by Russ Roberts on May 21, 2007

in Regulation

Paul Krugman ($) (HT: Jim Morse) blames the recent E. Coli outbreak on Milton Friedman:

These are anxious days at the lunch table. For all you know, there
may be E. coli on your spinach, salmonella in your peanut butter and
melamine in your pet’s food and, because it was in the feed, in your
chicken sandwich.

Who’s responsible for the new fear of eating?
Some blame globalization; some blame food-producing corporations; some
blame the Bush administration. But I blame Milton Friedman.

How’s that? It’s simple. The Bush Administration is in thrall to the free market principles of Friedman:

Without question, America’s food safety system has degenerated over
the past six years. We don’t know how many times concerns raised by
F.D.A. employees were ignored or soft-pedaled by their superiors. What
we do know is that since 2001 the F.D.A. has introduced no significant
new food safety regulations except those mandated by Congress.

isn’t simply a matter of caving in to industry pressure. The Bush
administration won’t issue food safety regulations even when the
private sector wants them. The president of the United Fresh Produce
Association says that the industry’s problems “can’t be solved without
strong mandatory federal regulations”: without such regulations,
scrupulous growers and processors risk being undercut by competitors
more willing to cut corners on food safety. Yet the administration
refuses to do more than issue nonbinding guidelines.

Why would
the administration refuse to regulate an industry that actually wants
to be regulated? Officials may fear that they would create a precedent
for public-interest regulation of other industries. But they are also
influenced by an ideology that says business should never be regulated,
no matter what.

The economic case for having the government
enforce rules on food safety seems overwhelming. Consumers have no way
of knowing whether the food they eat is contaminated, and in this case
what you don’t know can hurt or even kill you. But there are some
people who refuse to accept that case, because it’s ideologically

That’s why I blame the food safety crisis on
Milton Friedman, who called for the abolition of both the food and the
drug sides of the F.D.A. What would protect the public from dangerous
or ineffective drugs? “It’s in the self-interest of pharmaceutical
companies not to have these bad things,” he insisted in a 1999
interview. He would presumably have applied the same logic to food
safety (as he did to airline safety): regardless of circumstances, you
can always trust the private sector to police itself.

So here’s Krugman’s logic.

A. The food supply is less safe

B. The Bush Admiinistration has issued no new regulations

C. The Bush Administration must be following Friedman’s logic

I guess this is good news for us free-market types. Any day now, the Bush Administration will be getting rid of farm subsidies and all other corporate welfare that Friedman opposed. They’ll stop negotiating trade agreements and unilaterally lower all tariffs and quotas. And they’ll reduce government spending instead of spending a record high amount of money. They’ll make all drugs legal. Yessireee. This administration loves Milton Friedman. The signs are every where.

What kind of chutzpah does it take to  blame Milton Friedman for the failure of a govenrment agency to do its job well? The illogic is breathtaking. So what’s Krugman’s game?  I think he figures that people hate Bush so much, if he can only get those same people to associate Bush with free markets, he can get people to hate free markets.

The other part I like is the implication that until the evil free market Bush administration got in power,  we had a safe food supply.

FYI, Paul, there were major E. coli outbreaks in the US in  1994, 1996, 1997 and 1999. There was also one in January and February of 1993, but I won’t count that one. I’ll blame that one on the Friedman-influenced Bush the First.

In 1996, there were major outbreaks in the Friedman-dominated free market anarchist utopias of Germany, Scotland and Japan.

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R. Steven Cox May 21, 2007 at 5:27 pm

How good a teacher could someone as crazed as Krugman be? He seems to dote on politics with no interest in scholarship.

Methinks May 21, 2007 at 5:29 pm

Wash your greens thoroughly before you eat them (they grow in dirt – duh) and cook your meat properly – that's what meat thermometers are for. The only reason people don't anymore is because they've been lulled into complacency by the nanny state.

What percentage of the vast amount of food we consume is contaminated? How many people are seriously hurt and what is the cost of further regulation? Krugman doesn't say.

The largest players in the industry want barriers to entry for competitors generously set up for them by government? SHOCKING! Why, we can't expect a possible future Nobel prize-winning economist to work all that out, can we?

Krugman is a hack.

