Consumer Protection after Consumer Sovereignty

Luke Herrine–

The consumer is at the center of the neoliberal’s moral universe. For both neoclassical welfarists and Hayekian moralists, the consumer is the Everyman. For, whatever else we do, we are all consumers. The “free market” has value because it forces the firms that control the process of production and distribution to compete for our business. Because firms’ very survival depends on their ability to convince us to pay them and because we only pay for things we think are valuable, firms are incentivized to take our interests into account in every decision they make. As they compete to serve our interests more and more effectively, the process of production and distribution becomes more and more efficient at giving us what we want.

According to this ideology of consumer sovereignty, we collectively control the social provisioning process through our individual decisions. Democratic governance is the facilitation of free consumer choice.

Consumer sovereignty is at the center of many familiar neoliberal reform projects. Chicago School antitrust builds on the proposition that the only reason to prevent business consolidation is to lower prices for consumers. Virginia School public choice (and its theory of regulatory capture) depends on the idea that citizenship is basically like consumption, with elected officials acting as firms that compete for votes and appointed officials as firms that compete for resources. Part of the First Amendment’s Lochnerization has involved undermining legislative and regulatory power in teh name of protecting consumers’ right to the information that judges deem necessary to make their purchasing decisions. Etc.

It has become familiar to those who follow the LPE movement that, in building a post-neoliberal way of thinking, we need to move beyond consumer sovereignty. LPE thinkers in antitrust have pointed out the implications of corporate power for workers, for productivity, for corruption of our political system, and generally for our collective ability to control our social system. Similarly with respect to public choice theory and the Lochnerized First Amendment.

But what does all of this mean for how we think about consumers and the law that is supposed to protect them? How can we think about consumer protection law if we reject the ideology of consumer sovereignty?

As I argue in a draft article, consumer protection law should be understood as a variety of moral economy.

E.P. Thompson’s classic article “The Moral Economy of the English Crowd in the Eighteenth Century” introduced the concept of “moral economy” to contemporary debates. In that article, Thompson explains how grain riots in the early days of capitalism can be understood as a form of (what we would now think of as) consumer activism to enforce a community’s concept of a “just price”. Just prices were part of a broader framework for regulating markets so that they comported with “public morals”. Evolving forms of this framework can be traced back to the early days of the common law (and beyond). Indeed, Thompson argues that grain riots can be understood as enforcing ancient common law norms against the emerging new norms of “free trade”.

In addition to rules about fair prices, the moral economy framework included restrictions on when, where, and how goods could be sold, detailed regulations of the quality of various goods, licensure requirements for sellers, rules about common carriers and common callings, etc. Some of these rules were set and enforced by one or another legal entity, and some by non-state parties such as guilds, religious leaders, and, when necessary, food rioters.

Bill Novak has shown that much the old moral economy continued to guide American common law development well into the nineteenth century. The nationalization and consolidation of the economy that took place after the Civil War undermined state/local authority to enforce these norms while reigning laissez faire ideology prevented a national variety from taking shape.

Much of the efforts of the Populist and then the Progressive movements can be understood in terms of updating moral economy concepts for modern conditions and developing the infrastructure to enforce them. Sanjukta Paul has an excellent draft article that explains the Sherman Act as part of this infrastructure. Also part of it were the Food and Drug Act of 1906, the Federal Trade Commission Act of 1914, and other building blocks of the modern infrastructure of consumer protection.

Reviving the moral economy tradition does not require reaching back into a mythical pre-capitalist past in which everybody freely took care of each other according to a perfectly ordered society or rediscovering the “true” meaning of consumer protection by hanging onto every word of our Progressive forebears. Rather, it should involve recovering the basic intuition–familiar to all the many strands of the critical realist tradition–that markets are socio-legally constructed spaces that can serve different interests in different ways depending on how they are constructed.

Rather than comparing every actually existing market to some catallactic ideal, we should ask which interests a given market serves, which it might serve, and which alterations of its institutionalization might move us from the former to the latter. Rather than treating individuals as maximizers of preferences without provenance, we should understand them as social and political beings pursuing a variety of socially constructed interests. Moral economy is how we reason about how markets ought to balance interests based on how (capitalist or non-capitalist) markets actually work, not how they’re theorized by neoclassical economics. Democratic forms of moral economy require developing institutions that enable collective deliberations about which (and whose) interests various markets serve and which interests they ought to serve that are connected to the institutions that structure markets.

From this perspective, consumer protection is the area of law that sets and enforces norms for reasonable business conduct based on an interpretation of what consumers interests in a given market are. It is part of the infrastructure of the social control of business. The way these norms are set will depend on the moral framework of the coalition that controls the regulatory infrastructure. Consumer protection is thus unavoidably political.

The draft article linked above explores the implications of this way of thinking for the FTC’s authority regulate “unfair acts and practices”, but the implications go well beyond that particular agency or area of doctrine.

Rethinking consumer protection in this way invites us to revisit its history, its present, and its potential futures. It invites us to reconsider its administrative architecture and its relationship to adjacent areas of law like antitrust, banking, securities regulation, and the emerging law of online platforms. It invites us to explore new ways to engage the perennial tension between the interests of workers and consumers. Perhaps most importantly, it invites those who have been excluded as inexpert in the ways of “the market” to participate in the process of determining which values the markets that order their lives should reflect.

Luke Herrine is a Law and Political Economy Fellow and a PhD Candidate at Yale Law School.