Consumers’ sovereignty – significant failures: why consumers’ demands for environmental, human and animal protection are often unmet

The competitive market system is sometimes extolled on the basis that it results in consumers’ sovereignty and minimizes (e.g. according to Hayek) the amount of information required for the efficiently operating economic systems for organizing resource use. This view is outlined and its assumptions are found to be too restrictive. This is illustrated by examining several economic aspects of food safety standards. These include an economic assessment of optimal food standards, the relationship between income levels and the demand for food safety and optimal geographical differences in food standards. The extension (evolution) of market systems has lengthened and diversified product chains. The implications of this for consumers’ sovereignty are considered. Some assessments of food safety standards are biased because they evaluate only the negative health effects of productive methods, for example, the use of pesticides and use of chemicals to preserve food, without considering the economic and health consequences of not using these substances. This aspect is investigated. Examples are given of certification designed to allay consumers’ concerns about the effects on the state of the environment and social and animal welfare of the production of their purchases. The examples are for the certification of the environmental and social attributes of forest products and for free-range eggs. This type of certification can be problematic. The final section considers whether consumers’ choices of purchases and use of products should be restricted when their consumption itself results in adverse externalities or has adverse consequences for consumers themselves. Excessive consumption of alcohol is taken as an example.