February 20, 2012

Educating the Consumer

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In a recent column, I wrote about the growing popularity of  “ethical consumerism,” a movement that aims to incite social change through conscientious purchasing decisions. Ethical consumerism, I suggested, is predicated on consumers’ ability to get comprehensive, accurate information about the products they buy. Otherwise, it’s impossible for ethical consumers to tell whether or not a given product truly aligns with their values.

There’s a corollary to this argument, though, that I think also merits discussion: Just as information is necessary to empower consumers, it’s similarly necessary to protect them. This point may seem somewhat uncontroversial, but the vehement opposition that consumer protection initiatives frequently encounter strongly suggests otherwise. Of course, consumer protection takes many forms, some of which elicit greater backlash than others. This column is chiefly concerned with access to information.

Arguments against disclosure requirements for producers tend to take the following forms: First, industry interests might argue that the information being disclosed is unimportant or irrelevant to consumers’ purchasing decisions. Second, opponents argue that disclosure requirements place an undue burden on producers, who may have to change labels, rewrite contracts or conduct product testing (consider, for example, nutritional labeling). More generally, those with a distaste for market regulation might find disclosure requirements unnecessary or redundant: Consumers acting in their self-interest will naturally seek out products that maximize their well-being; if companies harm them, consumers will vote with their pocketbooks more effectively than government can regulate. And finally, some have suggested that product disclosure overwhelms consumers with information that they may not understand or know how to use; as such, these requirements inhibit efficient decision-making more than they help it.

Many of these arguments, often voiced by free-market advocates, rely on the notion that the natural workings of the marketplace obviate the need for government intervention. But in instances where consumers have incomplete access to information (a situation known as informational asymmetry), government regulation in fact facilitates market efficiency.

To illustrate how this works, let’s consider a “market” we students have become all too familiar with: course enrollment. The analogy isn’t perfect, but I think it’s nonetheless very instructive as to why certain forms of consumer protection can be immensely beneficial.

Every semester, students face the daunting task of picking classes for the next semester (and the even more daunting task of actually waking up in time to nab them). You can think of students as consumers “shopping” for a product, in this case, classes. Student Center, then, is something like a virtual mall, albeit one apparently designed to make its patrons utterly miserable.

Innumerable factors influence our “purchases”: Is the course material interesting? Does the class fulfill a requirement? Is it at the right time? Is the professor good? These questions are answered by consulting a wide range of sources: We ask friends, check out Ratemyprofessors.com and Coursehero.com, maybe even email a professor or two. But I imagine that despite exhaustively researching courses, many of you have wound up in classes that underwhelmed or disappointed.

Some of the mismatch is inevitable: Even the best information can’t compensate for actually experiencing a class. But I’m sure many of you, like me, have wished that more information about a course was made available during course enroll.

Course descriptions are often brief, unhelpful or sometimes entirely nonexistent. Reviews on Ratemyprofessors or Coursehero tend to be sparse for all but the largest of classes, and even then aren’t necessarily credible. And not only are past syllabi unavailable in most colleges, but now median grade reports are gone, as well. In short, a lack of usable information can make course selection all the more daunting, and lead to decisions that we later regret. Sure, there’s always add/drop, but students then face a second round of complications from having to order new books, or catch up on reading.

Imagine how much clearer Course Enroll would be if syllabi and course evaluations were publicly available for classes in all colleges (as they are in CALS). Students would have more accurate expectations regarding the content and nature of their courses, and would therefore be more likely to pick classes that truly fit their interests. And there are external benefits to more accessible information, as well: Underwhelming classes otherwise kept afloat by successive waves of unknowing students would be more quickly weeded out, and professors would have even greater incentive to improve their classes. Here, greater access to information not only benefits consumers, but improves the entire market.

The same is true on a larger scale, which is why I greet opposition to consumer protection with more than a healthy dose of skepticism. The enrollment analogy, of course, is a very basic justification for disclosure requirements, but a valid one nonetheless: Consumers have a right to accurate and comprehensive information about the goods and services they purchase, not only for their own sake, but for the sake of a well-functioning economy.

When it comes to information disclosure, the truth only sounds counterintuitive. Regulations don’t inhibit free markets. They create them.

David Murdter is a senior in the College of Arts and Sciences. He may be reached at [email protected]. Murphy’s Lawyer appears alternate Tuesdays this semester.

Original Author: David Murdter