Saturday, February 21, 2009

Peanuts and the Economic Value of Inspectors

There's no lack of examples these days of how a lack of government oversight can be a business's worst enemy. Seems like anti-regulatory policies don't so much set corporations free to grow as give them the freedom to hang themselves.

According to an AP article, the inadequate number of state inspectors may have contributed to the outbreak of salmonella in a Georgia peanut plant. The Peanut Corporation of America now "faces mounting lawsuits and a bankruptcy filing." A useful question is how frequent were inspections at the plant, when Georgia's 60 inspectors have 16,000 sites to monitor.

The logic of self-interest would suggest that businesses will monitor themselves to avoid bad publicity. But obviously that logic fails here. Self-interest in a highly competitive world means cut corners and do whatever you can get away with.

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