Replacing Protectionism with “Informationism”

February 23rd, 2009 by Al Lewis (alewis)

Food labels have listed ingredients for decades.  Some people ignore them while others read them before making a purchase decision.   No one questions the value of the information to the consumer, though.

Appliances have been sporting Energy Star labels for two decades too.  Once again, some people ignore them while others don’t, but no one questions their value.

Similarly, some people are very interested to know which products are made in the United States.  So why can’t all consumer products list their domestic content percentage?  And why can’t stores list their overall domestic content percentage?  Some people will ignore the information while others will prefer to “buy American” as much as possible. 

Is this protectionism?   It does not involve tariffs, quotas, hidden subsidies, government rules about public-sector purchasing, or even incentives.  It is purely informative.  If other countries “retaliate” by listing their own domestic content percentages, so be it.  If it is protectionism, it is “opt in” protectionism.   Only people who want to alter their purchase decisions to buy American-made products, will do so.   

The unintended consequence:  support for the auto industry bailout will evaporate.  The average person has no idea that the difference in domestic content between foreign and Big Three autos is not even close to 100%.  It is probably more like a third, on average.  That means if indeed Chrysler and GM do go under, the majority of their foregone auto production will remain in the US even if the nameplate changes. 

Inspired by Sam Lippe

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7 Responses to “Replacing Protectionism with “Informationism””

  1. harvardeconomist Says:

    Interesting….I don’t know whether to characterize this as protectonist or not. It is also hard to argue with a “solution” which simply provides information. China would object since their projects are usually full of poisons, and China buys most of our debt these days. But there are a lot of worse ways to get people to buy American

  2. jeff Says:

    This is a very aggressive use of information. I wouldn’t call it protectionism. BUT it needs a name — “informationism.” Still, hard for anyone to oppose more disclosure.

    Point about the Big Three is right-on. They would sink. I would definitely adjust my own spending patterns a little.

  3. alewis Says:

    good call. I changed the title per your suggestion

  4. mindyk Says:

    I don’t think anybody has any idea what % of stuff is made abroad or domestically. rather than this being an “efficient market” already somehow, I think spending patterns would change overnight

  5. bceconomist Says:

    Whether something is produced domestically is, IMHO, a totally legitimate factor to weigh in a purchase decision. I see no reason why we shouldn’t do this

  6. melinda Says:

    People pay extra for product “features” all the time. Domestic content is simply a product “feature” and if someone wants to pay extra for that, let them.

    Maybe some people think there isn’t value in buying American, but that is true for many product features, and no one is forcing them to do this. I for one am paying for many cable stations I never watch

  7. richinrichmond Says:

    Careful that you JUST list domestic content and not content-by-country. Some countries could take the latter very personally.

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