Bob in SeaTac May 21, 2007 at 5:39 pm

Krugman has a severe case of BDS. And he's certainly no economist. Go against all his economic choices, and you will do well.

Tim May 21, 2007 at 6:05 pm

I don't get it, who is he and why does the press listen? He is like the anti-christ of economics. Can someone tell me what makes what Krugman says relevant? Is it because it is 180 degrees different from what every other economist is saying? Or is it because it echoes what the media wants to hear?

The Albatross May 21, 2007 at 6:13 pm

I'm calling Princeton — I want my money back.

PatrickR May 21, 2007 at 6:49 pm

Speaking as an evil labor-exploiting, profit-seeking type, I've always considered it to be counterproductive to poison my customers.

pinus May 21, 2007 at 7:07 pm

Does Krugman imply that current regulation allows supplying poisoned food into supermarkets? I doubt it. So whom should we blame? The FDA, which allowed food that is not in line with the regulation to get to consumers, despite the fact that it is its purpose to prevent such things from happening? But then Krugman's logic implies that we should abolish it (or maybe regulate it with FDA^2).

Or is it simply a thing that happens time to time, simply due to the law of large numbers, and never-possibly-perfect state of the world?

There were 42,636 deaths from car accidents in 2005 in the U.S. – one death every 13 minutes. I wonder how many newspaper articles is Krugman going to write about this.

John Pertz May 21, 2007 at 7:08 pm

Honestly, Krugman's article is so pathetic that it borders on bizare. I almost feel sorry for him in a way. He just missed out on a nobel prize and his journalism career has been nothing more than avowed attempt to ruin whatever respectable reputation that he had built as a productive economist.

Mathieu Bédard May 21, 2007 at 7:11 pm

Following Krugman's logic it is always in the interest of food suppliers to poison their customers and since people always go back to restaurants serving food that makes them sick, these places are more likely to thrive than good restaurants or good supermarkets. As a matter of fact, physicians who murder their patient are more likely to gain a good reputation over time, and have a successful career.

ben May 21, 2007 at 7:24 pm

Paul Krugman's reputation RIP

speedmaster May 21, 2007 at 7:33 pm

I've said it before and I'll say it again, I don't understand how this guy gets to be called an economist.

Methinks May 21, 2007 at 7:34 pm

Why not, Mathieau? After all, Krugman butchers economics and logic regularly and people keep coming back for more.

Mathieu Bédard May 21, 2007 at 7:52 pm

While most people do read the papers with hope to find unbiased information–or at least they pretend they do–, many are looking for evidences to comfort them in their opinions. It's not necessarily bad or evil, and it's certainly not a 'market failure'. Krugman and the likes are talking to that crowd, hoping a few curious readers with little to no critical thinking will stumble upon their articles. This is why there will probably always be a socialist press.

To go back to my sarcasms, unlike dishonest economics, I don't think there is a consumer demand for bad food or for bad surgery, so I don't think your example holds up.

tarran May 21, 2007 at 8:33 pm

Someone at the Ludwig von Mises Institute revealed that they had considered insituting a regularly given out "Broken Window" award for the most fallacious article published on economics every quarter.

He claimed that the idea was quickly killed when someone asked, "What happens when Krugman runs out of shelf-space?"

save_the_rustbelt May 21, 2007 at 8:36 pm

The most dangerous part of the food is driving to the supermarket – maybe that is Uncle Miltie's fault too.

dave smith May 21, 2007 at 9:13 pm

Krugman is a hack.

That is what I told the book rep from his company when she pushed his text on me.

I told her she could quote me on the back cover.

Greg Rehmke May 21, 2007 at 9:56 pm

I notice Krugman waited until Friedman was no longer able to respond before making this claim.

colson May 21, 2007 at 10:05 pm

Skip the broken window award and we'll just have an annual contest in the comments of this blog, I already have a name picked out:

"The Krugman Award" or "Kruggies" for short. Instead of giving him an award, name the award after him and then you don't have to risk handing the prize over to the same person every time.

Greg Rehmke May 21, 2007 at 10:08 pm

I notice Krugman waited until Friedman was no longer able to respond before making this claim.

John May 21, 2007 at 10:16 pm

With Bush soon leaving office there is a chance to alter our country's direction. I believe that Krugman is afraid of free market ideas; that's why his columns on free markets are full of hatred and his columns on Bush's administration are merely disdainful. I expect to see a lot more of these libelous attacks on free market thought from Krugman in the next year and a half.

