Two days ago, I went to my bank (a branch of TD Bank) in my suburban Maine town.
A classical liberal or a libertarian should be tolerant: that’s constitutive of the brand. Tolerance, or respect for others’ choices, is part of the implicit normative implications of microeconomic theory. This means, of course, to be tolerant of others’ individual liberty, not of their tyrannical longings. We should be tolerant of anything that does not directly threaten the spontaneous order in which every individual can choose the personal lifestyle that he wants. (I use “he” to mean he or she. Please be tolerant.) James Buchanan and Friedrich Hayek, two economists and political philosophers who each won a Nobel prize in economics, have done much work on these issues.
My bank celebrates Pride Month with little posters inside and a big rainbow flag in the double door entryway of the tiny building. Inside, the personnel was, as usual, enthusiastically helpful and customer focused.
Can we assume that the company, in line with its customer focus, is tolerant and that its next celebration will be, say, Individual Liberty Month or Free Speech Month or the Second Amendment Month? (Parenthetically, I was armed as I walked into the bank, but nobody is forced to be armed, which is part of the essential meaning of liberty and tolerance, and I did not shout about it: “Hey! Look at my Sig under my shirt!”) The Free Speech celebration should in fact be called “Free Speech, Not Fair Speech” to make sure that it says what it means. The answer is no: they will not do this. Politicization of business is a zero-sum game; it leads to confrontation and makes tolerance more difficult.
In a free society, tolerance between consumers and producers appears to be asymmetric. Producers (in the general sense of suppliers) are very tolerant of and certainly would not dare to challenge their customers’ opinions, while consumers normally don’t refrain from expressing opinions that their suppliers may not like. Your heating oil delivery company doesn’t advertise political opinions on its trucks but you don’t care whether or not a political sign on your lawn displeases your oil delivery man. There is a reason for this behavior, typical of commercial societies all over history: producers are serving consumers, not the other way around. Although most individuals are both consumers and producers (some, like children or social welfare recipients, are only consumers for a time), the sovereignty of the consumer reflects the idea that we produce in order to consume, not the other way around. This amounts to saying that an individual naturally wants prosperity, not slavery.
It is different under an authoritarian regime where producers serve political power first and consumers must be content with that is left. In his 1969 book Éloge de la société de consommation (In Praise of the Consumer Society), French philosopher Raymond Ruyer succinctly described the difference between a market economy, where consumers are sovereign, and a planned economy, where producers run the show (under government control):
In a market economy, demand is imperious and supply is supplicant . . . In a planned economy, supply is imperious and demand is supplicant.
Dans l’économie de marché, la demande est impérieuse, et l’offre suppliante . . . Dans l’économie planifiée, l’offre est impérieuse, et la demande suppliante.
READER COMMENTS
Ronald Murphy
Jun 8 2022 at 12:25pm
Have you ever tried to go to a luxury store with crocks? They won’t let you in. Therefore, it is not true that producers don’t place no demands on consumers.
Pierre Lemieux
Jun 8 2022 at 5:39pm
Ronald: Of course. Even fast-food joints don’t want customers to be bare-chested or barefoot. They also require them to pay the agreed price (and they prohibit shoplifting). What I meant is that, in a free society where there is separation between business and government, they don’t try to impose their political opinions on their customers. They have a strong incentive to do so for they would otherwise lose customers to competitors. I have posted a few times on this issue, for example: https://www.econlib.org/political-harassment-from-your-suppliers/.
Walter Boggs
Jun 9 2022 at 10:33am
Disallowing Crocs could well be construed as serving the customer. It’s just that in that establishment, customers not wearing Crocs are valued over those wearing them. All customers are not created equal.
David Killion
Jun 8 2022 at 3:35pm
Under your shirt, Pierre. Your Sig is under your shirt…
David Killion
Jun 8 2022 at 3:36pm
That was a quick correction!
Pierre Lemieux
Jun 8 2022 at 5:26pm
David: Thanks for indicating the terrible typo. I was away from my desk but fortunately my friend and co-blogger David Henderson emailed me, I got he message on my phone, and hurried to make the correction (before I saw your own post)!
Jose Pablo
Jun 8 2022 at 7:16pm
But … if businesses are doing that: engaging in virtue signaling and social desirability bias, it should be a reason.
Candidates I can think off:
a) Agent-principal conflict: the virtue signaling, and social desirability bias don’t serve the business’ bottom line well but allow the CEOS, Board Members or other agents of the firm to advance their own particular agenda
b) Regulatory distortions: this business behavior reduces the total amount of utility companies provide but are good for the bottom line since they allow rent seeking.
c) They are genuinely good for business since in a market economy is not “demand” which is imperious but “outspoken demand”. Most of the “demand” don’t care at all about irrelevant virtue signaling characteristics of the product (i.e., the posters and flags hanging on their bank’s door), but an outspoken subset of the “demand” (or even other business’s demand) do care about that irrelevant virtue signaling characteristics of the product and can damage the business’ reputation and by doing so its bottom line.
