How Much Protection Does Consumers Need

Can consumers make appropriate choices for themselves? Caveat emptor (let the buyer beware) is an ancient legal doctrine that buyers are the best judges of whether they receive full value and so should bear the consequences of their own decisions. But the doctrine of caveat venditor (let the seller beware) also has a long history, reflected in prohibitions against fraud and in imposing legal liability on sellers for damages if dangers lurk in a product. Society increasingly holds firms responsible for product safety and reliability. Naturally, these regulatory costs are passed forward as higher prices, forcing us to buy built-in insurance policies on some goods we purchase.

The strongest trend, however, is toward government edicts that either prohibit or mandate certain activities. A century ago, one could legally purchase any available drug. Today, many drugs are absolutely banned (LSD and heroin are examples); others require doctors’ prescriptions. And producing automobiles without safety and antipollution equipment is forbidden.

We know that people’s ideas cannot be pigeonholed precisely, but those who favor market solutions over government regulation tend to have faith in people’s abilities to choose for themselves. They reason that if consumers lack information, government can either provide the information or leave it to organizations such as Consumers Union. On the other side of the fence sit those who distrust the market system to provide safe and environmentally clean products. These people point to the increasingly sophisticated nature of products and have little faith in the ability of the typical person to choose given the volume and depth of information necessary to make informed product choices. Would you still buy your favorite brand of Columbian coffee if you found out the maker exploited its workers? What if you found out that if you and others stopped buying that brand, those very same workers would have to resort to planting coca leaves?