by Jeff Sovern
Once upon a time, in a not-so-distant country, peanut butter sales were regulated in a distinctive way. Grocery stores that sold peanut butter were regulated by one agency; supermarkets by another agency; and convenience stores that sold peanut butter by a third agency. Stores that were chartered by the federal government had one set of regulators while those chartered by states had a different set. These agencies had many different responsibilities, including some that conflicted at times. They were charged with insuring that the peanut butter was appropriate, but also that the stores they regulated used their resources wisely. Peanut butter sellers could choose which agency would regulate them by deciding whether they were a supermarket, grocery store, or convenience store or whether they would be chartered by the federal government or a state. And because some peanut butter regulators received their revenue from fess paid by the peanut butter sellers they regulated, the regulators had an incentive to attract and keep peanut butter sellers to regulate. The more peanut butter sellers you regulated, the more revenue you had. That meant they had an incentive to regulate lightly and protect peanut butter sellers.
One day, one of the sellers came up with a new kind of peanut butter which combined some old and some new ingredients and was cheaper at first than the old peanut butter. It began selling this new peanut butter to people who could not formerly afford peanut butter. Lots of people bought the new kind of peanut butter and soon other peanut butter sellers began selling it too. They made lots of money for a while. Regulators weren’t worried about the new type of peanut butter because the ingredients were all listed on the jar. In fact, some thought it was great that some people who formerly couldn’t afford peanut butter could now buy it. Besides, if they intervened to prevent sale of the peanut butter, the peanut butter sellers they regulated would just change what kind of business they were and get a different regulator, and that would cost the regulators revenue—and wouldn’t keep the sellers from selling the new kind of peanut butter. Some also believed that too much peanut butter regulation would make peanut butter too expensive and choke off innovation in peanut butter. When some state peanut butter regulators tried to prevent sale of the new peanut butter, federal regulators went to court to stop them.
But the consumers who bought the new kind of peanut butter weren’t able to figure out from the list of ingredients what effect the peanut butter would have on them over the long term. The list of ingredients was long and confusing, and the consumers lacked the experience needed to make sense of it. After a while, a lot of the consumers started getting sick from the peanut butter. They stopped doing things that they had formerly been able to do, and that hurt even people who hadn’t bought the new peanut butter. Some of them stopped paying for their peanut butter, and that hurt the peanut butter sellers. Some of the sellers started losing money, so much money that some of them went out of business. The government became concerned that peanut butter would no longer be available, and so it gave lots of money to some of the biggest peanut butter sellers to keep them in business.
Then some people said that a new agency was needed to protect consumers from peanut butter that was bad for them. This said that protecting people from bad peanut butter was so important that the agency should have that as its sole mission instead of having it as one of several goals that might sometimes conflict with protecting people from bad peanut butter. They pointed out that other products, like jelly were regulated in such a way and that jelly regulators just thought about whether the jelly was safe and sound, rather than thinking about whether the jelly sellers were safe and sound. They said that having the ingredients listed on the jar wasn’t always enough and that this agency should have the power to ban peanut butter that contained ingredients that were harmful. They said that the agency should have the power to regulate all peanut butter sellers whether they were a grocery store, convenience store, or supermarket. They said that the new agency should have the power to make stores sell plain peanut butter and that if stores wanted to sell peanut butter with special ingredients, they should have to do more to explain to consumers what was special about it.
But the peanut butter makers thought this was a bad idea. They argued that the new agency would impose a new set of regulations. They pointed out that most peanut butter sellers had not sold the bad peanut butter but would have to pay for complying with the new regulations. They wondered how the new agency would be paid for. They were concerned about how the new agency would decide what plain peanut butter was and feared that the agency would stifle innovation. Because the peanut butter sellers were rich and gave lots of money to politicians, could afford to hire very good advocates to make clever arguments, and knew things about the peanut butter business that no one else knew, they were listened to carefully. Of course, the peanut butter sellers were not thinking about the fact that the new agency would not have to compete with other agencies to attract sellers to regulate and so would not tailor its regulations to attract such sellers. They were solely concerned with the public good.
And consumers put peanut butter and jelly on sandwiches even though the two were subject to different regulators and rules.
