CPSIA – Nancy Nord Op-Ed on the Wasteful 100 ppm Lead Standard

From the Washington Times (July 18, 2011): NORD: Playing around with toy makers Stricter lead regulations will cost jobs without making children’s products safer The Obama administration has recognized that excessive and unnecessarily burdensome regulation is a drag on the economy. As the administration has worked to promote job creation, it has publicized its efforts directing agencies to eliminate or revise unnecessarily burdensome and inefficient regulations. Apparently, the Consumer Product Safety Commission has not gotten the word. The commission’s failure to get the word is no more apparent than in its efforts to implement the Consumer Product Safety Improvements Act. The legislation was enacted after agency recalls of imported products illuminated the issue of import safety. The goal of the law is to assure that products intended for children are safe, a goal for which there is universal agreement. The devil, of course, is in the details, and the details of implementing this laudable statutory goal are devilish for sure. For the rest of the article, please click here .

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CPSIA – Nancy Nord Op-Ed on the Wasteful 100 ppm Lead Standard

CPSIA – NAM Ad In The Hill Supporting Passage of ECADA

From The Hill Newspaper, dated July 21, 2011: The time left to Congress to act on amending the CPSIA before the 100 ppm lead standard boom crushes more businesses and jobs is only 24 days .  [ Html version of the ad ]  This includes the time to get through the Senate, then conference, then to the President for signature.  Not a lot of time . . . and par for the course for this government, I suppose.  Will they act in time?  I certainly hope so but with Henry Waxman doing his evil best to prevent any progress on this issue, I don’t have high expectations.  Let’s hope some Democrats still have a conscience.

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CPSIA – NAM Ad In The Hill Supporting Passage of ECADA

CPSIA – You’re Only SAFE if It’s 99.99% Lead-Free . . . But Don’t Tell the EPA

Last week, the Democrats took action to protect you and your kids from the perils of lead.  As we have been relentlessly reminded by non-scientists, there is “no safe level of lead” – just ask Bob Adler and Inez Tenenbaum.  Now, in the wake of the conclusion that reducing lead content from 300 ppm (lead-in-substrate) to 100 ppm will produce “minimal” health benefits (read, none), the CPSC Commission voted three Democrats to two Republicans to reduce the lead limit to 100 ppm.  Reducing lead standards from 300 ppm to 100 ppm can be expressed a different way mathematically.  This is a reduction from 99.97% lead-free to 99.99% lead-free.  [ Credit to Anne Northup for the mathematics!] This will cost billions and the economic devastation was ALSO documented by the CPSC Staff in their analysis on the 100 ppm standard .  Nevertheless, the non-scientists who rule the roost at the CPSC saw nothing but health upsides in this technologically feasible but economically absurd feat.  And, as we know, injuries to children have an infinite value when you are unable to assess risk.  The numbers work out – yes, the cost may be in the billions and the reduction in incentives will cost yet more, but the savings are infinite!  Even one avoided injury is an infinite savings.  Queue the tears . . . .  What-a-deal! Ironically, last week the EPA bowed to political pressure and in an exercise of common sense, eased up on precautions against lead-in-paint in housing stock.  Hello?  Did you catch that one?  Twelve Senators signed a letter in April to protest this proposed rule as excessive and damaging to small business, and bingo, something good finally happened.  Olympia Snowe was so delighted that she put out a press release to celebrate it.  Please note that the EPA acknowledges that lead-in-paint in housing stock is the principal source of lead poisoning in the United States.  [It sure ain't toys.]  They have previously acknowledged in writing ( lucid writing, actually ) that their rules on lead need to be measured and that the economic impact of their rules must also be carefully assessed. The EPA does not attach an infinite value to injuries, even to children .  They aren’t idiots.  Draw your own conclusions. Hello, Senators, anyone home? The foundation of the “no safe level of lead” slogan has been laid by the American Academy of Pediatrics, a political organization masquerading as a professional organization.  This organization was aggressively and justifiably attacked by Anne Northup during the 100 ppm Commission meeting.  It is rare to see anyone attack these people, perhaps besides me (not a fan . . .), but do they ever deserve it.  Here is what Dr. Dana Best of the AAP told a House Subcommittee on April 7, 2011: ” Exposure to lead is amply documented to cause the loss of intellectual capacity. On average, children whose blood lead levels (BLLs) rise from 10 to 20 micrograms per deciliter (mcg/dL) lose two to three IQ points. More recent studies have shown an even greater impact on IQ of BLLs under 10 mcg/dL. Key studies reported a loss of 4 to 7 IQ points in children whose lead levels rose from 1 mcg/dL to 10 mcg/dL. These studies suggest that “low” levels of exposure – meaning BLLs less than 10 mcg/dL – cause proportionately greater harm than higher levels. . . . The medical and scientific literature are in substantial agreement that an increase of 1 mcg/dL in blood lead level is capable of causing the loss of approximately one IQ point in children whose blood lead level is under 10 mcg/dL.”  [Enphasis added] Dr. Best, well-known for her fear of children licking bicycles , has previously posited “millions” of victims of lead-in-substrate .  Despite taking such a dramatic stand, Dr. Best cannot seem to name even ONE victim or lead-in-substrate or provide a single case history demonstrating that such a victim has ever been located . . . anywhere.  Not even one.  Doesn’t matter, apparently.  When you’re right, you’re right. But is Dr. Best actually RIGHT?  Fascinatingly, when Dr. Best plugs the notion that driving lead concentrations below 10 mcg/dl will have some defined (definite) health benefits, she flies in the face of the official AAP Policy Statement on Lead Exposure in Children (recently restated on May 1, 2009).  The Policy Statement does NOT support her assertions – and she is on the committee that wrote/approved the statement.  You might say she got it wrong, or you might just say she’s a liar.  Is it really possible to be that incompetent?  Here’s what the Policy Statement says : ” Canfield et al recently extended the relationship between blood lead concentration and IQ to blood lead concentrations less than 10 g/dL. They observed a decrease in IQ of more than 7 points over the first 10 g/dL of l ifetime average blood lead concentration. . . . To confirm the adverse effects of lead on IQ at these concentrations, however, more children whose blood lead concentration has never been more than 10 mcg/dL should be studied. A reanalysis of the primary data from several of the prospective studies is underway to help resolve this issue. At the moment, however, these data have not yet been incorporated into policy, and the CDC16 and AAP24 both currently use 10 mcg/dL (Table 2) as the blood lead concentration of concern. “  [Emphasis added] The Canfield study is the study Dr. Best cites in her Congressional testimony above.  Canfield predates the restated Policy Statement (obviously, or else it wouldn’t be cited), and thus forms part of the basis of the recommendation for further study.  The AAP recommends further study to confirm its suspicions - and those studies aren’t done.  Dr. Best certainly didn’t cite them.  The AAP Policy Statement goes on to recommend: “RECOMMENDATIONS FOR GOVERNMENT:  Fund studies to confirm or refute the finding that blood lead concentrations of less than 10 mcg/dL are associated with lower IQ. The next important step in lead research is conducting of studies in which confounding by socioeconomic factors is not so strong. Funding of studies in this area needs to be given high priority, as was done in the early 1980s when the question of effects of blood lead concentrations less than 20 mcg/dL was raised.”  [Emphasis added] So the AAP acknowledges in its policy statement that the case is not exactly open-and-shut.  Dr. Best, a member of the AAP’s Committee on Environmental Health , continues to bash away on the hustings with her hyperbolic and conclusory message.  Perhaps she feels that no one will likely check her work or contest her blather, so why not? Senators?  Congressmen?  Does anyone care about the effects on business when it comes to the out-of-control CPSC?  There are now 25 days until the 100 ppm standard goes into effect retroactively .  Starting packing up, guys.  Will Congress act?  I have no idea – this is not, and never has been, a question of doing the right thing for you or me or for anyone, really.  The Dems have an agenda, a political agenda, and your problems are beneath their consideration.  I can’t say who will be the winners, but the losers are well-known by now. 

