Wednesday, November 24, 2010

The Freedom To Choose

It is often argued that government regulations are necessary to protect consumers from unscrupulous businesses. Without such regulations businesses could take advantage of consumers by misrepresenting their products or services, withholding information, or otherwise preventing consumers from making informed buying decisions. Regulations insure that consumers get safe and effective products.

This argument implies that offering safe and effective products is of no self-interest to businesses, that a company would sell anything in order to make money. It implies that a business would invest years of research and development and enormous sums of money only to market a product that posed a risk to consumers.

Certainly, there are companies that take a short-term perspective and focus on immediate results at the expense of long-term success (for one example see Enron). But such companies are rare. A product that is dangerous or ineffective will be discovered. And if the company knowingly and intentionally misrepresents its products, it is engaging in fraud and should be prosecuted. Defining and protecting individual rights is the only proper role of government in regard to "consumer protection." Indeed, protecting individual rights is the only means by which the legitimate rights of consumers and producers can be protected.

Rights sanction an individual's moral right to act according to his own judgment within a social context. The mutual rights of others prohibit him from interfering with their actions. If an individual chooses to market a product or service, he has a moral right to do so. And consumers have a moral right to purchase or boycott his offering. Nobody--including government--has a rational justification for interfering with either producers or consumers.

Yet, this is precisely what government regulations do. The threat of physical force--fines or prison--prohibits producers from offering the products or services they deem fit. That same threat prohibits consumers from purchasing products or services that they judge best serve their needs, desires, and values.

Government regulations prohibit individuals from exercising their own rational judgment and acting accordingly. For the mentally lazy this breeds a false sense of security--if a product or service is sanctioned by government it must be safe and effective. For the independent individual this limits opportunities and choices, and often results in actions the individual would otherwise not choose. As an example, see Social Security, which is forced upon all workers regardless of their own judgment regarding the merits of the program.

Abolishing government regulations does not mean that consumers would be left to the mercy of businesses. Indeed, there are myriad examples of private organizations that provide consumer education, certify the safety and effectiveness of products, and otherwise provide information that assists consumers in making choices that best fit their own needs and desires.

nderwriters Laboratories (UL) is one example. UL is a private product safety testing and certifying organization. Founded in 1894, their web site states:U
UL has developed more than 1,000 Standards for Safety. Our Standards for Safety are essential to helping ensure public safety and confidence, reduce costs, improve quality and market products and services. Millions of products and their components are tested to UL's rigorous safety standards with the result that consumers live in a safer environment than they would have otherwise.1
Products that meet UL standards are allowed to display the UL logo as long as it remains compliant. Though UL certifications carry no legal weight, the company’s reputation is such that failure to meet UL standards can mean the death of a product:
[I]t may be extremely difficult to sell certain types of products without a UL Mark. Large distributors may be unwilling to carry a product without UL certification, and the use of noncertified equipment may invalidate insurance coverage. It is common practice in many fields to specify UL Listed equipment or UL Recognized materials.2
Unlike government regulations, which are imposed on producers and consumers regardless of their individual choices, UL certifications are entirely voluntary. A manufacturer can choose to market a product that does not meet UL standards, and consumers are free to purchase such products if they choose. While both assume certain risks on the basis of their choices, each remains free to act according to his own judgment. UL is only one example of private companies offering testing and consumer information.

MET Laboratories offers a service similar to UL, offering further choices to consumers and manufacturers. MET’s web site describes the difference between its service and that of UL: “The main difference between these two marks is with the level of involvement and partnership between the manufacturer and the test lab.”3 Whether this difference matters is a choice that each manufacturer and consumer is free to decide.

Unlike government regulations, which impose one set of standards upon an entire industry regardless of the judgment of those subjected to the regulations, the free market provides producers with choices. A manufacturer can decide to have his product tested by UL, or by MET, or forgo testing entirely. Consumers are free to purchase products that are certified or not certified (and likely less expensive). While UL and MET focus their efforts on electrical products, other organizations test other consumer products.

Good Housekeeping has been testing and approving products since 1902. The magazine first began testing products “to study the problems facing the homemaker and to develop up-to-date, firsthand information on solving them.”4 In 1910 the magazine built the Good Housekeeping Institute in Springfield, Massachusetts to test products, which included a model kitchen, a domestic science laboratory, and test stations for testing products under household conditions. As with the UL mark, the Good Housekeeping Seal of Approval has become an important aspect of marketing and brand recognition for many products.

Interestingly, both UL and the Good Housekeeping Seal of Approval were started during the Progressive Era—a time when businesses were unjustly under attack for the safety of their products. Recognizing the need for independent evaluation of products, these two private companies moved to satisfy the legitimate concerns of consumers. And they are not alone in helping consumers make informed decisions.

Consumers Union (CU) tests products and publishes the Consumer Reports magazine. Its mission
is to work for a fair, just, and safe marketplace for all consumers and to empower consumers to protect themselves. The organization was founded in 1936 when advertising first flooded the mass media. Consumers lacked a reliable source of information they could depend on to help them distinguish hype from fact and good products from bad ones. Since then CU has filled that vacuum with a broad range of consumer information.5

In addition to its laboratory testing, CU also conducts reader surveys, which results in product reliability reports from the actual users of those products.

Other organizations also provide information to consumers. For example, provides “independent test results and information to help consumers and health care professionals evaluate health, wellness, and nutrition products.”6 Angie’s List allows consumers in more than 120 cities to share their experiences with service providers in more than 450 different categories. The Better Business Bureau “ensures that high standards for trust are set and maintained… so consumers and businesses alike have an unbiased source to guide them on matters of trust.”7 Many trade associations and product manufacturers offer certification programs that insure that professionals meet certain standards, properly install products, and operate ethical businesses.

Each of these is an example of the private sector providing alternatives for consumers to obtain the information that they require to make an informed decision. Unlike government regulations, which are inflexible and coercive, these organizations can respond quickly to changing market conditions and are entirely voluntary. As such, they respect the moral right of producers and consumers to act according to their own judgment. Protecting that right is the only proper function of government, and the only form of "consumer protection" required.

1 "Standards for Safety,"
4 "The History of the Good Housekeeping Seal,"
5 "Our Mission,"
7 "Vision, Mission, Values,"

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