Saturday, April 11, 2009

Can the Hair Club for Men Help Solve the Food Safety Problem?

Ian Ayres

Crosspost from Freakonomics:

Here’s a post I coauthored with Peter Siegelman (an economist who teaches at University of Connecticut law school) who is one of my earliest and most frequent coauthors (see, for example, here and here).

Hair ClubScreenshot from

By now, virtually everyone in the country has heard that the Peanut Corporation of America knowingly shipped peanut products contaminated with salmonella bacteria, leading to the deaths of at least nine people and sickening 22,500 others. Last year, the Westland/Hallmark slaughterhouse processed meat from “downer” cattle that were too sick to stand, forcing a recall of 143 million tons of beef. President Obama has spoken of a food-safety “crisis” confronting the country, and that over-used term does not seem to be an exaggeration in this case.

So what should we do? Government inspectors are too few in number to visit all of the thousands of food preparation facilities, let alone conduct thorough inspections.

Some large-scale purchasers conduct their own inspections of their suppliers, or the suppliers themselves pay for inspections, as was apparently the case in the peanut incident. But private audits have not proven to be much more effective than, say, the private credit-rating agencies that gave AAA ratings to all those mortgage-backed securities.

Maybe we should take a lesson from the 1980’s commercials for the Hair Club for Men. You may remember those cheesy ads, which concluded with the pitchman declaring that “I’m not only the Hair Club president, I’m also a client.” The right way to align the incentives of management with those of the customers, in other words, may be to make sure that the managers are customers. One way we could implement this would be to require inspectors to certify that they saw the president of the company (or perhaps the plant manager) eating a substantial helping of the product being sold. (Maybe the inspectors should be required to eat some as well!) Someone who knows that his downer-burger was made from a cow that was too sick to stand, or his salmonella-butter-and-jelly sandwich contained infested nuts, might not be so happy about his working lunch.

The idea is really an update of a very old idea. The court food taster’s job was to make sure that the food was not tainted — and the chief chef, like the C.E.O., is the perfect person to take action to make sure that a food product is safe. Managers would likely be more careful about inspecting their plant’s output if they knew they’d have to eat enough of it to make them pretty sick.

Mayor Bloomberg isn’t (to our knowledge) the president of a food company. But as mayor, he implements a version of this strategy. By riding the subway to work each day (well, at least for part of his commute), he has better incentives to make sure that the trains are clean, safe, and timely.

We routinely ask managers to hold company stock to better align their interests with the interests of shareholders. The ingestion idea is analogously a way to better align the manager’s interests with the interests of consumers.

The F.T.C. has wisely required that endorsers actually use what they endorse (you can read the regs. here). The law might do well to hear an implicit endorsement from food managers that they use and approve of their products. This would just be a default representation by a corporation — and could easily be disclaimed (say, in public filings). But consumers might legitimately worry about buying products that managers were unwilling to consume themselves. Just as “skinny cooks can’t be trusted,” we might worry about managers who aren’t willing to drink their own Kool-Aid.

Of course, this is far from a perfect solution: despite the Hair Club president’s endorsement, the product seems to have been every bit as cheesy as the ads themselves. Still, forcing managers to publicly “eat what they sell” would at least provide them with a vivid sense of the risks they are imposing on everyone else, a perspective that seems to be all too lacking these days.