Current Scholarship
Consumer Protection after Consumer Sovereignty

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Author: Luke Herrine

This article argues for a fundamental rethinking of the function of consumer protection. It is time to abandon welfare economics and adopt what this article refers to as “moral economy”.

While it is increasingly accepted that the standard neoclassical model makes unrealistic assumptions about consumers and that it tends to portray markets too rosily, many scholars seem to think that a few tweaks to the model are enough to redeem it. This article argues against that notion. Most of the claimed benefits of the law-and-economics approach—its “scientific rigor”, its “anti-paternalism”, its respect for “choice”, its ability to transcend “moralism”, and the like—depend on the unrealistic assumptions of its baseline model. It is only in this model’s hothouse version of markets that normativity can depend entirely on what consumers, suitably “informed” and properly “rational”, choose for themselves. And it is this notion of rational informed choice—of “consumer sovereignty”—that serves as the problematic Grundnorm for even the most behaviorally inflected, transaction-cost-rich forms of welfare economics.

Consumer protection should instead be seen as a series of tools that allow a community to (appoint representatives to) determine the values any given market ought to further and to experiment with ways to ensure that the market lives up to those values. From this “moral economy” perspective, markets are not pale shadows of an ideal form of perfect aggregation of individual choices but rather socio-legally constructed spaces that serve different interests depending on how they are structured. Consumer protection operates via more conventionally political forms of sovereignty: it is a way for a political community to correct for forms of market ordering that are not living up to the values of that community.

The presentation of this theoretical argument is grounded in the analysis of a particular law: the FTC’s authority to ban and remediate “unfair…acts and practices”. Making sense of this law historically and conceptually requires grappling concretely with theoretical issues that might otherwise seem airy.

Herrine, Luke, Consumer Protection after Consumer Sovereignty (February 8, 2021). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3781762