Comment on fair trade labels
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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

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Comment on Fair-Trade Labels

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Comment on fair trade labels

Comment on Fair-Trade Labels

Nov, 1, 2009

OECD Workshop on Societal Concerns

Yanghoon Song

Chungbuk National University


Fair in what sense a simple test are you utilitaririan or egalitarian

‘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

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?

Implication of value systems such as utilitarianism and egalitarianism on economics

Implication of Value systems such as Utilitarianism and Egalitarianism on Economics:


Linear SWF



L-shaped SWF


Non-linear SWF

Bridging the gap: What should happen will happen?

Different value systems lead to different welfare distribution





Between the two:


Fair to whom

Fair to whom?

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?

Impact of fair trade labelling on growth of developing countries

Impact of Fair-Trade Labelling on Growth of Developing Countries

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?

Limitation of any labelling information asymmetry

Limitation of Any Labelling – Information Asymmetry

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.

Limitation of any labelling information asymmetry1

Limitation of Any Labelling – Information Asymmetry

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?

Grains and meat products tend not to be fair trade labelled why

Grains and Meat Products Tend NOT to be Fair-Trade Labelled, why?

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?

Comment on fair trade labels

Society is changing what it is asking of science, the role of science in decision making is quite complex.

  • Pielke 2007

Ballad of distributional considerations craswell 1989

Ballad of Distributional ConsiderationsCraswell, 1989

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

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