New APPS

Art, Politics, Philosophy, Science. Mostly Philosophy.

recent posts

about

    Neoliberal Handwashing

    By Gordon Hull

    We’ve all heard that regulations are bad, because they interfere with businesses doing what they want (rules about dumping toxic chemicals get in the way of dumping toxic chemicals.  Laws against murder hamper the business model of assassins.  And so on.).  New North Carolina Senator Thom Tillis made the media rounds this week for some odd remarks he made on the topic.  When asked to name a regulation he thought was bad, he came up with… the rule that restaurant employees wash their hands after visiting the toilet.  He then proposed that it would be better to have restaurants state whether or not employees have to wash their hands, and then “let the market” take care of it. 

    There’s two obvious problems here, both of which have been pointed out a lot.  One is that there’s a public health issue.  The other is that he hasn’t actually reduced regulation: he’s just replaced a public health rule with a rule about signage.  I actually think the second point is interesting, well beyond the “gotcha!” treatment it got, because it perfectly illustrates something about neoliberalism: it doesn’t think regulations that create markets are regulations (or, if you prefer, regulating to create markets is good, other regulations are bad.  This is the same mindset that concludes that the hyper-regulated Chicago futures markets are unregulated).  The cleanliness of restaurant operations is not something consumers can know much about on their own, since they don’t do things like follow employees to the restroom.  In this sense restaurant sanitation is a credence good (you have to believe the restaurant; you can’t inspect the product before you buy it).  Since dirty food preparation can make people very sick, rational consumers should be willing to pay more for the knowledge that their food is safely prepared.  But since they won’t be in any position to know about food safety, except (maybe) for places they’ve eaten before, we can expect market failure until some mechanism arrives to help consumers make their decisions.

    One way to deal with the problem is the status quo: require employees to wash their hands, and inspect restaurants for compliance with other safety issues, and make that information public.  The other strategy is to make a market.  For the neoliberal theorist, as Foucault points out and as Philip Mirowksi emphasizes forcefully, making a market is always the better policy, because markets always do a better job in allocating resources to those who want them.  But the only way to make a market for food safety is to require restaurants to disclose their hand-washing policy, since consumers won’t otherwise know what they’re getting.  With signage, consumers would then have the incentive to research which restaurants have good handwashing policies, and make appropriate decisions.  Hence the rather odd spectacle of Tillis saying that the signage rule would be less regulation than the handwashing rule.

    Of course, the public health argument ought to win here, even when you put your neoclassical economics hat on: even with the sign, restaurants in Tillis’ world have no incentive to enforce sanitation policies (which might cost them resources); their only incentive is to post a sign that they think the public wants to see, and in order to fix that incentive structure you need to … have the policy we have now in the status quo.  It’s also hard to see how consumers would conduct the market research needed to know which restaurants were actually clean.  It isn’t just that restaurants have an incentive to lie, thereby distorting the market (recall: this precise argument is used by Posner to say individuals don’t need privacy!).  It’s also that you’d need a pretty big sample to conclude that any given illness was caused by a restaurant’s poor sanitation policies, but illness is going to be one of the better proxies for sanitation.  I’m betting that people would use racial and other stereotypes to make their decisions.  

    Plus, the negative externalities of food borne illness are pretty high, so the regulatory cost of attempting to enforce sanitation rules is pretty low by comparison.  In other words, sometimes, it’s worth going directly to the outcome you want, and prioritizing consumer safety.  But I do think I have my new teaching example for the weirdness of the thesis that markets are always better.

    Posted in ,

    2 responses to “Neoliberal Handwashing”

    1. Hans VE Avatar
      Hans VE

      Your point was already argued against by Milton & Rose Friedman’s 1980 book ‘Free to Choose’ in chapter 7. They argue that restaurants do have an
      incentive to adopt food regulations and make this known to their consumers; mainly because consumers like hygienic restaurants. By contrast, state-imposed
      regulations result in an incentive to do as little as possible by restaurants and an incentive not to inform yourselves by consumers. Their line of argumentation is more complex of course but as always their main point is that state-imposed regulations make matters worse rather than improve them.

      Like

      Reply
    2. Gordon Hull Avatar
      Gordon Hull

      I don’t have the Friedman in front of me, but his argument strikes me as clearly wrong, for reasons that I alluded to in the OP. First, if restaurants have an incentive to be clean, then we should have expected to see clean restaurants as the norm before the advent of health regulations. I’ve never seen any evidence to that effect, and there’s certainly evidence going the other way.
      Second, if it’s true that restaurants have an incentive to be clean (because consumers like hygienic restaurants), then there’s no reason to think that they’d suddenly lose that incentive just because there’s a regulation added. Indeed, the restaurants with incentives to be clean would be eager to prove they went beyond regulatory minimums (we see evidence for this when restaurants advertise organic, sustainable, etc. food that exceeds regulatory minimums). So the idea that adding regulations somehow transforms the incentive to be hygienic into an incentive not to be hygienic doesn’t make a lot of sense. Does it lull customers into complacency? Well, they have an incentive to look for the state-provided certification, and that’s less work than trying to investigate restaurants one at a time. And consumers are going to find such investigatory work very difficult to do accurately (what are they going to do – inspect kitchens on their own?). If the work is hard, and the results aren’t reliable, rational hygienic-preferring consumers will just stop going out to eat. That’s bad for the entire industry. So even if regulations impose a cost, that cost might be worth it from an industry point-of-view, because it increases consumer confidence in the entire industry. (Plus, why is it a good idea to make consumers work hard to prove that a restaurant is clean, rather than to make restaurants work hard to be clean?)
      More generally, because food safety is a credence good (consumers can’t evaluate it before purchase), and because there is a huge information asymmetry involved (restaurants know all about their preparation processes; consumers know nearly nothing), market failure is predictable. Customers won’t know enough to accurately price their food. This is probably true even after a meal: if you go to a restaurant and get the flu next week, it’s going to be very hard to know whether unwashed hands at the restaurant were the problem. Even for food-borne illness, it’s hard to track.
      Restaurants have an incentive to be perceived as clean. But of course that’s not the same thing as an incentive to be clean, and consumers know that. So what restaurants really have is an incentive to verifiably be clean, which means they need some sort of independent verification, like a set of rules and an inspections regime (yes, I know you can have market-based ratings agencies, like Moody’s, that just paid vast sums of money in fines for presenting misleading ratings).
      In any case, none of this is what I thought was interesting in Tillis’ remarks, which was that he perceived one regulation as a regulation, and the other as an unhindered market, even when it clearly was not.

      Like

      Reply

    Leave a comment