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  • Moral Hazards are Not Something to Toy With

    The recently enforced Consumer Products Safety Improvement Act created many unintended consequences for toy manufacturers and oddly enough, even for your local library, but most of which, blinded parents’ sense of caution when it comes to buying toys for their children.

    This regulation, which went into effect on February 10, 2009, mandates that all products targeted to children must contain safe levels of lead and phthalates (plastic softener). Who can be against that?

    Goodwill for starters.  The legislation not only mandates that new products are safe but also that all products sold or given freely meet these standards. The question now becomes, do you invest the money to test all your merchandise or do you destroy it?

    Goodwill plans on destroying 170 million dollars worth of goods simply because it’s cheaper.

    The economic impact of the Consumer Products Safety Improvement Act has been mapped out by The Heritage Foundation’s Alex Adrianson. You can read his thoughts here.

    The US Product and Safety Commission want to make the world safe for our children, but that is the job of the parents. When the federal government creates a supervisory board to inspect toys, it suppresses a parent’s natural inclination to be cautious when purchasing goods, which creates a moral hazard.

    Take, for instance, the Securities Exchange and Commission. Their mission is to protect investors. Now, let’s say you were approached by Bernie Madoff and he asked you to invest in his company. You might do your research and see that Mr. Madoff was investigated twice by the SEC and found nothing wrong. When a government agency, with the word security in it, signs off on the Madoff operation, why shouldn’t you? Well, we all know how that worked out.

    There is a proper role for the government in protecting its citizens (read: anti-fraud laws, and laws against dangerous toys entering the market.) The SEC and the US and Product Safety Commission do this, respectively. Ideally, harmful products will never reach the market place but if one does, people will respond and not purchase goods from that company or supplier in the future. If the company wants to survive, they will have to reemerge as an industry leader and provide safe goods – remember what happened to the fast food chain Jack-in-the-Box? The proper incentives are in place for companies to follow the rules or else they’ll be out on the street.

    So, while a proper role for government does exist, we must not let government agencies lull us away from our natural hesitations or excuse us from our responsibility to provide a safe environment for our children.

    Moreover, the overregulation from this policy is doing much more economic harm than regulatory good. Right now, the economic impact is roughly one billion dollars sitting in inventory at manufacturers and second-hand charities.Tthere is nothing fun about that.

    Posted in Economics [slideshow_deploy]

    8 Responses to Moral Hazards are Not Something to Toy With

    1. Bruce Macomber, Miss says:

      Question:

      In light of that fact that a HUGE percentage of goods come from China, where it is certain such guidelines are not adhered to (correct me if I am wrong), what impact does this regulation have upon the retail distribution of imports?

    2. Cynthia Broockman, M says:

      Please support Rep Dingell in his investigation of these very concerns and quest to compell Waxman and Pryor to FINALLY hold hearings and scrap/rewrite or amend this law. It is having disastrous economic consequences across this country for micro, small and large business alike. See Dingell's letter to Nord of March 4th http://cpsia-central.ning.com/profiles/blogs/new-
      ingell

      Support S374, HR1027, HR968 by clicking on the link at http://www.savekidsresale.com

      Thousands and thousands of pounds of perfectly good stuff is being ditched in landfills! It's illegal to sell a kid's piece of clothing with a zipper or a snap unless you 'know' it doesn't contain lead. Who are they kidding? How many Americans have survived wearing 'dangerous' hand-me-down kid's clothes.

      Why are Waxman and Pryor refusing to hold hearings. Everyone ever scheduled – cancelled. Nord is not the problem. The way this law was written, the very words used are the problem. Give American's back the use of their free will and freedom of choice! Stop Congress from regulating us to death and killing our businesses.

      READ Walter Olsen's (Manhattan Institute) superb continuing coverage of this bizarre legislation and it's impacts at http://www.overlawyered.com

    3. Ryan, Fl says:

      Another unintended consequence of the CPSIA is the banning of children’s motorsports. While it makes sense to ban lead from a baby rattle I doubt many kids are going to lick a carburetor. Companies like Yamaha have stopped selling products geared for kids (link below).
      http://www.yamaha-motor.com/sport/products/modelh

    4. Franklin's Lock says:

      Another unintended consequence of this law is that millions of old books will have to be destroyed. As if kids are eating books. You know…all those books that are out of print that have Judeo-Christian values, correct historical events, and so many of books that Liberals did not write. I am not saying this is conspiracy to live a scene in Fahrenheit 451 but it is sure ironic that books will have to be burned because of lead that support our values and principles.

      http://franklinslocke.blogspot.com/

    5. suek says:

      Hey…playing in discarded cardboard boxes was good enough for my parents, it ought to be good enough for my grandkids…!

    6. Spiritof76, New Hamp says:

      The toxic waste is in the halls of the Capitol. We must quarantine them and then apply Constitutional cleaner to clean them.

      They told us that consuming tuna fish was bad for you because it contained mercury. However, they are mandating us to use CFL which contains mercury. If it breaks you need EPA to clean it up at your house.

      The federal government has become a locust menace. It is killing off everything it touches. We are in serious trouble in this country.

    7. Barb -mn says:

      Stop importing toys and give back manufacturing business to America! China has been killing us and continues to with their products… is China the only ones? PROBABLY NOT! FREE MARKETS IN AMERICA. BRING IT BACK NOW! QUITE WASTING OUR MONEY!!!!!! LIFT THE IGNORANCE BAN OF MAN-MADE GLOBAL WARMING. TOO MUCH ARROGANCE, IGNORANCE AND STUPIDITY RUNNING THIS COUNTRY!

    8. David, DC says:

      It's alwats scary when someone blogs about something they're not familiar with. It's the Consumer Product Safety Commission, not the "US Product and Safety Commission" nor the "US and Product Safety Commission."

      Over 70% of parents already think that the government tests toys before they hit toy store shelves. Any why shouldn't they? Is there a moral hazard when we expect the FDA to make sure that drugs are safe for our kids, or the USDA to ensure that our meat isn't contaminated by salmonella?

      Unfortunately the "proper role for the government in protecting its citizens (read: … laws against dangerous toys entering the market.)" were too weak to work. Hence the 140 million recalled units in 2008; they entered the market despite the laws preventing them.

      Testing and certifying products for safety is common-sense, not a government fiat.

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