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CPSIA – You’re Only SAFE if It’s 99.99% Lead-Free . . . But Don’t Tell the EPA

CPSIA – Alliance for Children’s Product Safety Reacts to 100 ppm Decision

The Alliance for Children’s Product Safety, a coalition of small business owners, manufacturers, crafters and entrepreneurs who are impacted by the Consumer Product Safety Improvement Act (CPSIA), issued the following statement regarding the CPSC’s passage of the 100 ppm for lead content rule today by a vote of 3-2. “Today, just three days after President Obama issued an Executive Order instructing the CPSC and other independent agencies to examine all rules for ineffective and unnecessary burdens and instructed the agency that decisions should be made only after consideration of the costs and benefits of new regulations, the CPSC enacted yet another costly rule that will do nothing to improve product safety but will cause further job losses in the children’s product market. The CPSC has already acknowledged that businesses will not be able to meet the 100 ppm lead standard without cost and disruption, and that consistent compliance with the new standard will be nearly impossible due to material and inter-lab variability and regulatory uncertainty. Most importantly, overwhelming costs imposed by the new standard will disproportionately affect smaller companies. On the other side of the ledger, the CPSC admits the health benefits of the new standard will be ‘minimal’. President Obama’s Executive Order states ‘Wise regulatory decisions depend on public participation and on careful analysis of the likely consequences of regulation. . . . To the extent permitted by law, such decisions should be made only after consideration of their costs and benefits (both quantitative and qualitative).’ The President’s order notes the duty of the CPSC to regulate for public health and safety ‘while promoting economic growth, innovation, competitiveness, and job creation.’ The new rule fails Mr. Obama’s test. It is disappointing that the majority of CPSC Commissioners ignored the explicit terms of the President’s order governing regulatory excess. The 100 ppm standard is a prime example of the economic self-destruction caused by the CPSIA: the imposition of costly and burdensome regulations that don’t improve product safety. It is now up to Congress to fix the numerous ‘unintended consequences’ of the CPSIA before more small businesses are forced to go out of businesses and more jobs are lost.” The Alliance for Children’s Product Safety, Chaired by Rick Woldenberg, is a coalition of small business owners, manufacturers, crafters and entrepreneurs who are impacted by the Consumer Product Safety Improvement Act (CPSIA). For additional information, please visit www.AmendTheCPSIA.com or contact Caitlin Andrews at 202-828-7637.