If the cost of serving this “outspoken demand” are low enough (like including long ESG-friendly declarations on their annual report) it make sense for firms to provide them. Provided this “irrelevant characteristics” of the product (from the consumer utility point of view) don’t outrage a significant subset of customers (which could explain the “issue selection bias” you mentioned in your post).
Not sure if the list is mece or what is the right reason … maybe a combination of the 3 with weights depending on each particular behavior observed.
Pierre Lemieux
Jun 9 2022 at 1:21pm
Pablo: Good hypotheses. I suppose (b) includes fears of regulatory punishment.
Jose Pablo
Jun 10 2022 at 5:30pm
It does, particularly after what happened to Disney in Florida (if you offend DeSantis you will be punished) and what is happening to Tesla / Musk for “offending” the POTUS
https://www.wsj.com/articles/nhtsa-upgrades-tesla-autopilot-probe-into-emergency-scene-crashes-11654789798
https://www.bloomberg.com/news/articles/2022-05-19/tesla-s-removal-from-s-p-index-sparks-debate-about-esg-ratings#xj4y7vzkg
Increasing governments economical/regulatory power inevitably leads to this (and we knew it).
Monte
Jun 9 2022 at 10:53am
In a free society, tolerance between consumers and producers appears to be asymmetric. Producers (in the general sense of suppliers) are very tolerant of and certainly would not dare to challenge their customers’ opinions, while consumers normally don’t refrain from expressing opinions that their suppliers may not like.
And there are always plenty of examples to the contrary:
-Allied Van Lines/Avis-Budget/Best Western Motels: Stopped offering discounts to NRA members.
-Bank of America: Refuses to loan money to gun manufacturers.
-Hyatt Hotels: Refuses to rent premises to conservative groups labeled hate groups.
-Starbucks: Refused service police officers.
-Red Hen Restaurant: Refused service to Sarah Huckabee sanders and her entourage.
Many producers today simply virtue-signal in order to attract the rainbow dollar (pink dollar has become too passe).
Jose Pablo
Jun 9 2022 at 1:12pm
I am not sure your examples point “to the contrary”. I think they are examples of precisely that: producers not daring to challenge their customers.
Since “customers” (like “Americans”) don’t have the same preferences and don’t feel outraged by the same features of the product, companies choose not daring to challenge the preferences of the “most populated” (or more likely, the “most vocal”) segment of their customer base.
Pierre Lemieux
Jun 9 2022 at 1:26pm
Monte: Your first point is not the same sort as the others. Suppliers have long offered discounts to specific clientèles, not for political reasons, but to expand their customer base. NRA members travel and move and are looking for inexpensive motels. As for the other ones, they explain why I emphasized “in a free society.”
Monte
Jun 10 2022 at 1:01am
Pierre,
“Suppliers have long offered discounts to specific clientèles, not for political reasons, but to expand their customer base.”
OK, but what are we to make of the following move on the part of these rental car agencies and how can this possibly be interpreted as a supplier attempting to expand its customer base?
https://www.dallasnews.com/business/2018/02/23/enterprise-alamo-national-will-no-longer-give-nra-members-discounts-on-car-rentals/
Monte
Jun 10 2022 at 1:05am
https://www.dallasnews.com/business/2018/02/23/enterprise-alamo-national-will-no-longer-give-nra-members-discounts-on-car-rentals/
Monte
Jun 10 2022 at 10:26am
Pierre,
The link I attached is apparently gated, but it speaks to these companies discontinuing discounts to conservative groups/NRA members owing to the moral outrage over the Parkland shooting. How can we construe this in any way as “expanding their customer base” rather than caving to political pressure in order to preserve it?
Jon Murphy
Jun 11 2022 at 6:51am
The extension of benefits was the means to expand their customer base, not the removal of benefits. Likewise, removing benefits does not constitute denying service.
Jon Murphy
Jun 11 2022 at 6:53am
A couple of quick points on some of your examples, as they actually support Pierre:
First: the BOA move appears to have been due to political pressure rather than a willing move by the bank.
Second: Starbucks did not refuse service to cops. Some rogue employees did. When the company found out, the company apologized and punished the employees
Monte
Jun 10 2022 at 1:16am
I’d say refusing to serve customers on the basis of their political affiliation or an NRA membership is an excellent counter-example of a producer challenging their customers.
