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Waiting for the Invisible Hand: Novel Products and the Role of Information in the Modern Market for Food

Author

Listed:
  • Trenton Smith
  • Hayley Chouinard
  • Philip Wandschneider

    (School of Economic Sciences, Washington State University)

Abstract
This paper places the modern spread of diet-related chronic disease in the United States within the context of more than a century of innovation in food processing technology, discovery in nutrition science, and corrective policy measures aimed at improving public health. We ask whether the current state of a airs represents a market failure, and if so what might be done about it. We argue that while today’s industrial food system has its advantages, the asymmetric information problems inherent to this system have resulted in a lemons-style break down in the market for processed foods. The appropriate policy response to such situations (namely, verifiable quality standards) is well known, but such policies are likely (in the short run) to reduce profit for existing large industrial producers of food. In light of the food industry’s long history of success at regulatory capture, we propose the formation of a new independent food standards agency devoted to protecting the interests of the American consumer.

Suggested Citation

  • Trenton Smith & Hayley Chouinard & Philip Wandschneider, 2009. "Waiting for the Invisible Hand: Novel Products and the Role of Information in the Modern Market for Food," Working Papers 2009-07, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:tgsmith-4
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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/TSmith/wp2009-7.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    as


    Cited by:

    1. Smith, Trenton G. & Tasnadi, Attila, 2012. "'Hidden Quality' in the History of American Food: Consumer Search vs. Industry Obfuscation?," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125103, Agricultural and Applied Economics Association.
    2. Tessitore, Sara & Iraldo, Fabio & Apicella, Andrea & Tarabella, Angela, 2020. "The Link between Food Traceability and Food Labels in the Perception of Young Consumers in Italy," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 12(05), December.
    3. Smith, Trenton G. & Chouinard, Hayley H. & Wandschneider, Philip R., 2011. "Waiting for the invisible hand: Novel products and the role of information in the modern market for food," Food Policy, Elsevier, vol. 36(2), pages 239-249, April.
    4. Chad M. Baum, 2013. "Mass-Produced Food: the Rise and Fall of the Promise of Health and Safety," Papers on Economics and Evolution 2013-03, Philipps University Marburg, Department of Geography.
    5. Rohr, Sarah & Mounter, Stuart & Fleming, Euan & Griffith, Garry, 2020. "A Diagrammatic Framework for Accounting for Externalities in Agriculture and Food Sector Value Chains," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 28(5), December.
    6. Sizhong Sun & Sajid Anwar, 2018. "Product innovation in China’s food processing industries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(3), pages 492-507, July.
    7. Trenton G. Smith & Attila Tasnádi, 2014. "The Economics of Information, Deep Capture, and the Obesity Debate," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(2), pages 533-541.
    8. Ehmke, Mariah Dolsen & Bonanno, Alessandro & Boys, Kathryn & Smith, Trenton G., 2019. "Food fraud: economic insights into the dark side of incentives," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(4), October.

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    More about this item

    Keywords

    credence goods; history; food policy; certification;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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