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CPSIA – Alliance for Children’s Product Safety Reacts to 100 ppm Decision

CPSIA – 100 ppm Vote – What They Knew and When They Knew it

What did they know and when did they know it?  The vote on 100 ppm is going on this AM, so it’s too late to do anything about the projected 3-2 vote implementing this pointless and self-destructive provision of the CPSIA.  From my perspective, having investing time and money in trying to stop this train wreck, it has been a long time since there was anything we could do about it.  It’s not our country. I have written about this provision endlessly in this space. I thought I would just put up a couple bits of info previously disclosed here for perspective on the vote. The 100 ppm lead limit vote is a vote of conscience.   The Commission knows what they are about to unleash.  I told them in no uncertain terms during my February 16th testimony : From the CPSC Staff analysis of 100 ppm : “[While] staff does not have data on potential lead exposure from products that have lead content less than 300 ppm, but more than 100 ppm, staff expects that the overall contribution of such products to lead exposure in children is minimal.” “Staff has found no intentional uses of lead in materials at concentrations at or near any of the three statutory lead limits (i.e., 100 ppm, 300 ppm, or 600 ppm). . . . Without the intentional use of lead in materials or the use of certain recycled materials, the lead content of most materials is substantially below the mandated limits.” Notably, NO consumer group has responded to my call or Congress’ call for the identities of previous victims of the “hazard” that the CPSC purports to regulate.  With no victims identified EVER ANYWHERE , the claims of benefits from this provision are spurious at best. What is the EPA’s opinion on lead in dirt ?   400 ppm in play yards and 1200 ppm elsewhere is just fine.  No word yet whether G-d, the manufacturer of dirt, has to provide comprehensive testing for compliance. What is the economic impact of this change?   The CPSC did not do a cost-benefit analysis as Obama’s Executive Order requires now, but only provided “Economic Information” (cost only, no benefit analysis): “[Bringing] products that do not currently comply with the 100 ppm limit into conformance is generally expected to result in increased manufacturing costs. . . . [Manufacturers] of children’s bicycles experienced a 20 to 25 percent increase in the costs of metallic components when the lead content limits were reduced from 600 ppm to 300 ppm. . . . Learning Resources, Inc., a manufacturer of educational materials and learning toys, said it expects a 10 to 20 percent increase in the cost of producing finished goods when the lead content limit is reduced to 100 ppm. . . . testing costs may rise . . . . Because there are limits to the reduction in profits that firms are willing and able to accept, some manufacturers are likely to reduce their selection of children’s products or exit the children’s market altogether. Some manufacturers may even go out of business. . . .” “The higher costs associated with metal components will probably result in some efforts to substitute lower cost materials. Plastics, for example, might be substituted for metal parts in some products. Some of these types of substitutions may affect the utility of the children’s products. . . . Additionally, and as noted in comments from the Handmade Toy Alliance and the Bicycle Product Suppliers Association, it is likely that the costs will have relatively greater consequences for smaller manufacturers and artisans, who have less bargaining power with components suppliers, fewer technical resources, smaller production runs to spread testing costs over, and smaller product lines.. . . ,There appear to be few readily available options for mitigating the costs associated with the 100 ppm content limit. . . .” Mr. Obama’s Executive Order requires the agency to make actual cost-benefit assessments of this change in law now.   I made the same call on February 16, 2011 during my testimony on 100 ppm: You can find numerous other clips from the 100 ppm hearing in posts in this space in late February or on YouTube.  You can also read my comment letter on 100 ppm.

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CPSIA – 100 ppm Vote – What They Knew and When They Knew it

CPSIA – Hey Republicans, You Aren’t Allowed to Think!