Nicholas Weininger May 21, 2007 at 10:55 pm

One interesting bit of hypocrisy: Krugman, who would *never* take industry spokespeople at their word when they say enviromental/safety/whatever regulation is *not* necessary, is more than willing to take them at their word when they say it *is* necessary.

Hasn't he ever heard of regulatory capture? This sounds to me like a textbook case of big food suppliers seeing an opportunity to force out smaller competitors.

Nathan Benedict May 21, 2007 at 11:08 pm

"The Krugman Award" or "Kruggies" for short. Instead of giving him an award, name the award after him and then you don't have to risk handing the prize over to the same person every time.

–Not really a solution. Just shifts the problem to Lou Dobbs.

Pretinieks May 22, 2007 at 12:07 am

on the top of that all, Krugman obviously doesn't bother to check the data.

Isaac Crawford May 22, 2007 at 5:22 am

Krugman's article is, as usual, nonsensical but he does touch on a potential critique of non regulation that I think has some merit. I am a devoted free market type, and I do not think that most regulations are helpful or needed. I have been able to refute most pro regulation state arguments fairly well, but I worry about this one potential argument. If things were totally deregulated, I do believe that the markets would take care of themselves, things would adjust to new information and the best products and services would win out. The decent argument against this is that the feedback mechanism with food, drugs, and other health issues are people's lives. Sure, if I find out a certain drug or food product makes people sick and/or kills them, I wont take it, but what about the people that "provided" the data? I still think that no regulation is the best way to go, but this does give me pause and I am unwilling to use my optimism against this argument for regulation. Bad products come through the pipeline from time to time. To me the question is do the regulations cut down on the prevalence of these occurrences and what do they cost. If the answer is "Yes, they do limit the numbers of these occurrences," the next question is do we value the lives and health that are saved enough to cover the cost. No matter how the valuation goes, it always puts free market and anti regulation folks in a bad light, how do we counter this?


Mathieu Bédard May 22, 2007 at 6:03 am

Hasn't there been a few instances where pharmaceutical firms took their product off the market despite government's approval, and before any bureaucrat reacted? Isn't this a proof that bureaucracy isn't reliable for quick critical decisions regarding our health?

Eric H May 22, 2007 at 7:35 am


In fact, I think there are a few beef producers (Creekstone Farms) who wanted to start testing for Mad Cow, but the USDA will
not let them.

Slocum May 22, 2007 at 7:38 am

Speaking as an evil labor-exploiting, profit-seeking type, I've always considered it to be counterproductive to poison my customers.

I'm not supporting Krugman's overall thesis about Friedman, but with respect to food, it's not so simple.

If a safety defects are found in Hondas, consumers switch to Fords (or whatever). But if there's an E. coli outbreak caused by tainted fresh spinach, what happens is that people stop buying fresh spinach completely, and store stop stocking it. It doesn't matter if you are a fresh spinach grower who has taken the utmost care — you're still screwed. There are no strong, well-known brands in fresh produce such that a reputation for unsafe food is limited to particular producers — instead it gets linked to a particular kind of food.

David P. Graf May 22, 2007 at 7:51 am

I just received yesterday Hayek's "The Road to Serfdom" book and had a hard time putting it down so that my wife could get some sleep last night. Did Hayek see any role for government in terms of regulations like the FDA?

Andy Wagner May 22, 2007 at 8:24 am

Apply the same logic to food safety that Friedman applied to airline safety…
Lets see, so the consequences would be reduced costs to the consumer, elimination of a needless government bureaucracy, and no net change to food safety.

Where can I sign up?

Methinks May 22, 2007 at 8:25 am

"…unlike dishonest economics, I don't think there is a consumer demand for bad food or for bad surgery, so I don't think your example holds up."

Mathieu, I was being facetious!

Slocum, more likely, people will either wash the bagged spinach when they get it home and/or cook it. Both activities take care of E. Coli. If a car is a lemon, it's always a lemon.

Jon May 22, 2007 at 8:40 am

What I love is how certain members of the produce industry seem to be blaming gov't for their failures as an industry.

