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July 30, 2007

Paying for risk

With the safety of imported foods increasingly in the headlines,
N.C. State University economist gives his opinion on two questions: Why would anyone take the risk of selling unsafe products? And how can consumers get such producers to sell only safe goods?

On the first question, he says, "I think it's really a matter of perspective. You have to realize that in many cases the new imports that the U.S. is using are coming from developing countries.

"There is a rule of thumb in economics that the higher your income, the more you are going to be concerned about safety and lowering risk. And when you are just starting out and you are focusing on just getting income, perhaps those characteristics aren't so important. So perhaps it's not surprising that we are having some issues here.

"Now on the second question, though, I think the biggest way for consumers to get those sellers who are making the unsafe products to change their habits is to motivate them with dollars -- that is, simply not to buy those products until they reach the safety levels that consumers want," Walden adds.

"In fact, it is this fear of consumer backlash that's really the motivator for producers anywhere -- not just from developing countries, but producers anywhere -- from producing products that consumers want.

"And I know, for example, in China right now, where a lot of these issues have arisen, there is a major, major focus of getting this issue off the table because they know that if it lingers it can seriously damage their economy."

Posted by deeshore at July 30, 2007 12:48 PM

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