During the July 7th House Energy and Commerce Committee’s Oversight Subcommittee hearing on regulatory reform among independent agencies (a hearing which presumably prompted Obama’s Executive Order two business days later), Ranking Member Diana DeGette (D-CO) trotted out one of the most common arguments against change: “I want to talk . . . about the recent proposals on the other side of the aisle that would undermine the Consumer Product Safety Commission and some of the other good work that they’ve done.  Three years ago, this Committee and this Congress worked hard in a significantly bipartisan manner to put meaningful reforms for consumers into the [CPSIA].  This has yielded unbelievable benefits. . . . So I think it’s important to know this, that these reforms were worked out by this Committee in one of the last great efforts that was completely bipartisan.  We should embrace that.” This is a familiar argument by Dems.  The law passed almost unanimously, guys, so it’s wrong to try to change the law now.  What logical point is DeGette making here?  How is this argument supposed to persuade us? At first, I thought the Dems were simply arguing the infallibility of Congress.  Congress never errs, so how can we doubt something every Congressman voted for?  Congress is all-knowing and cannot pass a bill without doing the right thing.  [And as Obamacare indicates, Congress apparently doesn't even need to read the bills to get them right.] To argue that this law is a product of infallible judgment is quite a leap.  Even the unanimity of the law hardly explains the mental state of Congress at the time.  Congress was ANGRY.  Have you ever said or done anything in anger you later regretted?  ‘Nuf said. No, an infallible Congress cannot be what Ms. DeGette is pushing.  Actually, I think it’s far simpler.  She is saying that the Dems were right and are still right and have no need or interest in changing their position.  She points out that the two parties agreed on the law’s text in 2008 and passed it almost unanimously.  Now the Republicans want to make serious changes.  She says the Republicans should return to their bipartisan brothers, the Dems, and support the work they did three years ago.  She essentially calls into question the motivation of the Republicans in opposing the Dems now, suggesting that this is a by-product of a broken Washington, where partisan posturing is all we can expect from these people. At the heart of her reasoning is the fact that the Dems are holding their course behind the law, and the Republicans have moved, and now she wants the Republicans to be more “bipartisan” by returning dutifully to agreement with the unwavering Dems.  Or is it the intransigent Dems?  A matter of perspective, I suppose.  Come back to the fold with the Dems!  DeGette’s argument relieves the Dems of any obligation to reconsider ANYTHING.  How convenient.  How Waxman-like. Here’s something the Dems won’t tell you – the law was jammed down the throats of the Republicans in both Houses of Congress.  Congress was controlled by Nancy Pelosi at the time (she of San Francisco, of course).  The CPSIA was purpose-built for getting Democrats elected and was not negotiated with the Republicans in any sense you would recognize.  On the national stage, the Obama wave was cresting at that time, too, so what do you think the political calculation was in the Bush White House and in the Minority ranks in either House on the CPSIA?  The Republicans knew that any opposition to any aspect of this law, regardless of how awful, would mean attack TV commercials on support for children’s safety at a time of great electoral vulnerability. Bush agreed to sign the bill to protect his party, not to protect kids.  At least it neutralized a possibly existential political threat.  Each Republican Congressman or Senator had to make a similar political calculation.  Only four people (Ron Paul and three Senators) were politically courageous enough to stand up against this excessive bill.  It is certain that far more than four members of Congress found fault with the CPSIA at the time.  The 2008 “great bipartisan effort” that DeGette romanticizes is an urban legend, a fiction, a fairy tale, a story.  She wants to cow the Republicans into losing their political nerve at this critical juncture when some kind of momentum behind our position may actually be growing.  She wants them to think ballot box. And for those of you who pepper me with defense of Dems or reminders of past Republican “sins”, all I can say is this:  the Republicans have nothing to gain politically from their three-year effort to right this wrong.  They are taking electoral risks to help us, and have been unwavering in their support of our mission. I can only believe that this is because they actually are trying to do the right thing.  This has never been about policy or safety. The Republicans know that this issue has been played for political gain by the Dems with no remorse over the devastation they have wrought to your businesses, your markets or job creation.  For them, it’s just too juicy an opportunity to get reelected.  And if that’s so, it must be the reverse for the Republicans. The Republicans are taking this risk on your behalf, for your benefit. I hope there’s a nice occasion to say “thank you”.  In the meantime, the likes of Diana DeGette must be vanquished.

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CPSIA – Hey Republicans, You Aren’t Allowed to Think!

CPSIA – The Cost of Government Regulation Examined

I recommend that you check out Wayne Crews’ article in Forbes dated July 6 entitled ” The Cost of Government Regulation “. This article predates the recent House Oversight hearing or the Obama Executive Order on Independent Agencies and Regulatory Reform. Mr. Crews cites regulatory costs in excess of $1 trillion for this excess ($1.4 trillion for the self-destructive overreaction to Enron, Sarbanes-Oxley alone). Costs of this magnitude makes cost-benefit analysis something of joke. He notes: “Agencies think within their squares and have conflicts of interest in assessing their own benefits. Regulators can ignore the opportunity costs and moral hazard they create. Even now they are in the process of distorting entire industry structures via limiting access to energy, antitrust regulatory abuse and “net neutrality” rules in telecommunications and government “stimulus” with regulatory strings attached.” Enough already!!!