There was in interesting article on TCS daily involving the FDA, not in regards to produce regulation, but in regards to drug regulation and why it's no longer profitable for some companies to produce effective drugs. Here's my post and the link to the article:

Heretic May 22, 2007 at 10:08 am

I would imagine there are no EXISTING regulations which empower the FDA to protect the public from a tainted food supply.

Of course, any failure of a government agency to be effective in protecting the public should be blamed on Friedman!

St Wendeler May 22, 2007 at 10:42 am

how did Krugman become so dense? Domestic food growers are lobbying the government for increased food safety regulations not for the "public good," but as a competitive advantage for domestic producers. Increase the amount of checks on foreign producers of strawberries and crush them.

And that the FDA hasn't created new regulations (other than those mandated by Congress – the ones who have the authority to pass laws) is a good sign, imho.

If only there was a bureaucracy that could come up with its own regulations on weekly allowances of Krugman's idiocy.

muirgeo May 22, 2007 at 12:59 pm

If some people are guilty of under estimating the power of capitalism others are likewise guilty of not understanding the daily benefit of good regulation, mostly because they never lived in an era of poor regulation.

Jon May 22, 2007 at 2:21 pm

And some people don't understand the nature or the political process and how it is easily manipulated to work toward ends that are actually harmful to the consumer….


muirgeo May 22, 2007 at 2:50 pm

So Jon the question might be how to make the political process better.

I say regulate the regulators. Make lobbying illegal and have publically financed elections. Bottom line is I think most people want better representation and the current incumbancy rates along with the dismal congressional approval ratings strongly suggest the current system is seriously flawed.

Methinks May 22, 2007 at 2:52 pm

And still others understand neither markets, nor the nature of regulation nor history. However, that doesn't keep them from using this ignorance as the very reason for backing restrictions on others. Of course, they perceive themselves to be possessed of infinite wisdom, for they can come up with perfect regulations which control human behaviour perfectly without worse unintended consequences.

Jon May 22, 2007 at 3:22 pm

Methinks is right on the $.

You still have Hayek's knowledge problem coupled with the nature of unintended consequenses.

Add to that this:

How in the world do you propose to convince politicians to restrict their own power with regulations. History has shown that this just doesn't happen.

And for the record the easiest way to restrict lobbying is to get all of the politicians out of DC. with all the technology we possess, we could easily teleconference the entire legislature and push the Senators and House of Representatives to STAY IN THEIR STATE!

The Albatross May 22, 2007 at 3:24 pm

Ok, before I start this, I just want to say that I am not sticking up for Krugman. I rarely agree with him, but I think I can provide some insight into why he does this sort of thing. I can barely remember him as a professor, but I can remember some things. I think my impression was that he was fairly matter of fact and on the whole unremarkable–as opposed to Don Boudreaux who was rather remarkable. Anyway, the consensus on Krugman was that he knew his stuff (I think he was Reagan's economic advisor at one point), but he sort of tended to lose it when he took of his professor hat. Funny thing is that I pretty much remember him keeping to the subject and rarely offering opinions. However, looking at his book on my shelf "The Age of Diminished Expectations," he seemed to think in the mid nineties that we were heading for imminent disaster over low productivity levels. As we all know from being alive recently, his scenario did not play out. Anyway, my sense of him was that he was one of those people who is not happy with anything. It's kinda sad, because I remember him being ok at some of the Xs and Os of economics. Pity such a talented man is such a colossal failure as a pundit. I wish Uncle Milt was still here–he would have softly torn Krugman a new one.

muirgeo May 22, 2007 at 3:26 pm


What's your solution? Assume you had your perfect society with perfectly free markets? What would it look like?

What in the free market society prevents massive accumulation of wealth to the point where all the land is owned by a handful of people. If Bill Gates was so rich he could by all of Rhode Island is that a good thing?

I told you my concern with free markets and wealth accumulation leading to plutocratic rule and loss of liberty for most of the population. Now you tell me how or why that wouldn't happen.

muirgeo May 22, 2007 at 3:33 pm

When I see people here criticizing Paul Krugman I wonder if they are not the same people who for some reason defend the outsider climate change skeptics like Richard Lindzens and the Pat Michaels. Is there a double standard here…maybe some inconvenient truths?

