Steve Chapman of the Chicago Tribune makes several excellent points in his column on the recent salmonella scare, commenting on the absurd tendency to reward government bureaucracies that screw up. But more important, he explains that there are very strong incentives for safety in an unfettered marketplace. The fundamental issue, though, is that there is no way of completely eliminating risk in society, so the responsible approach is finding the best ways to minimize risk without imposing excessive costs. Relying on free markets is surely the best answer, though the government does have a role. As Chapman notes, a well-functioning tort system ensures that companies can be punished by people who suffer damages. Command-and-control regulation, by contrast, is a very expensive and inflexible approach.
In the private sector, entities that fall short of doing their jobs find themselves forced to shrink. In the public sector, the opposite is typically true. Failure is an option, and often a beneficial one. The Federal Reserve Board and Treasury facilitated the 2008 financial crisis? Then obviously we have no choice but to give them even more responsibility. The Securities and Exchange Commission let Bernie Madoff rob investors? A bigger SEC will be a smarter SEC. Just once, I’d like to see a government official say, “We blew it, and you know what? If you give us another chance, we’ll probably blow it again.” But so far, my hope has not availed. It’s true that the FDA is charged with assuring food safety. But really, the government can’t do that. The task is too big and too complex. Fortunately, it doesn’t have to do it, because the pressures of competition force producers to make sure their goods are clean and wholesome. What goes curiously unnoticed is that egg suppliers and grocery stores have nothing to gain from sickening their customers — and a lot to lose. It doesn’t take many obvious hygiene lapses for a company to get a bad reputation, and a bad reputation can be catastrophic. In 1971, a New York man died of botulism after eating a can of Bon Vivant soup. If you’ve never heard of Bon Vivant soup, there’s a simple explanation: In no time at all, the company was bankrupt and the brand was as defunct as William McKinley. The farms implicated in this episode are likely to find themselves oddly short of buyers in the coming months, if not years — unless they can prove they have taken drastic steps to clean up their act. But the burden of proof will be on them. They can also expect to be sued for huge sums of money. Meanwhile, there are plenty of other companies that didn’t screw up, whose wares will be more attractive going forward.