Monday, September 27, 2010

Deception at Farmers' Markets

Via Tim Diette at WLU:

A nice example of the potential value of regulation so that consumers have information on what they are buying.

Stories from NY Times (here) and Roanoke Times (here).
I'm not a expert in the economics of regulation, but I do a bit of political economy in my research, and I did OK in the game theory portion of my micro sequence in grad school, so here's how I'd see this one playing out. Regulation will ultimately be lobbied for most by big players in the organic/local market (think whole foods, etc.). My thinking here is that the big producers actually have less incentive to "cheat" by outsourcing produce advertised as local and/or using pesticide-enhanced produce, because everyone will remember it if Whole Foods gets busted; no one will remember if Johnny Farmer does. Consumer groups will support it, but the final product will mainly serve to: (1) bar entry for small sellers; and (2) help the same big players signal their reputation cheaply. It will go over great for a while, but eventually, enough of the relatively honest small producers will collectively complain about the onerous opportunity-killing regulations. If they succeed, we'll be right back at square one.

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