When risks turn to uncertainties: insights from the food markets in China and in Japan

The paper explores the relationship between risks and market organisation by means of two case studies. After defining the two concepts, it analyses how risks influence the functioning of markets, by means of the theory elaborated by Knight (1921). The Knightian focus on the role of judgments in risks analysis implies that the concept of rationality has to be enlarged beyond the rational choice theory. Similarly, markets cannot be defined anymore as simply an equilibrium between supply and demand: they are a special type of institution. Therefore, the analysis centres on how people make decisions and apprehend risks in relation to market structures. In the rest of the paper, two of the most prominent food safety crises in recent years are analysed based on this conceptual framework: the milk powder crisis in China (2008) and the sanitary crisis following the Fukushima nuclear accident (2011). It is shown that they represent two types of market risks, one generated by the food market organisation and the other one related to the definition of the product quality.