Economics

USDA’S ECONOMIC RESEARCH SERVICE’S REPORT ON PRODUCT LIABILITY AND MICROBIAL FOODBORNE ILLNESS IDENTIFIES THREE ECONOMIC INCENTIVES MOST LIKELY TO RESULT IN THE PRODUCTION OF SAFE FOOD:

• market forces;
• food safety laws and regulations;
• product liability.

MARKET FORCES

Ideally, companies that produce contaminated food would lose market share and sales revenue.  In a basic economic model, markets are most efficient when both producers and consumers have complete information.  In the real world – and especially when it comes to foodborne pathogens, consumers do not have complete information, so “market forces,” which should drive change, do not work efficiently.

FOOD SAFETY LAWS AND REGULATIONS

Ideally, companies that violate food safety laws or regulations would be subject to various government-mandated penalties such as fines, product recalls and plant closures.  That, however, is not always the case.  For example, FSIS does not have the power to recall contaminated food products even when scientific testing establishes the presence of deadly bacteria and/or there are reported cases of illnesses.  In 2004, and then again later in 2013-14, CDC reported national outbreaks of Salmonella, but since FSIS could not link a specific illness to a specific (and labeled) food product, the Agency’s ability to issue a recall was hampered significantly.  While the 2013-14 outbreak finally resulted in a recall, CDC was reporting illnesses from chicken products for over a year.   FSIS needs to declare significant Salmonella strains as adulterants in food, as it has already done for E. coli O157:H7 and the six other non-O157 E. coli strains.

PRODUCT LIABILITY

Ideally, companies that produce contaminated food would be held liable for the injuries and deaths caused by their defective products.  However, it is well known among food processors that foodborne illnesses are rarely traced to their source – in fact, a large majority of sporadic foodborne illnesses (70%-80%) are never linked to a food source.  For illnesses associated with outbreaks, only about 34% of the outbreaks result in an identified source.  Therefore, the likelihood of a company being held financially responsible for damages caused by their defective product is slim.  As a result, there is low incentive, based on product liability threats, to produce safer food.

Some recent efforts have improved food safety, most notably the passage of the Food Safety Modernization Act of 2010 and the 2015 USDA proposal to establish Salmonella and Campylobacter standards for poultry products.

• Roberts, Tanya, ed. Food Safety Economics, Incentives for a Safer Food Supply. International Association for Food Protection, Food Microbiology and Food Safety series; Springer International, 2018.
• Click here for 2015 IAFP Poster, by Dr. Tanya Roberts, entitled "Free Riders and Economic Incentives"
• Click here for Dr. Tanya Roberts Abstract to New York Academy of Sciences’ 2014 Conference
• Click here for Dr. Tanya Roberts power point presentation at the NYAS 2014 Conference.
• Click here for Dr. Tanya Roberts article in Choices, 2013