Actually I think there is greater professional consensus on how climate works as opposed to the "science" of economics. (Based on the SAAE study I'm reading about) Yet everyone here talks with such certainties on their subject but never fails to mention the EXTREME uncertainties of climate science. Again.. double standard?

colson May 22, 2007 at 4:04 pm

Thanks Muiregeo for making a straw man – now go put him in the field to scare off the crows. None of these arguments are made from the point of supporting an outsider/insider.

You ask about a "perfect" society? The truth? [I don't think] you can[t] handle the truth?! All joking and JN quotes aside, you've created a baited question.

The "perfect" society to a libertarian would be widely held as "imperfect" by someone such as yourself. Thanks for the bait but I'll sidestep the question for the next one:

"What in the free market society prevents massive accumulation of wealth to the point where all the land is owned by a handful of people. If Bill Gates was so rich he could by all of Rhode Island is that a good thing?"

I see the point you are trying to make, but a simple change to the question you ask will render a more productive answer. To say it another way:

Why hasn't Bill Gates purchased Rhode Island? (or Washington for that matter)?

The answer to my re-phrasing of your question might shine a bit more light the answer you are looking for.

Methinks May 22, 2007 at 4:21 pm


Randy May 22, 2007 at 4:26 pm

Well done, Colson. I was about to go into the details on the Rhode Island issue, but you got straight to the point in one sentence.

Objectivist May 22, 2007 at 4:27 pm

Here is the reason why government regulation is bad and free markets are good, muirgeo. If we have government regulations, then we get several problems. One, it costs money to follow these regulations, so this raises barriers to entry. So does campaign contributions and other ways of influencing regulations. The result is that companies which buy influence can obtain immense power, crush competition, and screw the consumer. All the oligopolies and monopolies we have now are the result of government regulation, along with politically attuned corporations which literally buy their market.

Now lets assume that we have no regulations. The barriers to entry which accrue via government regulatory costs, as well as corporate influence peddling, etc., are erased. Because there is no regulation, anyone may enter the market, and there are no rigged auctions to determine market share, no government bs which raises the costs of starting up and forces companies to screw consumers. Now then, the companies involved in this market will competing with each other freely, leading to optimal prices and efficiency. Lets say that some companies try to rig a cartel. Then someone new will come along and undercut them. If there is an attempt to create an industry wide cartel and set up trusts, the rewards of making a new company and stealing the market will be very high. Additionally, if there are bad companies, they will lose customers and go out of business; the best and most efficient will survive. Because of supply and demand for workers and consumer choice, in a real free market, its actually the consumer and worker who wins, while the companies are actually the ones gain the least, as they are all in competition with one another.

Methinks May 22, 2007 at 4:33 pm


"The Age of Diminished Expectations". Hmmm….sounds an a lot like "The Age of Uncertainty" by J.K. Galbraith. Maybe Krugman is our generation's Galbraith?

I'm quite sure the man knows economics and the fact that he didn't share his political opinions in class wins him points (IMO). But being a good economist won't stop him from the fantasy of social engineering – paradoxically. In his memoirs, Milton Friedman describes a particular female economist at Cambridge who was both a fabulous technical economist and a communist. She came back from Castro's Cuba singing its praises. Galbraith described the Soviet Union as a model of economic progress and happiness after his visit in 1984. Krugman is the heir to these people.

Everybody loves to argue with Milton Friedman, when he's not in the room. Should be easier now.

muirgeo May 22, 2007 at 4:47 pm

Why hasn't Bill Gates purchased Rhode Island? (or Washington for that matter)?

Posted by: colson

The answer I think is because we have some what of a progressive tax structure and an estate tax that make such an occurrence less likely. Still even in this system we have wealthy families like the Marr's, Dupont's, Morgan's, Fords ect who are born into wealth, privilege and power that would have stunned the Founding Fathers. They basically rule by birth right.

Now your turn to answer the original question rather then answering with another question.

And here's another one. You implied that a free market society would not be perfect. Sure but what would it look like? Would their be large tracts of Shanty towns and Castles on the hills?

Most importantly could you convince a majority of Americans it would be in their best interest? In other words could your free market society happen democratically? And if not what other way but though authoritarian rule or rule by a privileged few? Please try to answer these questions. No one here seems to be able to. I think they get to the heart of the Quixotic quest that seems to be libertarianism.

