Home > economics, justice, politics > >Standards versus consumer affairs

>Standards versus consumer affairs

>Given the importance of standards it is reasonable to argue there should be a portfolio and minister assigned to this. New Zealand has a Ministry of Consumer Affairs which covers much of this. Unfortunately the structural organisation is such that different issues are at risk of being conflated. The hierarchy is

  1. Ministry of Economic Development
  2. The Ministry of Consumer Affairs
  3. Measurement and Product Safety Service
  4. Trade Measurement

Standards are not an issue of economic development, they are an issue of honesty. That it may lead to economic growth is a side issue. Consumer Affairs covers a variety of related and unrelated issues. Measurement and Product Safety is an umbrella group for both measurement (i.e definitional standards), and safety issues and minimum standards (possibly important but a separate issue). I would favour expanding trade measurement to cover all relevant measures and making it a separate portfolio.

Confusion in this area of ensuring standards is seen in the Briefing to Incoming Ministers.

The practical implications of this structure is that Consumer Affairs has a special identity as the Ministry with a focus on creating an environment in which consumers can transact with confidence, and also works within a broader sustainable economic development framework.

One can attempt to encourage confident transactions without being involved in economic development. One can ensure market transactions are honest without trying to manipulate the market.

One outcome was that the focus of consumer policy should be on creating the conditions in which consumers can “transact with confidence”. In practice this means that consumers should get what they reasonably expect from a purchase and, if not, have access to redress.

Transacting with confidence is not just important for the individual, it is also essential to a thriving, innovative and sustainable economy. When consumers demand higher quality products and services, make effective choices among the offerings of competing suppliers and seek satisfaction when their purchasing expectations are not met, they can stimulate greater economic efficiency and innovation.

The first paragraph is reasonable, so long expectation is in line with what was offered. But we desire this not because it leads to a thriving economy, rather because the alternative is fraudulent transactions. The error is apparent in the further comment.

For example, information barriers are a significant reason why consumers do not get what they expect when making a purchase and this has led to an emphasis on information disclosure as a principal regulatory tool. However, consumers do not always respond as expected when better information is available to them. Behavioural economics may offer new insights into consumer behaviour.

Information is exactly what is needed. But there is not necessarily any state expectation concerning consumers. The government shouldn’t care if the demand is for higher or lower quality, the quality margin may not exceed the monetary margin. I don’t want the government telling me what I should and should not buy. And not recognising that there are different issues here may lead the ministry to focus on economic manipulation and growth rather than honesty. If fraudulent behaviour leads to economic growth, why forbid it?

Categories: economics, justice, politics
  1. 2008 December 3 at 21:29

    In thinking about the issue of standards and other interaction between individuals and big business I have some reflections.
    Corporations who gather resources and produce a good of some kind are effectively pulling together a whole lot of things into the one place. It can be more efficient for them to do it than any individual even with a profit margin.
    If individuals fail to purchase the product then the business will cease to exist. So the theory is, that businesses must 1/ make a profit and 2/ provide value to consumer in order to survive.
    Those into low regulation will assume that the individual customers have enough knowledge to only make purchases when value is there, hence the business is kept in check by the consumer.
    To do this all these individual consumers have to act together in order for their influence to make a dent. It is no good for just a few to be informed as their influence will not be sufficient.
    If we look at Milk Powder as an example – how many people even knew that melamine was an issue. So even if it was correctly labelled on the packet, it would not have helped people to avoid it if they didn’t realise the health issue. As consumers we buy things from people we don’t know, made by people they don’t know. There is no room for trust in the 1950’s corner store way. Central regulation for safety and quality (fit for purpose) is an inevitable part of having a production-line consumer culture. As long as there is faith in the standards set and the enforcement of those standards, then consumers can efficiently make purchases.

  2. 2008 December 4 at 08:38

    TMYU, yes there is a need for safety standards for some items, but this is a different issue. Further melamine is an illegal additive. Also one can enforce labelling without banning. High allergenic ingredients in bold, must include trans fats with comment that these are bad for your health, health warnings on cigarettes.
    The addition of poisons (does not include long term possible health detriment) to foodstuffs is not a standards issue, it is a criminal issue.

  3. 2008 December 6 at 07:43

    legal and illegal is standards

  4. 2008 December 7 at 00:48

    legal and illegal is standards
    Not in the context I am using it. I agree that we may need minimal standards for some things. I am saying that even if a minimum standard is not required there is a need for definitional standards. It is not that I want the state to ban what they consider suboptimal food. I want to know that when something says it has 20% protein it does not in fact have 5%.
    The word standards can mean rule, but it does this based on the metaphorical use of comparing an object to a known standard.
    If there is a set weight or length then other people can use this to verify or calibrate their objects. If a personal measure is not the same as the standard it is not “up to standard.”
    Subsequently this was applied to other things in a metaphorical way, eg. morality. God sets moral standards, do we “measure” (live) up to them?
    We can thus legislate moral “standards,” i.e. legal and illegal, but this meaning is different in that it carries a moral ought. The ought in my context has to do with honesty in trading, not ethical or safety issues.
    However in my next post I will discuss the addition of substances. I guess I see melamine as a criminal issue because it is poison, whereas watering down the milk would be a standards issue.

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