On the proliferation of confusing labels
Ezra Klein channels his econ-geek and laments that price signals don’t tell the whole story these days:
…we hope that prices include the relevant information. That’s been the goal of the environmental movement’s effort to build the cost of carbon emissions into the price of goods. Rather than asking each consumer to act as a climate scientist when wandering through Costco, the climate change community is trying to let them act as a consumer.
It’s a fair point. These days we can promote labelling and the dissemination of information, but all information processing takes time. What’s the difference between free-range, organic and eco-friendly eggs? Does the SPCA standard mean they’re free-range or just that they’re not battery hens? Is organic meat humanely slaughtered? Were the cattle raised on a farm that pollutes the local stream? Figuring all that out would take up a fair bit of time and I’m sure there are things I would miss.
The point is that the proliferation of voluntary standards and labelling can eventually become overwhelming to the point that it’s meaningless to consumers. And they shouldn’t have to try to figure that stuff out. Using economic instruments to internalise harm in the production process allows consumers to just pick out the best value product and be safe in the knowledge that they’re not killing the planet. And then I would blog about stuff other than the environment 😛
The cynic in me says that voluntary standards and labeling are being deliberately proliferated so that the consumer is overwhelmed, stops using the label and instead relies on the branding! Its much easier to sell a brand than information
Two problems with this:
1. The regulator doesn’t know the cost. If regulators could accurately work these things out, we wouldn’t need markets at all.
2. Politicians are the lowest form of life and so need to get credit for environmental measures. They don’t get that if consumers don’t see the effect. That is why they prefer things involving labels.
Labels really are not confusing.