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Fall 2006

ISSN 0890-913X

Volume 22, Number 1

Categories: Economics | Fall 2006

Consumer Sovereignty in the Modern Global Era

Jason L. Saving, Federal Reserve Bank of Dallas

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JournalofPrivateEnteiprise,VolumeXXII,Number1,Fall2006ConsumerSovereigntyintheModernGlobalEraJasonL.SavingFederalReserveBankofDallasConsumersovereigntyistheideathatconsumersexertultimatecontrolovertheeconomy.Underconsumersovereignty,consumerpreferencesdeterminethecompositionofgoodsthatareproducedintheeconomy.Throughtheirspendingdecisions,individualconsumerscontrolboththeallocationofresourcesandthedistributionofgoodsacrosstheeconomy(Hildebrand,1951).Threeassumptionsunderlietheideaofconsumersovereignty.First,consumersarerationalinthesensethattheyattempttomakeoptimalchoicesgiventheirpreferencestructures.Second,consumersareinformedinthesensethattheyhaveenoughknowledgetomakeoptimalchoices.Finally,consumersareabletopurchasegoodsinacompetitivemarketplace.InthewordsofArrow,"theconsumersareincommand,subjectonlytowhattheycanaffordtospend."(Arrow,1963a)Thereisalsoasocialwelfaredimensiontoconsumersovereignty.Manyproponentsofthedoctrinehaveassertedthattheperformanceofaneconomyshouldbeevaluatedbytheextenttowhichitsatisfiesconsumers(Rothenberg,1962).Inthewordsofonepoliticaleconomywriter,"democracydependsonafreemarketeconomicsystem,whichintarnisbasedonconsumersovereignty,whichisreally'votingwithdollars'forourfavoriteproductsandservices.Americanpoliticalsovereigntyisnecessarilytiedtothepeople'srighttosellorbuywhatevertheyfinduseful"becauseconsumersovereigntyfacilitatesdemocraticparticipation—andprovidesanimportantlineofdefenseagainstanoverweeningstate(Cobb,1994).OnemightexpectthatsuchabedrockprincipleofbothmarketJasonL.Saving107

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Metadata [hide]

Title	Consumer Sovereignty in the Modern Global Era
Authors/Creators:	Jason L. Saving, Federal Reserve Bank of Dallas
Year:	2006
Volume:	22
Number:	1
Pages:	107 - 119
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Consumer sovereignty, Social welfare, Economic calculation, Prices, Hayek, Knowledge, Role of government, Democracy

Citation:
Saving, Jason L. / 2006. "Consumer Sovereignty in the Modern Global Era." The Journal of Private Enterprise, 22(1): 107-119.