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CPSIA – The Cost of Government Regulation Examined

CPSIA – Hypocrisy on Display

CPSC Chairman Inez Tenenbaum was home in South Carolina last week and made an appearance to commemorate a new State ATV safety law known as ” Chandler’s Law “.  This law is supported, even encouraged, by the ATV industry.  Notes Paul Vitrano of the SVIA, “Chandler’s Law is a major step in the right direction. It’s something to be celebrated and we extend sincere thanks to everyone involved in its enactment. But there’s much more work to be done in South Carolina and all over America. ATVs are safe when used properly, but they are not toys. No responsible parent would hand the keys to the family car over to their child and send them on their way.” [Emphasis added] ATVs are not toys.  But ATVs are regulated by the CPSIA as though they are toys.  Notably, as a consequence of the CPSIA, access to youth-model ATVs has been all but eliminated .  Incredibly, there is still NOT ONE test lab certified by the CPSC to test ATVs for compliance either.  Testimony to this effect was given at the February 16th CPSC hearing at which I appeared.  Jay Howell of the CPSC acknowledged that the expense of testing ATVs cannot apparently be recovered by labs because there are so few youth model ATVs left on the market.  No lab wants to invest for testing at a loss.  The market speaks?  The absence of youth model ATVs from the market also means that they are not being rented out.  Rental and sales are the same thing under the CPSIA.  They’re gone. Interestingly, Chandler’s Law prohibits children under 16 from riding adult-sized ATVs.   If you can connect even two dots, you will realize that this is a tacit ban on children riding ATVs.  Period.  This is the secret agenda of the consumer group zealots like the former AAP majordomo Cindy Pelligrini as she admitted at a meeting of stakeholders with the House Energy and Commerce Committee staff on January 6, 2011.   So in other words, the consumer groups have a political agenda that they cannot accomplish via direct legislation – taking away ATVs from your kids, even using youth model ATVs developed at the request of the CPSC.  ATV riding is too popular regionally for a ban to ever pass Congress - so the consumer groups obtained their objective under the cover of darkness with the CPSIA and sympathetic Dem plants on the CPSC Commission.  And here’s the hypocrisy of Ms. Tenenbaum on public display.   Appearing to herald the restrictions on youth access to adult-sized ATVs, Ms. Tenenbaum does not mention that she is ALSO responsible for the removal of youth-model ATVs from the market and that Chandler’s Law essentially implements a ban on ATV use by children under 16 years of age in South Carolina.  Had she admitted it, the publicity storm would have been bad for South Carolina legislators and Dems all over the country.  She’ll never breathe a word. Not unlike the rest of the CPSIA mess, the reality is kept beneath a cloak, out of sight.  You will only notice, if you ever do, when you go to the store and try to buy something wonderful that you have used safely in the past . . . and it’s gone.  Where did it go?  The self-appointed ” fun suckers ” have been there first.  Youth model ATVs – they’re against them.  Trampolines, backyard pools, fireworks, rhinestones, brass instruments  - all too “dangerous” for you to be allowed to use.  They know what’s best, and you should be thankful. It’s our country but they’re running it.  When are you going to do something about it?  After three years, you don’t have much time left to figure it out.

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CPSIA – Hypocrisy on Display

CPSIA – Do Accidents Happen?