Jose Pablo
Jun 10 2022 at 6:32pm
I don’t know … let’s say you run a business in which 10% of your customer base are NRA members and the other 90% of your customer base are outraged by the fact that you serve NRA members.
In this case you refuse to serve NRA members precisely because you don’t dare to challenge your customers.
Wil W
Jun 10 2022 at 7:29am
It is not uncommon in the US South for businesses such as oil trucks and other mobile business vehicles to have small (or occasionally large) religious symbols.
While it is somewhat due to their beliefs, is not this and the action of the bank just an attempt to receive favor from some segment of their customer base?
I’m not sure it is different than advertising then. Advertising pride month is a better advertisement than 2nd amendment month. Just like a bank may do market research and find that blue is a better logo color than yellow. Are Christmas decorations at the bank also polarization, just from longer ago?
In the end, I see this as merely market driven advertising instead of polarization.
Monte
Jun 11 2022 at 9:52am
It’s true that the examples I provided above do not, in the strictest sense, meet the standard of refusing service (the Red Hen incident notwithstanding). I’m simply countering Pierre’s claim that producers are “very tolerant of” and certainly do “dare to challenge” their customer’s opinions, especially in today’s politically charged environment.
What we’re seeing from many companies today are politically motivated business decisions, not the “one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it engages in open and free competition without deception or fraud.” Friedman).
I agree with this observation by Peter A. French, Arizona State University emeritus philosophy professor and founding director of the school’s Lincoln Center for Applied Ethics:
“America is headed in the very bad and dangerous direction of segregating its citizens in ways that could well lead to greater discriminatory practices than being asked to leave a chicken restaurant. I worry about the potential of the Balkanizing of this country into irreconcilable hostile factions.”
Pierre Lemieux
Jun 11 2022 at 3:48pm
Monte: I don’t disagree with this. That’s what I qualified my statements with “in a free society.” It’s not clear that we are still in such a society.
nobody.really
Jun 14 2022 at 1:05am
I concur that producers tend to cater to consumers, and often find it in their interest to do so–and that on this basis, consumers have come to regard themselves as sovereign. But I reject much of the rest.
First, if you think that producers would rarely turn away the business of a willing customer, then you would conclude that claims about racial exclusion throughout the American South (and elsewhere) were mythical. But this ignores that producers may choose to discriminate against black people as a means of currying favor with the majority of OTHER consumers (or, at least, avoiding provoking their ire).
But moreover, producers are PEOPLE. People don’t seek to maximize profits; they seek to maximize utility. And some people may derive greater utility by declining to serve a willing customer than by serving them. Some producers in the South may have derived net utility by declining to serve black people. Some liberals may derive net utility by declining to serve conservative politicians. Bono may derive net utility by declining to perform for the Saudis. Some religious fundamentalists may derive net utility by declining to bake a wedding cake for a gay couple.
In short, I reject the sovereignty of the consumer, because I reject sovereignty. Lemieux correctly observes that “an individual naturally wants prosperity, not slavery.” In general, even when you choose to enter into serving others, you do not thereby enter the institution of slavery–compelled to do and say whatever the customer wants. In short, whoever said “the customer is always right” was wrong. Producers get to reject business if they choose to.
But note that I say, “In general.” English/US law recognizes some exceptions: William Blackstone’s Commentaries on the Laws of England (1765–1769) noted that innkeepers could be sued for refusing hospitality to a traveler without good reason. When you enter the military, you surrender some autonomy rights, and may be compelled to do things you disapprove of–even, contrary to some comments, be compelled to carry weapons. If you enter certain nurturing professions, the law may impose on you a duty to report certain statements (for example, statements about child abuse) to civil authorities. And many governments have adopted civil rights laws that prohibit producers from discriminating on the basis of suspect categories–typically race, creed, national origin, gender. In each of these cases, people who enter into certain professions effectively enslave themselves to the service of others, at least to some extent.
I try to note the erosion of civility, and I share concerns about the loss of norms about tolerance. But in this case, I argue that the things we should strive to tolerate are the ideocratic preferences of our fellow humans–including humans who have assumed the role of “producer.” If Mount Holyoke discriminates against admitting men, does this fact increase or decrease the diversity in the education market? As you drive pass Hiltons and Motel 6s, if you see one hotel entitled, “WE DON’T SERVE BLONDS HERE,” does this enhance or detract from the diversity in the hotel market? And if your Michigan State sports bar refuses service to people who attended U. Mich, does that enhance or detract from the diversity of dining establishments? Viva la difference!
(For more on this topic, here is a lengthy discussion about the merits of permitting people to violate civil rights laws provided the defendant can mount a Market Power Affirmative Defense.)
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