Methinks May 22, 2007 at 4:52 pm

I second Randy – well done Colson!

Muirgeo, when an economy grows and people become more productive, the aggregate amount of wealth grows. Bill Gates is worth a lot of money – $50 Billion, give or take. But you have to remember that this is in the context of an economy that produces a GDP of around $12 trillion annually. What percentage of the means of production do you suppose the richest man in America owns? A very small one.

What's to prevent you from becoming Bill Gates or from simply becoming wealthier than you are now in a free market?

But let's look at your Rhode Island example. Here's a question: who is Bill going to buy Rhode Island from in a free market? Considering that Rhode Island consists of thousands (at least) parcels of private property, Bill would have to negotiate with each Rhode Islander individually. No Rhode Islander will sell Gates his property if he doesn't believe that Bill is paying him enough for it. Each property owner will sell only if it enriches him. So, the better question is this: if each Rhode Islander feels he is enriched by selling his land to Bill Gates, why should these people's enrichment bother you?

Now, let's take a look at what goverment does consistently in our regulated free market today: If a company wants to put up a shopping mall, the state can and does take private property under "eminent domain" laws (which, of course, the state writes). the hapless property owners are compensated, of course, at the "market rate". But what do you suppose happens to the market rate when a neighbourhood is declared Eminent Domain? Market rates tank. This new, much lower market rate, is then paid to the individual property owners as they are forcibly shoved from their land.

Which system seems better to you?

Methinks May 22, 2007 at 5:19 pm

Muirgeo: "The answer I think is because we have some what of a progressive tax structure and an estate tax that make such an occurrence less likely."

It would be a lot easier to answer your questions if you actually knew what you were asking. Similarly, it would be a lot easier if you explain how the above statement makes sense to you. I'd answer it if I could figure out how exactly a progressive tax system and inheritence tax stops people from buying large tracts of land. I haven't noticed that it has, actually.

"They basically rule by birth right."

Sometimes I just wonder if you actually think about any of the Marxist talking points you post before you post them. How do the Duponts rule you? If you think that their wealth allows them to buy politicians, then you are correct. But that just means that politicians are too powerful. Government has the power to coerce and those in government are self-interested (as we all are). They will seek to enrich themselves by taking bribes by special interest groups. If government were less powerful and intrusive and stuck to perventing coercion instead of propogating it, the Duponts will merely be rich. The only way they could force you off your land (for example) is to pay you more than what you think the land is worth. That will make you wealthier and you could maybe upgrade from a shanty to a small castle. That's a free market.

"You implied that a free market society would not be perfect. Sure but what would it look like? Would their be large tracts of Shanty towns and Castles on the hills?"

I've pointed out to you before that the more free market an economy is, the fewer shanties and the more castles. I've even given you examples of such countries (including this one – which only became less free market in the middle part of the 20th century and more free market during the Reagan administration). I've also pointed out to you that countries which adopt this "mixed economy" you favour are mostly shanties with a couple of castles thrown in. Take a look at India, Russia, East Germany (before reunification) and the current state of France and Germany. And before you start screaming "Russia was not mixed, it was communist!". It wasn't. Lenin tried actual communism for about 5 minutes and the entire economy collapsed because it so disorganized labour. He went back to a market economy with heavy doses of government interference to make it look like the economy was planned (who actually plans shortages and surpluses of goods?). You may be familiar with this interference – it's called government regulation and taxation.

You may have also noticed a phenomenon that occurred in this country when Reagan slashed regulation and reduced taxes – huge economic growth. Do you remember the 70's? Gas lines (thanks to government regulated prices), runaway inflation, a high unemployment rate, etc. Compare that to now.

Given that the readily observable fact is that there are more shanties and fewer castles in highly regulated economies and fewer shanties and more castles in more free market economies, I think it is YOU who must explain how you suppose there would be fewer shanties and more castles if we implement more regulation.

steep May 22, 2007 at 5:32 pm

muirgeo you need to read what others write a little more carefully. colson didn't say that a libertarian society would be imperfect. colson wrote, "The "perfect" society to a libertarian would be widely held as "imperfect" by someone such as yourself." Implying that his definition is much different than yours.
A libertarian society doesn't see enforced equality through progressive tax rates and estate taxes as a good thing. Inequality is an incentive to progress. Forced equality brings stagnation.

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