Accidents happen . It’s an old saying. Once upon a time acts of fate were no one’s fault and we each bore the risk individually. Today, things seem different – when bad things happen, the search begins for someone to blame. The media and politicians feed this trend in hysterical tones (they profit by doing so). Individual responsibility is passé. In the case of children’s products today, blame is often laid at the feet of the product or its manufacturer by the CPSC. In some cases, the fault is clear (the hazard is “substantial”); in other cases, it’s not nearly as clear. In this article, I am only interested in those more ambiguous cases where there is an element of fate or other factors outside the control of the manufacturer. Should we be satisfied with how the CPSC draws the line? CPSC as Allocator The CPSC’s assignment of responsibility for injuries (in the form of recalls) is an inherently “legal” process. Our laws allocate risk and responsibility in society in the form of rights. About 75 years ago, legal theorists developed a field of inquiry known as “ law and economics ” which held that legal systems incorporate economic principles which ensure efficient allocation of resources and promote economic activity. “Rights” are essentially factors of production in economic terms. Ronald Coase of the University of Chicago Law School won the Nobel Prize in Economics in 1991 for his seminal work on law and economics over the preceding 50+ years. Notably, Obama regulations “czar” Cass Sunstein is an ex-University of Chicago Law School law professor, as is President Obama himself.  Sunstein is closely associated with the study of law and economics . The issues confronting the CPSC over injuries to children are not emotional in nature at all. They are actually purely economic issues because the CPSC is a market regulator. It is an objective fact that injuries to children or other consumers are a cost we bear in exchange for the benefits of economic activity (availability of innovative manufactured products, the provision of jobs, etc.). Naturally, as a community we want to bear as few such costs as is efficient, again to promote growth, hence a societal interest in reducing injuries. The interest in reducing injuries is economic, however; we are not indifferent to cost and judge them in light of corresponding benefits. For instance, this explains why you do not wear a crash helmet on the way to work despite your awareness that fatal auto accidents happen every day. The costs outweigh the benefits. As a regulator, the agency brokers costs among a large group of parties. Consumer costs related to injury (including emotional loss and lost income, among other things) are weighed against manufacturer and market costs (recall costs, damage to brands, decreased growth, lost jobs, etc.). Whether the CPSC does the math properly or not, their decisions allocate resources by directing that one party incur costs to protect other parties from incurring costs. These decisions are purely economic even if stated in emotional terms. It is therefore clear that CPSC regulators have the capacity to promote economic growth or stifle it. Is the Goal “No Injuries” Ever? The CPSC has a legal responsibility to differentiate between a product hazard that causes accidents and accidents caused by the hand of fate. Congress limited the authority of the agency to regulate only those product hazards deemed “substantial” (a term of art under the CPSA and FHSA). As stated here many times previously, I believe the CPSC under current leadership regularly exceeds its legislative authority in this regard. The CPSC acts as though its role is to move society toward a Utopian ideal in which children are never injured or die prematurely. While I certainly don’t endorse injuries to children, the Utopian ideal of injury-free childhoods is illusory. In fact, an injury-free childhood could only be achieved at a very high cost. If the CPSC attaches an almost infinite value to preventing injuries, their allocation decisions will always constitute a transfer (a tax) and cause economic inefficiency (depress economic activity). This over-appraisal of the cost and consequence of childhood injury is illustrated by recent remarks of Chairman Inez Tenenbaum about a recall of one million pool drain covers. Ms. Tenenbaum appears to justify the recall on the possibility of injury despite media reports confirming that no deaths had occurred since 2009: “I want to make it clear that this recall announcement does not mean that one million drain covers will need to be replaced or repaired. The recalled covers were marked with the wrong flow rating . . . . Now for those public pools and spas that need their covers replaced or fixed, I have an obligation to advise that those facilities be closed at this time. They should reopen as soon as the work is completed that addresses the recall and brings the facility into compliance with the law. I know this is a very difficult message for many communities to hear so close to Memorial Day weekend, but we cannot risk a child becoming entrapped in a recalled drain cover .” [Emphasis added] This unstated policy attaching infinite value to childhood injury is much more than a strict liability standard because the CPSC only acts after an assessment of fault (rather than simply assigning responsibility). Isn’t the agency saying that the actions or inactions of manufacturers cause accidents? Recent Recalls Allocate Uncontrollable Costs to Manufacturers Consider some recent recalls for perspective: a. Big Lots recalls bunk beds recalled after a three-year-old child died when caught under a futon. b. Maclaren recalls one million strollers sold over 11 years because of more than a dozen fingertip amputations caused by a hinge. c. Mattel recalls more than 7,000,000 children’s trikes sold over 14 years because of genital injuries to ten young girls jumping on the trike. While it may be hard to look past these sometimes grisly childhood injuries, each of these cases calls into question whether the injuries were really the fault of the manufacturer. It’s not worth defending the product designs – let’s concede that in retrospect the products could have been better designed. Parental supervision appears to be an issue in each case. Manufacturers are typically unwilling to resist CPSC recalls by blaming consumers for injuries incurred using its products. That route is very risky and may in fact be more costly than going along with the CPSC’s dictates. As a result, the record in these cases is usually very one-sided – the CPSC has the first and last word on the subject, often on TV. Why would anyone stand up for these companies in public? There’s no incentive to do so; after all, the costs are paid by only one party, and that party isn’t talking. There is a fundamental error in routinely blaming manufacturers for accidents or fate. It is widely accepted that laws operate efficiently when they allocate responsibility for risk to the party in the best position to address the risk. Manufacturers can efficiently bear many such costs – but not all. For instance, product safety is best assigned to manufacturers rather than consumers. This is fairly obvious – manufacturers know their own products better than consumers do and are best able to take steps to keep products safe at the lowest possible cost (most efficient). This is the reason why the common law tort system assigns product liability costs to manufacturers. So who is in the best position to control costs associated with accidents or fate? Risks associated with acts of fate are difficult to control.  