Will the benefits of safer food due to public sector interventions be worth the expense? Even without tallying benefits and costs, the answer is no if food safety is treated as an item routinely bought and sold. If consumers could select a desired level of safety in the same way that they select clothes or books, the public sector could not make better food safety decisions than consumers could make for themselves.
How can there be a market for safe food when safety cannot be observed? Before assessing the benefits and costs of a particular government program, researchers must be confident that a market for food safety has failed to appear and that consumers cannot make informed choices. There are several reasons to suspect that a market for food safety has failed to appear:
- It is difficult for consumers to determine whether a food is safe or not. Food that is contaminated with disease-causing pathogens may look, smell, and taste like food that is free of pathogens.
- If consumers cannot observe differences until it is too late, food suppliers may not have incentives to produce safer foods. Manufacturers and suppliers might not be compensated for their time and costs involved in producing safer foods.
- If consumers cannot discern safety differences, they may not be willing to pay more for safety.
The private sector is actively trying to market food safety, with numerous firms offering services to trace foods and ingredients through the supply chain, providing better process and inventory control, and improving capability to remove contaminated products. Other firms offer certification that processes meet particular safety standards, in the hope of making suppliers' claims about food safety credible to consumers.
As defined by the International Organization for Standardization (ISO), which develops voluntary international standards for products and services, traceability is the "ability to trace the history, application, or location of that which is under consideration." This definition is necessarily broad because food is a complex product and traceability is a tool for achieving a number of different objectives. As a result, no traceability system is complete; a system for tracking every input and process to satisfy all objectives would be enormous and very costly.
Traceability systems are a tool to help firms manage the flow of inputs and products to improve efficiency, product differentiation, food safety, and product quality. U.S. private-sector food firms have developed varying amounts and kinds of traceability, balancing the private costs and benefits of traceability to determine the efficient level of traceability. Firms determine the necessary breadth, depth, and precision of their traceability systems depending on characteristics of their production process and their traceability objectives. Traceability is the necessary information flow to make food safety information credible.
Tracing a particular food product may seem like looking for a needle in a haystack. However, U.S. ranchers, farmers, food manufacturers, and distributors have a number of incentives to keep accurate records tracking their food production and distribution. These records form a traceability system that provides information on the flow of food and food products throughout the U.S. food supply system and aids in tracking food to its source.
ERS researchers have investigated the amount, type, and adequacy of traceability systems in the United States, focusing particularly on the fresh produce sector, the grains/oilseeds sector, and the cattle/beef sector.
An ERS report, Traceability in the U.S. Food Supply: Economic Theory and Industry Studies (see link below), describes the results of an investigation into the amount, type, and adequacy of traceability systems in the United States, focusing particularly on the fresh produce, grains and oilseeds, and cattle/beef sectors. The results stem from research into the market studies literature, interviews with industry experts, and on-site interviews with owners, plant supervisors, and/or quality control managers in fruit and vegetable packing and processing plants; beef slaughter plants; grain elevators, mills, and food manufacturing plants; and food distribution centers.Traceability in the U.S. Food Supply: Economic Theory and Industry Studies
Researchers found that traceability systems vary across industries as firms balance the private costs and benefits to determine the efficient level of traceability. The private sector has developed a number of mechanisms to address deficiencies in its own traceability systems, including contracting, third-party safety/quality audits, and industry-maintained standards. The best-targeted government policies for strengthening firms' incentives to invest in traceability are aimed at ensuring that unsafe or falsely advertised foods are quickly removed from the system, while allowing firms the flexibility to determine how to do so. Policy options include timed recall standards, increased penalties for distribution of unsafe foods, and increased foodborne-illness surveillance.
Labels for processed foods in the United States must convey standardized information about content and nutrition. In addition, some labels convey limited information related to food safety such as safe-handling tips, safe storage practices, and safe cooking temperature. Some consumers perceive quality attributes on labels such as organic, pesticide-free or growth hormone-free, and country of origin as providing safety information. Consumers, food processors, third-party entities, and governments all play a role in determining which of a food's many attributes are described on food labels. Consumers use their purchasing power (their consumption choices) and political activities to help determine which attributes are described on labels. Private firms seek out attributes that are attractive to consumers and voluntarily label information about these attributes when the benefits of so doing outweigh the costs.
Policymakers have a number of tools at their disposal to influence market outcomes, including taxes, subsidies, and production and marketing regulations. In recent years, policymakers have increasingly turned to the use of information to influence consumer and producer behavior. Information policy involves providing or requiring information about specific product attributes, the proper use of a product, or best production practices. This is often achieved through labeling and education programs. Food labeling can also be used to provide nutritional information and dietary guidance (see Food Choices & Health: Education, Information & Labeling).
