Tuesday, December 19, 2006

Market Failures in Everything: iodized salt

Marginal Revolution has a continuing series called "Markets in Everything" which highlights unusual markets. But for some reason they don't seem to have the opposite corollary, "Market Failures in Everything". I may not have their readership, but perhaps I can help anyhow.

MR pointed to an amazing NY Times article, In Raising the World’s I.Q., the Secret’s in the Salt.

The money quote is: "Worldwide, about two billion people — a third of the globe — get too little iodine, including hundreds of millions in India and China. Studies show that iodine deficiency is the leading preventable cause of mental retardation. Even moderate deficiency, especially in pregnant women and infants, lowers intelligence by 10 to 15 I.Q. points, shaving incalculable potential off a nation’s development."

And the solution is government regulation of private salt producers, forcing them to iodize the salt at a trivial cost, a little over a dollar a ton. The article details why this is necessary, but just on the surface it is obvious from the fact that universal iodization has never been market driven.

7 comments:

Trent McBride said...

Just curious why the only solution is regulation of salt producers. Why the speciifc tax (essentially) that only they must pay? Why can't the costs be spread over everyone to pay the prodcuers to add iodine to their salt?

Mike Huben said...

Because some producers would defect, claiming iodine was harmful, and refuse to add it.

Elzair said...

I agree with Adi. I would think that parents (of any intellect) would want to make their kids smarter (at a small cost). Why do you think people bought that Baby Bach stuff?
Also, what do you think of this article?

Mike Huben said...

The article is stupid: by its logic, you cannot explain ANY maintenance by government.

The simple fact is that iodized salt has been known to solve goiter for decades, but that's not enough for markets to solve the problem. Why? well, we can speculate a whole bunch, but frankly I'd just point out that it's a historical fact that markets don't solve certain problems well, and that government solves those problems better. Defense, roads, iodization, social insurance, etc.

Mike Huben said...

It amazes me how libertarians in one breath whine about how business shouldn't unjustly bear any social cost, and in another breath smugly observe that they'll just pass the costs on to the customers. Likewise, in one breath they'll scream government tyranny for this mandate, and praise business benificence for the same result in the next breath.

But the pragmatic answer is that there is a huge market failure due to information costs. It's vastly cheaper to add iodide to the salt than to have a public information campaign that would be as effective. Government subsidy would run into the usual gamut of libertarian objections.

Public health programs frequently have payoffs that are dispersed, but hundreds of times greater than the investments. Fluoridation, Iodization, Vitamin D added to milk, vaccination: the list is large. No private enterprise would ignore such obvious payoffs. But libertarian ideologues would.

Jeremy said...

It amazes me how libertarians in one breath whine about how business shouldn't unjustly bear any social cost, and in another breath smugly observe that they'll just pass the costs on to the customers. Likewise, in one breath they'll scream government tyranny for this mandate, and praise business benificence for the same result in the next breath.

I agree: as a libertarian, I see the modern multinational corporation as a bureaucracy on par with the State. The kick, though, is that all corporations are state-chartered and privileged entities. So by def'n big business = big government.

Mike Huben said...

Joh, your analysis makes about as much sense as your diagnosis of iodide as a "vitamin". You say I have no way of distinguishing which costs businesses should bear, yet provide two obvious criteria. Perhaps you should read up on public health economics to learn about what is really done in the real world.

Jeremy, if you claim that big business = big government, then government should get credit for the amazing increases in productivity of business in the past 150 years of modern incorporation.