In fact, many foreseeable risks leading to childhood injuries are completely outside the control of manufacturers: 1. Fate 2. Failures of adult supervision 3. Product abuse or misuse 4. Mental deficiencies or mental illness (e.g., pica) 5. Risks well-known to the user (e.g., knives are sharp). I would advance that good adult supervision is the lowest cost way to prevent accidents with children’s products. There are significant limitations to what a manufacturer can achieve on behalf of consumers who don’t adequately supervise their children. Of course, drawing the line is a big issue here. But can’t an argument be made that adult supervision of the toddlers using the Mattel trike could have prevented foreseeable injuries from jumping on the trike? That a parent must carefully supervise the location of a child’s hands before closing a stroller? This is a simple point – manufacturers cannot control these factors from their offices or warehouses. The cost for a manufacturer to do so would be excessive. Some people might argue that assigning blame for matters of fate to manufacturers of consumer products is a neat way to efficiently spread cost among the community. Why not make the manufacturer pay the uncontrollable cost of fate relating to their products, and let them pass the costs along to consumers in the form of higher prices? Manufacturers can be converted into involuntary insurers by public policy, risk intermediaries for events of misfortune. The appeal is irresistible; after all, it doesn’t cost tax dollars to pay for these losses if we force responsibility on manufacturers. Of course, if you are a careful consumer, you might resent paying more to subsidize free-riding consumers who don’t take appropriate precautions.  But money aside, doesn’t it reflect a hardening of our society if if we ignore heart tugs when kids are injured? Is this heartless . . . or sensible? Is the CPSC doing the American public a favor by increasingly pushing responsibility for uncontrollable risks to manufacturers? The Important Role of Economic Efficiency in Laws Governing Children’s Products I believe bad things do sometimes happen to good people. What is the economic effect of assigning these costs to manufacturers by default? Unfortunately, this invariable result is not economically efficient and will have the effect of a tax on the children’s market. In other words, the economic incentive to participate in markets will shrivel as manufacturer returns on investment decline because of legal risks (costs) they cannot control. This is basic stuff, folks – the reduced economic incentive causes market participants to withdraw, just as high taxes cause people to stop taking risks (trading). Ronald Coase addressed this subject in two articles that led to his Nobel Prize. In a 1937 paper on the nature of the firm , Coase articulated what became known as the Coase Theorem which holds that if trade in an externality is possible (in this case, childhood injuries) and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights. Translated into English and applied to the facts here, Coase theorized that it would not matter which party was responsible to pay the costs of an injury (victim or tortfeasor) if there was no cost to bargaining between the parties. This of course is not the case in the real world. Coase returned to the subject in a 1960 article entitled “ The Problem of Social Cost ” and explored the role of regulations in achieving economic efficiency when economic activity creates social costs. This eminently readable article is a foundation stone of modern legal theory. Considering the social costs of human activity (such as pollution or injuries from the use of children’s products), Coase concluded that efficient allocation of resources would be achieved regardless of allocation of rights relating to social costs (responsibility to pay those costs) provided that trading can be conducted without transaction costs. In other words, in an efficient market, economic factors (resources) will always be put to their highest and best use through allocation of resources and bargaining. Through bargaining in an efficient market, the party with the most productive use of economic factors will ultimately possess the resources, thus ensuring compensation for social costs regardless of who has been assigned legal rights. Coase cites numerous examples (including torts) in making this point. Coase notes the symmetry of these disputes in his analysis. When cattle overrun crops causing economic losses, there would be no damage without the cattle, and likewise no damage without the crops! Causation is not black-and-white to an economist interested in efficient outcomes. As he notes, a smoothly operating pricing system ensures that “the fall in the value of production due to the harmful effects would be a cost for both parties.” Nevertheless, Coase recognized that there ARE transaction costs in the real world (e.g., legal expenses, bargaining holdouts, etc.). These costs of altering and recombining rights allocated by the legal system can interfere with the ability to bargain and thus prevent the efficient allocation of resources in the market. He argued therefore that regulations are justified to the extent they allocate rights to the most efficient risk-bearer. Regulations can supersede market transactions by imposing the most efficient outcome. This is presumably the underpinning of President Obama’s call for more federal regulation. According to him, this will be good for us.  Coase might demur, noting that it all depends on the facts as we shall see below. Coase was realistic in his assessment of the inherent dangers of regulation: “But the governmental machine is not itself costless. It can, in fact, on occasion be extremely costly. Furthermore, there is no reason to suppose that the restrictive and zoning regulations, made by a fallible administration subject to political pressures and operating without any competitive check, will necessarily always be those which increase the efficiency with which the economic system operates. Furthermore, such general regulations which must apply to a wide variety of cases will be enforced in some cases in which they are clearly inappropriate. . . . It is my belief that economists, and policy-makers generally, have tended to over-estimate the advantages that come from government regulation.” Coase’s solution: perform a cost-benefit analysis to make sure that regulations increase economic output (the all-in costs must be less than the all-in benefits when reduced to dollars). We encounter situations regularly in which the party causing a legal nuisance does not bear the consequential costs. For instance, a home remodeler does not have to pay compensation to neighbors for noise and debris that may adversely affect them. He may feel a social obligation to give them freshly-baked cookies but is under no legal obligation to do so. This is one of many legalized nuisances. Why is this the legal rule? The