Why Encourage Discrimination? The Case of Mandatory National Origin Labels
You’ve probably noticed that imports are labeled by national origin. This is usually required. The most obvious effect of such regulation is to slightly disadvantage foreign producers by raising their cost of production. But the only slightly less obvious effect is to reduce consumers’ cost of discrimination. If you have to do your own homework to discover products’ national origin, you’ll probably accept your ignorance and decide based on price and apparent quality. If regulation imposes national origin labels, you might play favorites instead.
Once you start throwing around the charge of “discrimination,” however, it’s easy to see that there are two distinct kinds of national origin discrimination that consumers might commit.
One is standard taste-based discrimination – tipping your personal scales against products from countries you don’t like. When I was a kid, crusty American war veterans kept the fire of World War II glowing by refusing to buy goods from wicked Japan.
The other, however, is statistical discrimination – rationally using national origin as a signal of product quality. Plenty of people still aren’t fond of the Germans, but still eagerly buy products with the “Made in Germany” label because they correctly identify German manufacturing with quality.
Given Americans’ near-religious objections to both taste-based and statistical discrimination, it’s puzzling that the law doesn’t merely allow, but actively facilitates them. Most Americans, I suspect, would defend these laws with arguments that would make them cringe in other contexts. E.g. “Consumers have a right not to support countries of which they don’t approve,” or “Knowing what country a product comes from helps consumers make a wise choice.”
Challenge: Is anyone willing to often even a semi-plausible economic argument in defense of mandatory national origin labels?