If left to its own devices, the private sector can act in such a way so as to only benefit itself at the expense of others creating A Tragedy of the Commons – examples abound. Moreover, it is in the inherent interest of the private sector to advocate for laws, policies, and regulations that benefit its own self interest if left unchecked as this invariably leads to greater profitability via gaming the system to its advantage via regulatory capture. However, such actions in the aggregate when viewed from a Fallacy of Composition perspective reveals this creates negative externalities and spill over effects resulting in a deadweight loss on society that is absorbed by everyone collectively. This brings me to the notion of Caveat Emptor or Buyer Beware.
For starters, there is not any reason that Caveat Emptor should even exist in the marketplace. Why should a buyer beware of the products sold, rather, it should be Cave Operante or Producer Beware as it is the consumers who vote with their currency. The notion of Caveat Emptor immediately places the burden on the consumer of the product and/or service thereby reducing accountability of the producer. It would seem that the marketplace via its self regulating properties would immediately eliminate those companies that pose the greatest risks to consumers of the product/service, however, this is not necessarily true. For if this was true, then laws, policies, regulations and lawyers to protect consumers would not exist because companies that cause serious harm would immediately go out of business.
The alternative to Caveat Emptor is placing labels and educating the consumer on the harm and risks that a particular product or service can cause. However, in so doing, the accountability has still shifted from the producer to the consumer of the product again. Moreover, the labels, education, and marketing of the product/service presumes that all relevant pieces of information are put forward in good faith for the consumer to make a valid assessment, which is also not necessarily true.
The ability to place labels regarding the harm a product or service can cause creates a “well you should have known better” argument for producers against consumers, and still obviates producers from accountability as a result. Rather than fall back on Caveat Emptor or labels, products/services that can cause serious harm should not even be able to enter the marketplace as it inherently does not serve any purpose. However, in so doing, others will argue that such an action is a threat to freedom of choice. Yet, no consumer, from a mass consumption perspective, should be choosing between product/service Serious Harm 1 and product/service Serious Harm 2, irrespective of labels.