allocation of rights takes into account that as a society, we want to encourage investment and capital improvements. The small cost of dealing with these inconveniences is considered a cost we all should bear in exchange for the benefits received from the economic activity. This rule does not apply to exceptional cases of nuisance where the costs outweigh the benefits. Not every instance of damage is remediable under our legal system for good reason. Coase cites a fascinating real world example of this rule carried to a surprising extreme: under traditional English law, railroads are protected from liability for fires caused by sparks from their engines. Coase devotes considerable ink to prove that this legal rule creates an efficient allocation of resources (a positive effect for society) notwithstanding that there are “winners” and “losers”. This result would be very difficult to achieve through bargaining. Clearly a railroad would have a very difficult time working out a deal with every landowner along its lines as a precondition to laying down track. Importantly, Coase points out that the opposite rule (where the railroad must pay for the fires its engines cause) does much more than just transfer liability. It also shifts incentives to everyone’s detriment. A farmer along the track now can gamble with the railroad’s money – he can get a market price from market buyers if he can harvest his crops or from the railroad if there is a fire. The farmer’s return is thus guaranteed, the incentive to take care is removed, and he will be rewarded for planting crops likely to be burned. This alternative rule’s transfer of costs to the railroad will simultaneously reduce tje potential reward for constructing tracks and likely result in fewer train lines, reducing the broadly-distributed economic benefits that come with the expansion of the rail system. In other words, shifting liability in this case makes everyone along the train line poorer. Coase notes that “nuisances” are not always against our interest: “[Pigou] is wrong when he describes these actions as ‘anti-social’. They may or may not be. It is necessary to weigh the harm against the good that will result. NOTHING COULD BE MORE ‘ANTI-SOCIAL’ THAN TO OPPOSE ANY ACTION WHICH CAUSES ANY HARM TO ANYONE.” [Emphasis added] CPSC, are you listening? Placing the cost for nuisances on the producers’ shoulders may be well-intentioned but it is not necessarily the right result because it does not provide any incentive to consumers to take steps to prevent injury. “A tax system which was confined to a tax on the producer for damage caused would tend to lead to unduly high costs being incurred for the prevention of damage.”  The CPSC’s tendency to blame products via recalls and bans is the equivalent of a tax in this case. The “unduly high costs” leads to a reduction or suspension of economic activity. We can observe this in the children’s market over the past three years – the agency and Congress have both received considerable testimony on this topic (and seemingly ignored it). Coase won the Nobel Prize for pointing out that regulators often neglect to look at the full economic picture and thus fail to achieve optimal social results. It goes without saying that the regulators may nevertheless achieve optimal newspaper headlines. Conclusion Why is it inefficient to invariably push costs to manufacturers for injuries associated with children’s products? As Prof. Coase notes, in a raucous marketplace, transaction costs can distort the allocation of resources. In this case, the prospect of liability and uncontrollable losses are a high transaction cost that affects the efficient allocation of resources by trade. Coase posits that a cost-benefit analysis must be performed to make sure that efficiency is achieved. The rule for such analyses is quite clear – the all-in cost of the regulation must be less than the all-in economic benefits achieved. The best way to understand the formula in this case is to look at all marginal children’s recalls as a class. Let’s agree that there actually are some “substantial” product hazards out there and exclude them from our analysis.  [Manufacturers are in the best position to evaluate and prevent "substantial" hazards on behalf of consumers.]  We must also assess all the money spent as a result of CPSC action as a group. It does not matter who spends the money – we want to tote up all the costs and lay them off against all the benefits. The benefits are easy to calculate – there is an economic value to a life and also to injuries. This type of analysis is not only common, it is a requirement of federal law (as a result of Coase’s work outlined above). The government has tables of these values . Likewise, the costs are pretty easy to tote up: out of pocket costs for the recall, replacement of inventory, damage to reputation and brand, legal and regulatory costs, lost jobs, reduced investment, etc. In the case of accidents or other uncontrollable factors leading to injury, the CPSC’s calculus is defective. It is quite telling that the regulators are not interested in my point that no victims have been identified. Lead-in-substrate victims – NONE. Phthalates victims – NONE. The ledger on the benefits side is undocumented, vague and untested, but the regulators’ indifference suggests that they place an almost infinite value on injury or even the possibility of injury. On the cost side, the regulator also seems to largely ignore the impact on markets. As noted by Coase, the regulators are not subject to competitive pressures so they can easily overlook these costs. The math does not add up, and as a result, their decisions inevitably will choke the market. The CPSC acts as though not subject to the laws of economics . The legislative fix for this misguided regulatory effort is clear – mandate economic analyses as a justification for any CPSC regulation. It is also necessary to restore (actually, to mandate the use of) risk assessment by the CPSC. Risk is all about cost allocation and cost management. By removing the ability to assess risk, Congress essentially removed the wiring necessary for the CPSC to make an intelligent assessment of the economics of their decisions. While the CPSIA was clearly written and passed into law in anger, enough time has passed to expect cooler heads to prevail. Congress, it’s time to act!

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CPSIA – Do Accidents Happen?

CPSIA – CPSC Announces that 100 PPM is Technologically Feasible

The CPSC put out its report today concluding that the 100 ppm lead-in-substrate standard may come into force on August 14, 2011 because it is technologically feasible.  To quote: “Based upon this analysis, the staff could not recommend that the Commission make a determination that it is not technologically feasible for a product or product category to meet the 100 ppm lead content limit for children’s products under section 101(d) of the CPSIA.” This applies to EVERY product and EVERY product category. You are now OFFICIALLY SCREWED and may begin throwing out inventory.  Don’t expect Congress to help you out.

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CPSIA – CPSC Announces that 100 PPM is Technologically Feasible

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