will represent...

...I recall none of this: though I met a few of the monuments of Chicago culture, they were chiefly forgettable in their conversations...

...Jimmy's was a slum of a bar, its dusty board floors occasionally improved with sawdust...

...For a time he served Fox Head 400, the Mob's brew (for a time, Tony Accardo served as its chief salesman...

...Regulatory agencies generally appear to limit or decrease competition instead of protecting the public...

...The point is that safer autos, drugs, food, etc...

...This principle, though elementary, is frequently ignored in public policy...

...there is little ground for optimism...

...In such cases, regulation or consumer protection must be defended on grounds that consumers have less information than the regulator about the decision to be made by the consumer...

...Indeed, a recent study by Sam Peltzman found that the legislation, in fact, significantly impedes the rate of introduction of new drugs and thus prevents beneficial as well as harmful drugs from entering the market (Journal of Political Economy, September/October 1973, pp...

...The stated purpose of numerous ICC regulations imposing additional costs on truckers serving interstate markets is to prevent "excessive competition...

...There was a lot of the Anna Christie mood there in the afternoons, before the college mob took over...

...However, the same marginal principle relating to costs and benefits applies...

...Recent studies have found that costs of carriers exempt from ICC regulations are considerably less than for regulated general freight carriers...

...There is no strong prima facie evidence that this is the case or that benefits exceed costs to consumers from consumer-oriented legislation such as that relating to truth-in-lending, unit pricing of grocery products, and auto safety...

...One must compare consumer protection under competition (the market outcome) with the expected attainable alternative...

...Furthermore, policy makers quite often apparently feel that even well-informed consumers must be prevented from exposing themselves to risks which the policy makers regard as socially unacceptable...

...Our economy has traditionally relied to a major extent on the market mechanism...

...The consumer stands to gain more by the elimination of current regulations than from the creation of a new regulatory agency to protect his interests...

...We, as consumers, are not interested only in minimizing risks or maximizing product safety...

...Perhaps Jimmy's was (or is) greater than I think...

...The fact that price competition isn't permitted effectively denies airline travelers the opportunity to choose a lower-quality service at a lower price...

...And that is most likely my problem...

...First, many if not most regulations ignore a basic principle relating to benefits and costs...

...And I rather think that the profundities of students and assistant professors do not bear repeating, especially after ten years...

...That is, a freely functioning market will provide a variety of sizes, styles, and costs of autos, drugs, and other products to meet a variety of tastes...

...The Civil Aeronautics Board and the Interstate Commerce Commission, for example, have reduced competition in the air and trucking industries...

...Thus, in assessing the desirability of any proposal to protect consumers, the expected benefits must always be contrasted with the expected costs...

...Safety and other regulations, on the contrary, usually do not allow for this diversity of tastes...