The New York Times has editorialized in favor of mandatory country-of-origin labeling for “our food supply” on the grounds that consumers allegedly a) want to know where their food comes from and b) would prefer to “buy American” if they knew it were an option. There is certainly nothing wrong with wanting to buy American, and you can bet your bottom dollar that profit-seeking entrepreneurs would love to identify a group of consumers who are willing to pay a premium for food produced in the USA.
There are two problems with the Times’ logic. First, many entrepreneurs have already bet their bottom dollar that people are willing to pay a premium for American-made or locally-grown produce. The nationwide preponderance of farmers’ markets testifies to this. Our local grocery in St. Louis features locally-grown produce, including peaches from nearby Eckert’s Farm that are, quite simply, the best peaches I have ever eaten.
Second, the Times ignores the logic of demonstrated preference, which is possibly the most important insight economists can contribute to our understanding of the real world. The times cites polling data indicating that people would like to know where their food comes from. The economist should be immediately skeptical: my own scientific polls indicate that St. Louis-area economics graduate students want all of their material wants satisfied right now, this very minute.
We want plot-driven movies, spanking-new laptop computers, mahogany desks, giant SUVs that get 100 mpg and go from zero to sixty in 2.5 seconds, and high-quality food—what’s more, we don’t want to pay for any of it. But this information is positively useless. The point is that as it pertains to market transactions, economists don’t care about what people say.We care about what people do. And so do profit seeking entrepreneurs: if there are enough people willing to pay a premium for country-of-origin labels, entrepreneurs will be quick to fill that void in the market (in the absence of institutional constraints, of course).
As it stands, consumers writ large have not demonstrated a preference for country-of-origin labeling precisely because they do not value it enough to pay a price premium for it. The market, hampered though it may be, has given people what they want at the prices they are willing to pay. Any further intervention only distorts the market by extracting money from consumers to provide them with something they don’t want.
