Free To Choose: a personal Statement

Who Protects the Consumer?
213
Tris. Soon, something like 99 percent of all children's sleepwear
produced and sold in the United States was impregnated with
Tris. Later it was discovered that Tris was a potent carcinogen.
On April 8, 1977, the commission banned its use in children's
apparel and provided for withdrawal of Tris-treated garments
from the market and their return by consumers.
Needless to say, in its 1977 Annual Report the commission
made a virtue of the correction of a dangerous situation that had
arisen solely as a result of its own earlier actions, without ac-
knowledging its own role in the development of the problem.
The initial requirements exposed millions of children to the
danger of developing cancer. Both the initial requirements and
the subsequent banning of Tris imposed heavy costs on the pro-
ducers of children's sleepwear, which meant, ultimately, on their
customers. They were taxed, as it were, coming and going.
This example is instructive in showing the difference between
across-the-board regulation and the operation of the market. Had
the market been allowed to operate, some manufacturers no
doubt would have used Tris in order to try to enhance the appeal
of their sleepwear by being able to claim flame resistance, but
Tris would have been introduced gradually. There would have
been time for the information about Tris
'
s carcinogenic qualities
to have been discovered and to lead to its withdrawal before it
was used on a massive scale.
ENVIRONMENT
The environmental movement is responsible for one of the most
rapidly growing areas of federal intervention. The Environmental
Protection Agency, established in 1970 "to protect and enhance
the physical environment," has been granted increasing power
and authority. Its budget has multiplied sevenfold from 1970 to
1978 and is now more than half a billion dollars. It has a staff of
about 7,000.
17
It has imposed costs on industry and local and
state governments to meet its standards that total in the tens of
billions of dollars a year. Something between a tenth and a
quarter of total net investment in new capital equipment by
business now goes for antipollution purposes. And this does not

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FREE TO CHOOSE: A Personal Statement
count the costs of requirements imposed by other agencies, such
as those designed to control emissions of motor vehicles, or the
costs of land-use planning or wilderness preservation or a host of
other federal, state, and local government activities undertaken
in the name of protecting the environment.
The preservation of the environment and the avoidance of un-
due pollution are real problems and they are problems concerning
which the government has an important role to play. When all
the costs and benefits of any action, and the people hurt or
benefited, are readily identifiable, the market provides an ex-
cellent means for assuring that only those actions are under-
taken for which the benefits exceed the costs for all participants.
But when the costs and benefits or the people affected cannot be
identified, there is a market failure of the kind discussed in Chap-
ter 1 as arising from "third-party" or neighborhood effects.
To take a simple example, if someone upstream contaminates
a river, he is, in effect, exchanging bad water for good water with
people downstream. There may well be terms on which the people
downstream would be willing to make the exchange. The problem
is that it isn't feasible to make that transaction the subject of a
voluntary exchange, to identify just who got the bad water that
a particular person upstream was responsible for, and to require
that his permission be obtained.
Government is one means through which we can try to com-
pensate for "market failure," try to use our resources more effec-
tively to produce the amount of clean air, water, and land that
we are willing to pay for. Unfortunately, the very factors that
produce the market failure also make it difficult for government
to achieve a satisfactory solution. Generally, it is no easier for
government to identify the specific persons who are hurt and
benefited than for market participants, no easier for government
to assess the amount of harm or benefit to each. Attempts to use
government to correct market failure have often simply substi-
tuted government failure for market failure.
Public discussion of the environmental issue is frequently char-
acterized more by emotion than reason. Much of it proceeds as
if the issue is pollution versus no pollution, as if it were desirable
and possible to have a world without pollution. That is clearly

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