Incentives and institutions: A comparative legal and economic study of food safety

This dissertation analyzes food safety through a comparative institutional approach in three essays. In the first essay a stylized food policy framework evaluates various mechanisms: direct regulation, post-market surveillance, legal liability, and market forces. A comparative case study of the United States and United Kingdom that focuses on the institutional setting is presented to better understand these approaches. Examples from the fast food industry and a case study of a modern U.S. commercial meat plant provide further insight on the role of the private and public mechanisms. The second essay offers an in-depth look at the English and American legal systems. Food safety implications of the differing legal systems are discussed under two central themes: Constitutional Supremacy versus Parliamentary Sovereignty; American Tort Law, Litigiousness and Safety. This is followed by a discussion around three fundamental points: effectiveness and efficiency of the tort liability as a means to ensure safety, the litigative tendencies, and validity of pro-plaintiff expectations. The third essay formalizes the economic analysis of food safety with a principal-agent framework. The risk preferences of the agent, the mapping between effort and safety, and the quality/quantity of information are the three salient features of the model. Weibull distribution is utilized for three different cases of failure rates. As the model is applied to the U.S. meat industry, factors that cause incentive distortions and their impact on optimal contracting are reviewed. Firms have some private incentives to bundle safety with their products, yet there are significant gaps corresponding to the public goods nature of food safety, transactions costs and institutional factors. Amongst the various mechanisms available to the society to govern food safety, the main issue is to determine mechanisms that can perform well in the particular institutional setting that prevails. It is imperative that the regulators understand their own limits and the roles of other mechanisms. With the natural progression towards the market based private methods, it is vital that the regulators reevaluate their part in the post-modern food safety system and redefine their roles in eliciting food safety effectively and efficiently.