Law For Food: The law affects what you eat. What you buy to eat affects the law.

Credence Goods
5 July 2007, 1:20 pm
Filed under: Economics of Eating, food politics, labeling, Regulation

Sorry I’ve been quiet the last months. I am working on a paper about the mandatory Country-of-Origin Labeling program that was proposed in the 2002 Farm Bill and might be implemented in the 2007 Farm Bill, and I’ll share research on that in the upcoming days. Right now I wanted to use this post to introduce the idea of “Credence goods” to the discussion. Credence goods, as I understand it, are products or aspects of a product for which the consumer would be willing to pay more if she trusted that they were present, but which the consumer has no way of verifying. The importance of government or third-party trusted verification of credence goods ensures that consumers are able confidently to choose according to their true preferences.

Two examples of credence goods in food: Fair Trade Coffee, Tea, and Cocoa; Dolphin-Safe Tuna. In the first example a private, third-party certifying organization places its seal of approval on products which meet standards, and the value of the seal depends on the consumer’s trust of the certifiers. In the second example, the standards are verified by the U.S. government, as evidenced by Dolphin-Safe branding, and non-complying goods are banned from import.

Anyway the article shows how, in the absence of credible independent verification, markets devalue credence goods.

Update: I learned how to spell “credence.”


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