see, not all economists were convinced that this species actually existed, but it was sufficiently entrenched as a model of the individual that one observer in the mid-1990s could declare: “I suspect that the majority of economists remain confident of the survival of their favorite species. In fact, many see economic man as virtually the only civilized species” (Persky, 1995).
Even in economics, the characterization of consumers as insatiable individuals, interested in, and capable of, maximizing utility, had its critics. As we shall see in chapter 4, those critics have become more numerous in recent decades. Other academic disciplines have been even more scathing in their rejection. Sociologist Pierre Bourdieu, for example, referred to Homo oeconomicus as a “kind of anthropological monster. … the most extreme personification of the scholastic fallacy,” an error “by which the scholar puts into the heads of the agents he is studying … the theoretical considerations and constructions he has had to develop in order to account for those practices” (Bourdieu [1988] 2016: 209). In subsequent chapters of this book, we will examine many of the theories from other disciplines, particularly sociology, which reject Homo oeconomicus and embed consumption in a broader context. However, despite the academic scorn heaped on Homo oeconomicus, it provides a compelling justification for the “consumerist” interpretation. First, people know what creates satisfaction for them, and this cannot be judged by any outside observer. The act of paying for diamonds or Instagram-inspired clothing indicates that these items yield genuine satisfaction for the buyer. Further, the amount paid represents a measure of how much utility the consumer receives from the purchase. Consumers are also capable of judging the benefits they receive from alternative products, whether that is different offerings within the same category (for example, a Hyundai versus a Ford) or different categories of products (a car versus a vacation). This theory of the consumer lends itself to the idea that consumers know what is best for them and will be well served by a policy environment in which they can exercise their freedom of choice. It importantly also provides a justification for increasing consumption being interpreted as increasing individual well-being and, therefore, an important social goal. The model of Homo oeconomicus provides a logic for the dominant discourse surrounding the sovereignty of the consumer and the pre-eminence of consumer choice.
To see one example of how these premises justify the benefits of consumer choice and dismiss government intervention in consumption, we can look at Friedman’s example of consumer safety – whether the things people consume are safe. For Friedman, the combination of rational, self-interested consumers and a competitive market rendered regulations unnecessary. Since people take advantage of the information available to them, indeed, even seek out information on products, any substandard or hazardous products are likely to be detected by savvy consumers and the miscreant firms punished as customers reject their inferior or dangerous goods. Using Friedman’s own rhetorical flourish, the answer to the question “Who protects the consumer?” is “other firms” (Friedman, 1962), but this is possible only if people are well informed and rational.
A controversial example of this is Friedman’s claim that “licensure has reduced both the quantity and quality of medical practice” (Friedman, 1962: 158). According to Friedman, there should be no rules specifying the amount and type of training for health professionals. Providers of medical services will offer appropriate and affordable treatments in the absence of mandated training because consumers, able to discern effective treatments from chicanery, will demand it of them. Further, any practitioner that does provide poor service will soon find themselves out of business courtesy of market competition. “Insofar as [the doctor] harms only his patient, that is simply a question of voluntary contract and exchange between patient and physician. On this score, there is no ground for intervention” (ibid.: 147). Anyone with the inclination and ability should be able to hang out a medical shingle and the well-informed consumer will ensure that the market separates the healer from the quack.
In a more positive manner, freedom of choice is also held to be an important principle in its own right. It is an important principle of liberalism, which puts forward an idea of liberty that is based on maximizing the scope of choice that does not reduce the liberties of another. For liberals, government intervention reduces liberty by restricting the freedom to engage in voluntary and, consequently, mutually improving exchanges. For example, policies that would tax, restrict or ban the sale of high-sugar drinks have been criticized on the basis that these dietary choices are best left to the individual and that government has no role interfering with the free choice of consumers. While an “unfettered” consumer is not, strictly speaking, necessary to liberal theory, the claim that people are rational maximizers, capable of making decisions that are genuinely welfare improving, lends credence to the idea that people should be free to make their own consumption choices.
Friendly Amendments: Alterations to the Theory with Similar Implications
Like the Yeti, Homo oeconomicus is very difficult to find in the field. Critics have expressed varying degrees of doubt over the ability of individual, rational, maximizing assumptions to predict accurately how consumers actually behave. In this section we will focus on some modifications to these assumptions which still maintain the positive normative implications about consumption in our society.
Joseph Schumpeter broke from the neoclassical economists on a number of fronts, perhaps most famously their focus on static efficiency, analyzing economic performance at any one moment in time. In terms of consumption, static efficiency would mean that the largest quantity of a good should be produced at the lowest price – a result that would occur when supply equaled demand in a competitive marketplace. Schumpeter argued that thinking about a capitalist economy at any specific moment in time is to miss the point of the entire economic system, which is the dynamic “creative destruction” of the old by the new (Schumpeter, [1943] 2010: 73). This dynamism is at its best, according to Schumpeter, when facilitated by high prices and industries dominated by a few large concerns, which create the income and incentive for investment and innovation (ibid.: 79).
Schumpeter’s general idea of creative destruction creates a picture of the consumer that, in some ways, contrasts with the neoclassical picture of rational, individual maximization. The main distinction is that, in Schumpeter’s economy of continuous creation and destruction of products, consumers will not have a complete understanding of the menu of options available to them. New products and options will always be cropping up with which people have no experience and, therefore, will have difficulty evaluating. As a result, their tastes and preferences are not properly formed and not perfectly understood. In the absence of personal familiarity, people’s preferences are influenced by their social environment, and especially by innovative consumers who eagerly try, evaluate and publicize new products, blazing a trail for others to follow (Jonsson, 1994: 309). People rely heavily on custom and experience to make their decisions on goods with which they are familiar, creating an inertia that must be broken in order for people to change their preferences.
This is a different consumer than that modelled by the neoclassicals. Rather than being able to maximize utility from the consumption of products, people fumble haltingly toward their desired spending patterns. Further, unlike the neoclassicals, Schumpeter argued that people’s preferences are malleable rather than individually determined and that an important area of economic inquiry should be the manner in which preferences are formed (Jonsson, 1994: 307). However, Schumpeter’s differences from the neoclassicals over consumer behaviour must be placed in the overarching context of his overwhelmingly positive interpretation of innovation in consumer goods. For Schumpeter, the genius of capitalism was not ensuring low prices through competition but its tremendous capacity to better the human condition through new products and techniques of production. Consumers may not be rational maximizers in the neoclassical sense, but they most definitely benefit from the new technologies made available by the process of creative destruction.
One group did follow up on Schumpeter’s desire to study some of the influences on consumer preferences. These “behaviouralists” were uncomfortable with the lack of similarity between Homo
