Consumer Sovereignty

Theoretical Background

Consumer sovereignty is a classical economic concept that appears at least as early as Adam Smith's An Inquiry Into the Nature and Causes of the Wealth of Nations. It imputes to consumers the primary, if not sole, discretion for assessing the marginal costs and benefits of their prospective consumption of goods and services. This decisionmaking role determines the scale and scope of the production and provision of these goods and services, respectively. The concept continues in the neoclassical economic tradition, with both descriptive and prescriptive dimensions. In its descriptive dimension, consumer sovereignty refers to the capacity for consumers to discern and to maximize their own preferences without interference and to drive the resulting production and provision of goods and services in the economy. It joins with the following propositions to form a theoretical matrix in support of the free market:

• Producers are profit maximizers.
• There are no barriers to entry and exit from the market.
• There is perfect information, that is, true information about market conditions is available without limitation to direct and indirect market participants.
• Economic agents act atomistically, that is, as individuals and not in coordination with one another.

In its prescriptive dimension, the concept of consumer sovereignty is the economic analog to the political principle of noninterference, which John Stuart Mill defends in On Liberty. Because in the eyes of some supporters of the free market the concept of consumer sovereignty descriptively is foundational for the logic and operational viability of markets, it has been an accessible and attractive concept for prescriptive arguments in favor of market allocations that involve consumers and consumer choice.

Criticisms of the Concept of Consumer Sovereignty

However, the concept has faced challenges in the recent evolution of economic theory and policy, even from successors to the classical and neoclassical traditions out of which it arose. One criticism is that the conflation of the political concept of sovereignty into an economic concept is logically defective, in that it supports the problematic position that consumers can or should impose preferences in a market that ostensibly is free of coercion. The concept of consumer sovereignty as a principle for socioeconomic policy lacks a satisfactory account of why other market actors—or other stakeholders in general—would or should be less sovereign than consumers.

A second criticism has to do with the ethical vindication of the concept in its ostensible prescriptive dimension, that is, whether it is capable of sustaining a valid moral claim—or policy argument—on its own. To the extent that one invokes the concept of consumer sovereignty normatively, that is, to justify an ethical claim, it functions as a minor premise that furnishes factual or technical content. For consumer sovereignty to be normatively intelligible and viable as a principle for action requires that one underwrite it with a substantive and distinct moral principle as a major premise, for example, the principle of utility or an articulable account of a moral right. Otherwise, the argument dissipates into a purely descriptive (economic) construct and falls short of an authentic ethical justification.

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