Comment on Fair-Trade Labels . Nov , 1 , 2009 OECD Workshop on Societal Concerns Yanghoon Song Chungbuk National University Korea. ‘Fair’ in what sense? A Simple Test – Are you Utilitaririan or Egalitarian?. One gift, two boys Boy A: happy boy. Even a small gift will please him
Comment on Fair-Trade Labels
Nov, 1, 2009
OECD Workshop on Societal Concerns
Chungbuk National University
One gift, two boys
Boy A: happy boy. Even a small gift will please him
Boy B: unhappy boy. Even a big gift will not please him
Insist on giving the gift to A, you’are Utilitarian. Otherwise, you’are Egalitarian
Fair-Trade seems to base on Egalitarianism?
Bridging the gap: What should happen will happen?
Different value systems lead to different welfare distribution
Between the two:
Need to broaden the perspectives on who loses and who gains.
Ex: Fair-Trade label will benefit producers in developing countries but will hurt consumers in developing countries.
How about the others?
Sales of Fair-Trade labelled foods grow fast
Fair-Trade as a form of price distortion
Price distortion leads to inefficient resource allocation and hinders efficeint structural adjustment may slows down economic growth
Bigger pie but relatively smaller bite for agricultural producers?
Providers of Fair-Trade labled food have more info. than consumers info. asymmetry
Ubiquitous problem for organic food, imported meat vs. domestic meat, for example
Issue of enforceability : 3 measures to decrease info. asymmetry (1) increase the amount of fine for cheating (2) increase the prob. of being busted when cheat (3) decrease the price gap btwn the truly labelled and falsely labelled.
Can’t use (3) b/c prices are given
In recent study, using Bayesian Game Theory and info. entropy, it is found that (1) and (2) work, but info. asymmetry can’t be lowered under certain level for Korean beef mkt
For Fair-Trade labelling, (1) can’t be used b/c the organization is private. (2) could be used but may not be so effective
Then, how cheating(or info. asymmetry) can be controlled for Fair-Trade?
Fair-Trade labelled products such as handicraft, cotton and coffee happen to be labor-intensive or for a reason?
Grain&meat production: more capital intensive, developed countries dominate the world grain and meat mkts?
Any prospect for Fair-Trade labels on grain or meat products to be seen any soon?
Society is changing what it is asking of science, the role of science in decision making is quite complex.
Still, the economists hold to their sway:
Still the old litany echoes anew,
Making conditional all that they say;
Keeping them fixed in the orthodox pew.
Open a page of some learned review;
Look to the footnotes, and one will provide,
“So-and-so proves that this statement is true,
All distributional issues aside.”
Sir, if I learned just a dollar or two
Each time I heard that expression applied,
Life would be bliss with the wealth I’d accrue
(All distributional issues aside)
What do economists study today?
Anything anyone wants to pursue:
Monarchs of all that they care to survey,
Subjects beyond their dominion are few.
Still, there is one that they often eschew,
Leaving this caveat standing astride
Much of what legal economists do:
“All distributional issues aside.”
Where is the person who acts in this way?
Where the consumer or business who
Works without caring who pockets his pay,
Shunning discussion as strictly taboo?
Search from Australia to Kalamazoo;
Journey to anywhere humans abide:
No one (in practice) could live by the view,
“All distributional issues aside.”
Harsanyi, John (1975a) “Can the Maximin Principle serve as a Basis for morality? A critique of John Rawls theory”, American Political Science Review, 59, 594-606
Harsanyi, John (1975b) “Nonlinear Social Welfare functions: Do welfare economists have a special exemption from Bayesian Rationality?”, Theory and Decision, 6, 311-332
Harsanyi, John (1976), “Essays on Ethics, Social Behavior and Scientific Explanation”, Dordrecht, Holland/Boston-U.S.A., D. Reidel Publishing Company
Rawls, John (1958), “Justice as fairness,” Philosophical Review, 67, 164ff
Rawls, John (1971) “A Theory of Justice”, Harvard University Press, Cambridge Mass.
Sen, Armartya K (1970) “Collective Choice and Social Welfare” Holden-Day, San Fransisco
Sen, Armartya K (1973) “On Economics Inequality” Clarendon Press, Oxford
Richard Craswell, “Ballade of Distributional Considerations,” Journal of Legal Education, vol 39, no 1 (March 1989), p 54.1989