Fishy fraud?

by on July 16, 2004 at 7:40 am in Economics, Food and Drink | Permalink

While learning in a course how to extract, amplify and sequence the genetic material known as DNA, University of North Carolina at Chapel Hill graduate students got a big surprise. So did their marine science professors.

In violation of federal law, more than 75 percent of fish tested and sold as tasty red snapper in stores in eight states were other species. How much of the mislabeling was unintentional or fraud is unknown, said Dr. Peter B. Marko, assistant professor of marine sciences at UNC’s College of Arts and Sciences…Our work has a margin of error of 17 percent, meaning that between 60 percent and 94 percent of fish sold as red snapper in the United States are mislabeled,” Marko said.

Here is the full story. It is unknown how much of the mislabeling is fraud and how much is human error. They tested 22 fish, albeit from a few different states. Furthermore it is commonly known, however, that what is called “scallops” is often generated from the wing of a skate ray, using a cookie cutter. That is probably not human error.

How much should we, as economists, worry about “mistakes” of this kind? After all, I’ve bought “snapper” many times, and never been disappointed, at least not relative to expectations. The real problem comes when some customers want higher quality fish, or “real snapper,” as opposed to “snapper as we have grown to know it.” Perhaps those customers are willing to pay more, but they simply cannot be sure they are getting what they want. So they don’t go buying at all.

Do you know anyone who is searching around for higher-priced kinds of fish? I don’t, although this may reflect my lack of a home in Aspen. I was happy to buy a pound of catfish [or was it?] for $7.99 this afternoon. But if anyone is suffering from this fraud, she probably earns much more than I do.

Many fraud problems have this structure. Yes, you get screwed over but the price falls too. Costs arise when everyone substitutes into lower quality. Is your auto mechanic cheating you? Well, wait a long time before visiting him — then you know there is something wrong with your car. In the meantime, some cars will break down, thus the costs of fraud. But in this case? In the meantime, some wealthy people will go without real snapper, suffering with the indignity of having to eat instead “snapper as we know it.”

Addendum: I’m still trying to figure out what “scrod” is; no dirty rejoinders please.

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