The "Lemon Market" of formula milk

Nawa Thalo ,  Jakarta   |  Wed, 03/19/2008 12:20 AM  |  Opinion

The European Union food monitoring agency has on several occasions suspected the use of genetic engineering in imported food products.

Although health effects of such products remain largely unknown, the agency is obliged to inform consumers of GE foods on packaging labels.

Consumers have the right to broad information on the ingredients and manufacturing techniques of their products, and such a right should be campaigned all over the world.

Customers will likely come to trust a producer if its products are self-informative, leading to a mutually beneficial relationship.

Failure to inform will result in a consumer "lemon market", a term frequently used to describe market-based products that deceive their customers. Because lemons have thick skin, consumers remain oblivious to whether they have bought a rotten or fresh lemon until they return home and dissect the fruit with a knife.

Concerns recently arose in Indonesia after researchers at the Bogor Institute of Agriculture found that certain baby-milk products were contaminated by bacteria.

Consumers in this country remain largely uninformed of their food products' ingredients, and parents have no way of knowing whether their babies are being fed harmful milk until the babies get sick, assuming doctors make the connection.

Taking the example of baby-milk, consumers have two options available to them.

First, they can stop buying the product altogether. Should this happen, milk sales will decline, while both producers of harmful and unharmful milk will be punished, erasing the incentive for harmful producers to change. Economists will then declare "bad guys drive good guys out of business", and there will be no resolution to the problem.

Second, consumers will continue to purchase the milk. Babies younger than nine-months can only consume milk, and non-breast-feeding mothers may have no choice but to feed their babies processed milk, no matter how unwillingly. The question is, what kind of a government would force mothers to make such a decision?

The government's role must therefore be to test the validity of in-house and second-party product tests and then to inform the public of their findings. People have the right to know what they are eating, especially considering many second-party tests are funded by taxpayers.

Should bacteria-infused baby milk be proven unharmful, customers still need to know so that they can make well informed buying decisions. The government should inform us as part of our basic human rights and our freedom to choose.

The government's failure to provide this vital information benefits no one but the harmful milk producers. Consumers will lose faith in products, producers of harmless milk will be hit by loses in sales, while researchers, who should be appreciated for their efforts, will lose credibility without government backing.

However, if the government does choose to inform consumers, assuming its supposed role as protector of the people, the economy will be boosted, a "lemon market" will be avoided and babies will be healthy -- in short, a win-win situation.

Even when nutrition experts have questioned food products, legal action taken in the past has proved extremely slow and the government has often been careless in its punishments for manufacturers.

It is time to make the consumer well-informed about contaminated food products, while implementing suitable punishments that do not effect blameless producers. The benefits of a well monitored market-based economy should be the insurance of quality products and consumer welfare.

The writer is a research economist at The Indonesian Institute Center for Public Policy Research.

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