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My Brand of Economics

How best to protect consumers from unreliable or even unsafe products?  Contrary to the dogma espoused by many people who fancy themselves "progressive," brand names are among consumers’ best friends — as explained in this excellent op-ed, appearing in yesterday’s Chicago Tribune, by Edward Snyder, Dean of the University of Chicago Graduate School of Business.

Note that few Chinese producers yet have established brand names in the west.  That’s a problem — but it’s a problem best solved, as Snyder argues, by letting the market deal with it.

Here are the final few paragraphs of Snyder’s op-ed.

Those who advocate regulation by the West as the solution
might be smoking unregulated substances. Aside from the obvious point
that we have plenty of inspections and regulations of our own to worry
about, the opportunity for Western manufacturers and anti-globalization
interests to lobby against particular Chinese imports would be
irresistible. They would use the new bureaucracy to reduce the general
flow of Chinese goods. That would forward their objectives, but the
results would be bad overall policy.

Waiting for the market to
fix Chinese product quality — doing nothing — sounds like an
unattractive solution. But the market is already reacting.

Consumers are thinking twice about buying no-name Chinese products with
long lists of ingredients. U.S. distributors are checking their
sources. Retailers, especially those who stock a lot of Chinese goods,
are becoming a lot more concerned about their reputations. And Chinese
firms and their partners are investing in brands.

How does all
this happen? Firm by firm, case by case and step by step. You might
recall the recent case of the 1.5million Thomas & Friends toy rail
cars and accessories with lead paint. Fair or not, Thomas & Friends
has lost quite a chunk of its brand-name capital, and its very survival
is in question. No doubt Thomas & Friends has some new protocols.

How long will it take for the market to respond? Pretty much the same
amount of time it takes other branded toy manufacturers to check and
recheck for lead paint on their products.

Here’s another Key
Fact: Mattel, which produces Barbie dolls and characters from Sesame
Street and Nickelodeon, this month stopped about 700,000 toys with lead
paint from reaching U.S. consumers and recalled 300,000 additional toys
sold through retailers such as Target, Toys "R" Us and Wal-Mart.

So how long will it take for the market to respond? Less time than it would  take for new regulations to take effect.

(HT John DeVries)