Euclidean,
I see a few problems with your scenario. The first is that tort, and all other forms of civil law, developed under conditions of extensive and far reaching state intervention, nearly to the extent of feudalism. You do not get "duties" from the free market system, which tends to emphasize contracts-where agreement is primary, as opposed to duty.
You said:
Lo and behold, the manufacturers figure out "Gee we better start putting labels on this stuff so we have a leg to stand on in court", and pretty soon it becomes a widely adopted private regulation of various industries to list the contents of their products.
Now, with your specific example of a tort providing for labelling, you either have to have a law that allows the court to sanction the company beyond individual damages, or you have to accept that labelling won't always happen. And here's why:
If, as is traditional, the individual can only sue for damages to himself...then you can get plenty of cases, peanut allergies being a good one, where the company will do a cost analysis that runs roughly like this: "The cost of paying the 1 in a million person who will eat this and die is x. The cost of labelling every product is x-1. Therefore, it's cheaper to just pay damages to the few who are hurt by our packaging."
If you have a law that provides for damages beyond those incurred by the complainant, then you get exactly the same thing that a government agency does, regulation...except it's regulation by a judge who likely has zero expertise in the field, and will set damages and sanctions according to whatever he can vaguely divine from the briefs. I can't imagine how that would be preferable to something like the FDA in any scheme.
The trouble is when you have a government regulation, it's some politician's arbitrary standard of strictness which is applied. The standards have little or nothing to do with logic, they are dictated by special interests and the popular opinion of the masses.
The politician's standard need not be arbitrary-if he's accountable to someone for bad decisions, he has every incentive to make good ones. And the alternatives are either regulation by judge (eek!) or regulation by cost analysis...at which poitn the peanut allergy guy just has to die and leave the damages (if you have more government intervention in the form of survivor or wrongful death statutes, that is) to his heirs.
At times, I find the moral aspects of libertarianism I find more troubling than the practical ones.
Why should I be forced to pay for the government to administer regulations on labeling the ingredients of granola bars on the box?
Why should the rest of us be forced to respect your rights to property, and to invest resources in protecting them? The answer is: because most people think that's a reasonable thing to demand of individuals in a society. You could just as easily say: "Why should I be forced to pay for police that protect that guy's house, when he's not willing to pay for regulations that protect my health?". It ultimately will boil down to what either of you think is a reasonable demand by society against individuals-and I think the best, if still imperfect, way to settle that is through representative institutions to provide for a consensus position. That way, you can try to convince others that your right to property deserves resources while their rights to safety do not...but in the end, whatever most agree on will be made law.
A third problem is that once you have a government standard in place, people meet that standard and just stop because if they exceed it, they may be in violation of it. There's no reason to try to innovate if there's a government standard in place.
Well, if there's a market, there is certainly incentive to exceed standards. This is an example of how government regulations can provide a baseline, so that products compete on features other than "may not be as likely to kill you as the other guy's product!" I think there's at least a good case to be made that more innovation comes from those conditions, since consumers can worry about things other than complete fraud in their purchases.
Private, competitive expertise trumps politically motivated agendas pushed by less competent figures. With a mechanism in place to address conflicts and problems, we've covered the unforeseen. It's just that simple.
The problem is that private expertise has to be paid for-so it won't necessarily benefit the public in every case. The experts will be accountable to their incomes, not to the public. And you also have the problem of the commons, where it's in no individual person's interest to pay for that kind of expertise...but would benefit everyone were everyone to contribute to the pot. Which is exactly what government achieves by demanding payments.
No, government and state run programs are not the answer to everything, and they screw many things up. But there are some things that the market does not do well...hence the reason for the prosperity of America. We've got a pretty decent balance.
