Tuesday, March 25, 2008

Pthalates in Toys

The PBS show NOW aired a segment about pthalates which are a chemical found in many toys and other soft plastic goods made of PVC plastic.  You can access the show here.  The EU has banned these substances in toys and products meant for use by children because there is some scientific evidence (although not conclusive) that pthalates interfere with sexual development in boys.  The EU and San Francisco has banned the use of pthalates in toys.  Apparently, there are other chemicals and substances that can be used to make soft plastic toys that are pthalate-free, although they are slightly more expensive.  Many of these toys are manufactured in China, and many factories there have two production lines - for toys meant for the European market (pthalate-free) and those made for the American market.

In our liberalized regulatory environment, where we rely largely on ex-post regulation through litigation, this seems like a litigation waiting to happen once the science is more established.   This controversy also raises some interesting questions about the relationship between innovation and regulation.  It is possible that the absence of regulation in a case such as this results in less innovation, because there is no incentive for manufacturers to seek out alternative chemicals if consumers aren't informed enough to make their preferences known (assuming, of course, that significant numbers of consumers prefer toys that don't put their boys sexual development at risk).  There are a couple of regulatory reactions that the government could adopt.  Like Europe, we could ban pthalates.  Or we could require that manufacturers identify which of their products contain pthalates and let consumers decide whether they would rather pay more for a toy that is pthalate-free.  My sense is that the requirement of adding a pthalate warning (especially if it included substantive information about the risks) would spur the use of alternative chemicals.  According to NOW, there is some movement among big retailers (Wal-Mart and Toys 'R Us were mentioned) to demand pthalate-free toys from manufacturers.  If I were a European company, I would advertise my toys in the US as European regulated (especially my soft plastic toys) - there is a market for regulated toys that seems lucrative.   In fact, I think Europe could benefit greatly from its regulated environment by using the regulation as a seal of approval for American consumers.



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