ERS researchers have studied whether consumers have enough information to make informed food choices. Clearly, different policies would be called for depending on whether consumers and food producers have enough information about the foods they are buying and whether more information might substantially increase the safety of the food supply. Researchers examined what can best be done in the private sector to provide informative food labels and what role can best be played by the public sector in providing information.
Governments, responding to public-welfare concerns or other political considerations, may require that information on some attributes be included on food labels. The appropriate level of government intervention in labeling, whether establishing mandatory labeling laws, providing services to enhance voluntary labeling, or not intervening at all, depends on the type of information involved and the level and distribution of the costs and benefits of providing that information. Mandatory labeling, like other information policy tools, is often portrayed as a low-cost policy tool. However, the costs of labeling policy may be far-reaching and the benefits may not be very large.
In recent years, lawmakers have faced a number of food-labeling decisions, including initiatives concerning nutritional content, dolphin-safe tuna, organic products, country-of-origin, and biotechnology issues. Labeling decisions are increasingly going beyond addressing consumers' information needs to include determining the appropriateness of labeling policy for achieving social objectives, such as improving human health and safety, mitigating environmental hazards, averting international trade disputes, or supporting domestic industries.
In response to interest in food labeling, including labeling to achieve wide social objectives, ERS completed the study, Economics of Food Labeling (see link below). This report examines the economic theory behind food labeling and presents five labeling case studies (nutritional labeling, dolphin-safe tuna labeling, organic products labeling, country-of-origin labeling, and biotech labeling). The ERS report shows that the appropriate role for government, whether establishing mandatory labeling laws, providing services to enhance voluntary labeling, or not intervening at all, depends on the type of information involved and the level and distribution of the costs and benefits of providing that information. Furthermore, mandatory food-labeling requirements are best suited to alleviating problems that arise when consumers do not have adequate product information and are rarely effective in redressing environmental or other "spillovers" associated with food production and consumption.Economics of Food Labeling
Consumer Food Safety
Individuals who are more vulnerable to foodborne illness represent one potential target for food safety education. These consumers may also represent a niche market for foods produced with extra protection, such as irradiated foods. For many pathogens, infection rates are highest among children under 10 and adults over 65. Children are at higher risk because of their lower body weights and undeveloped immune systems (See "Children and Microbial Foodborne Illness"). Pregnant women who develop foodborne illness may pass the infection on to their fetuses, perhaps resulting in miscarriage, congenital illness, or chronic neurological complications.
Some consumers are less able to fight off foodborne illness because of a weakened immune system, resulting from a gradual decline with age, HIV infection, immunosuppressant medication following organ transplant, and radiation or chemotherapy for cancer or other illness. See Tracking Foodborne Pathogens from Farm to Table: Data Needs to Evaluate Control Options:Tracking Foodborne Pathogens from Farm to Table: Data Needs to Evaluate Control Options
ERS research shows that consumers who perceive higher risks of contracting foodborne illness are more likely to follow food safety recommendations, such as cooking hamburgers thoroughly. Consumers who say they read safe handling labels on meat and poultry also report that they follow food safety recommendations in greater numbers than other consumers. But further research is needed to determine whether these consumers were already concerned about foodborne illness and thus more aware of food safety information from labels and other sources (See Ralston, Katherine L. and C.T. Jordan Lin. 2001. "Safe Handling Labels on Meat and Poultry: A Case Study in Information Policy," Consumer Interests Annual, vol. 47, pp. 1-8).
ERS research on consumer tradeoffs in food-safety decisions focuses on the example of hamburger preferences at home and in restaurants. Using the 1996 Hamburger Preparation Quiz, conducted by the Market Research Corporation of America, ERS found that 10 percent of consumers had switched from cooking hamburgers rare or medium-rare 5 years previously to cooking them medium-well or well-done in 1996. This led to a decrease in the percentage of consumers cooking hamburgers rare or medium-rare from 24 percent in 1991 to 20 percent in 1996. Almost three-fourths of the respondents who switched from less well-done to more well-done explained they had made the change because of the possibility of becoming ill. Yet, not all consumers changed their behavior.
To explore these changes further, ERS used the Hamburger Preparation Quiz to study the relationship between consumers' hamburger cooking and ordering choices and their motivation to avoid the risk of foodborne illness from unsafely cooked hamburger. Risk-avoiding respondents ordered or cooked their hamburgers more. However, respondents who highly valued tender, juicy hamburgers were less likely to eat hamburgers cooked well-done (See "Awareness of Risks Changing How Hamburgers Are Cooked").