The Free-Market and Product Safety

One of the more popular arguments against free-market capitalism is product safety.

The argument goes something like this: We need the government to regulate and inspect products for our safety. If the government did not perform this function, the greedy businesses, which only care about money, would not make safe products and we would all die in the streets.

Or some other doomsday scenario.

There are at least three things wrong with this argument.

The first, and most obvious, is that it does not make for a good business model to kill or injure your customer base.

It just makes no sense that businesses would not care about product safety.

One of the signature qualities of a business is that in order to exist, it must continue to provide goods and/or services to customers, who, by definition of a free-market system, have a choice to do business elsewhere.

In this day and age especially, with our rapid forms of communication, it would be virtually impossible for a company that did produce faulty products to stay in business.

Sure, in theory, a company could let safety and quality slide, but what company would want to take such a chance on their reputation?

Another thing wrong with this argument is that it assumes the government’s role is to preemptively combat possible crimes, even when there is no evidence of guilt.

How painfully ironic that the same people who oppose a preemptive military strategy are often the same people who support a preemptive domestic strategy of government oversight, just in case someone might do something wrong.

The government’s role is to protect us from actual harm. To catch the bad guys, if you will.

It is not the government’s role to assume everyone is a bad guy and leave it up to them to prove that they are not.

Yet that is the operating assumption when the government over-regulates anything. (This does not just apply to the regulation of businesses.)

Why don’t we just have a code of laws that makes it a punishable crime when a company negligently produces faulty products, instead of a civil matter?

As it stands, government regulation is a tool that is used by large corporations to stifle competition from smaller businesses. Only those with money can afford to comply. A company needs its own legal department to even understand all of the complex regulatory codes, and sometimes it even needs to supply accommodations for government inspectors, at additional cost.

We might very well be reducing quality – the quality that comes from competition – with the very regulations that are meant to insure it.

And perhaps the best counter-argument comes from the private standard-bearers of product safety that already exist.

Underwriters Laboratories, Arts & Creative Materials Institute, Consumer Reports, and even the Good Housekeeping Seal of Approval all provide us with non-government means of ensuring that the products we purchase are safe and of good quality.

There are also trade associations, unions and guilds. Magazines. Word of mouth. Even online review sites.

I would never buy anything electronic without reading the online reviews first.

The market works for us – the consumers. We are the ones that businesses hope to win over. They need us as much as we need them, and it is not in their best interest to produce bad products.

In this era of online mass communication, the private sector can even better keep tabs on quality than at any time in our history. And it can respond to new information much more quickly than a government agency.

Private quality and safety firms have an incentive to remain diligent with their standards, for if they fail they will surely be discredited and go out of business. The same cannot be said of a government agency.

As consumers, we would benefit from an environment in which small businesses can compete without needing the money to invest time and man-power in understanding and complying with unnecessary regulation.

And as citizens, we would benefit from the freedom of a government with laws that assume innocence until guilt is proven.