Experimenting With Food Labels
Steve Bainbridge highlights pending federal legislation to preempt state food label rules that are inconsistent with the FDA’s standards. He comments that the law would be a “perfectly plausible exercise of Congress’ power under the Commerce Clause.” I agree, even though there are non-frivolous arguments to the contrary (federalism concerns for states’ police powers; locally grown foods; etc.) But putting aside constitutional shibboleths, I think that just because Congress has the ability to preempt state legislation doesn’t mean it should.
The argument against allowing states to add new disclosure requirements to food labels goes like this. The great competitive strength of the American economy is its internal free trade network. Inconsistent regulation internally is to be avoided where possible, because it results in inefficiencies as producers are forced to retool their products for different states. Moreover, producers must increase their legal compliance costs, hiring lawyers to keep track of regulations in the several states,
capture regulators lobby in 50 state legislatures, etc.
But such arguments discount the benefits of permitting experimentation in dealing with cognitive problems. The science of information processing is still relatively young: we haven’t gotten a handle on what disclosures trigger what types of consumption activity. As Larry Ribstein argues in a very different context here allowing states free reign to try different regulations will – as Brandeis long ago argued – create a natural laboratory allowing experimentation in reducing cognitive error. States that require disclosure of facts that consumers find unimportant will soon receive feedback to that effect. Similarly, if producers (as expected) increase prices in markets requiring more disclosure, we could obtain some evidence as to how much consumers actually value labeling. [This could get complicated given cross-border purchasing and free-rider problems, I suppose]. But most importantly, states could try different approaches to the problem of the method of regulation itself. Is the best way to encourage the right disclosure a rule (you must state the number of milligrams of sodium) or a standard (you must disclose information that consumers find valuable)? Should this process be run by regulators (as it is in the federal system) or the common-law jury?
We could start getting answers to such questions, but only if the feds back off.