Consumer Sovereignty


Mainstream economics uses some simple starting points; it believes that they are the best possible. First is that agents have more wants than they can attain, so that they feel scarcity; in fact, for practical purposes, wants are assumed to be endless. Second, third and fourth are that agents are self-interested, rational, and the best judges of their own well-being. These four assumptions are indeed usually good starting points, rather than starting by assuming that agents are completely fulfilled, altruistic, irrational, and not well-placed to evaluate their own situation. They are not equally good as finishing points. Sometimes good arguments exist for not accepting them.

An assumption that agents are the best judges of their own well being is less questionable for businesspeople and corporations, given the resources they have for analysis. Debate focuses more on consumers. The phrase consumer sovereignty is sometimes read descriptively, to mean that consumers are sovereign, in that procedures are induced via profit-seeking and competition  to provide what consumers want. Sometimes it is read normatively, to mean that consumers should be sovereign, their wishes should prevail concerning what is good for them. The normative claim can rest on three different bases: that consumers do make good choices; that the alternative stance is worse – to use someone else’s judgments and estimates of what is good for a person and how good it is; or quite differently, that people have the right to make their own choices and mistakes.

Consumers will not make good choices automatically and unconditionally. Our wants are not simple; for example, some are wants to not to have other wants (such as the desire to smoke or a compulsion to gamble). Establishing a mature balance between wants involves skills. Choice is also unlikely to bring satisfaction if taken on the basis of weak information. Markets often do not provide consumers with full and reliable information, for it is hard to exclude people from information and therefore to ensure payment for it, so its market supply is weakened. Instead, in a commerce-dominated society, one of the main types of information that adults get will be images that say the good life is obtained through high consumption of commodities; there is too little counteracting public information.

The issue of consumer sovereignty goes beyond whether choices are good for the chooser. Other people are affected. Some wants may thus be unacceptable, notably wants that bring harm to others, including even wants to harm others. Mainstream economists have unfortunately often taken a don’t-want-to-know approach to ethics in which they confuse acceptance of all wants with a value-neutral stance.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

National Sovereignty and Corporate Power


Multinational corporations present real challenges to a nation’s sovereignty and independence. The national sovereignty principle holds that a nation is a sovereign state whose laws, customs, and regulations must be respected. It means that a national government has the right, power, and authority to create laws, rules, and regulations regarding business conducted within its borders.

The second principle that shapes business-government relations in most countries is the business legitimacy principle. This principle holds that a company’s behavior is legitimate if it complies with the laws of the nation and responds to the expectations of its stakeholders. In theory, the principles of national sovereignty and business legitimacy are not in conflict.

As multinational corporations reach across national borders, their global operations may exceed the regulatory influence of national governments. This has raised concerns about the emergence of stateless corporation. These corporations have facilities, shareholders, and customers everywhere. Therefore, they seem to owe loyalty to no single nation and are able to organize and recognize around the globe. There are economic and political advantages to being, or appearing to be, stateless.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Private Enterprise


Private or free, enterprise is the economic system. It means that most of the country’s goods and services are provided by privately owned firms that compete with a minimum of government controls. The private enterprise system has six key characteristics:

  1. Private Ownership of Property: most businesses, land, minerals, buildings, machinery, and personal goods are owned by people, not by governments. This ownership is the right of people. It is an incentive to work hard to acquire and care for our own property. This sort of incentive contributes to the economic growth of the country.
  2. Freedom of choice and limited government: Freedom of choice allows businesses to select the products they produce, hire and fire employees, compete for customers and supplies, and make and dispose of profits. Freedom of choice also allows consumers to buy whatever products and services they are willing and able to buy from whichever firms they choose. Freedom of choice implies a limited amount of government intervention in the area of private enterprise. In a free enterprise system, government sets the” economic rules of the game” by establishing basic laws and regulations that ensure society’s welfare. But within the context, individuals and organizations are left largely free to pursue their own interests and inclinations.
  3. Consumer sovereignty: Consumers rule; the more carefully they make their decisions, the more clearly the economy will reflect their needs. The more money you spend in the marketplace, the greater your influence.
  4. Profits: Profits make businesses responsive to consumer wants. Profits are also a good indicator of where to expand and how to compete better. As a shop owner you can also compare the overall profits with past results or with profits of other businesses to gauge how well your shop is doing. Profits are the clearest standard of performance available to a business. But consumers often misinterpret business profits. They also don’t always understand how profits direct a business’ efforts. And consumers usually substantially overstate how high business profits actually are.
  5. Competition: Most business leaders believe their industries are highly competitive. But the term “competitive” has many meanings. Pure, or perfect, competition exists in an industry when 1) there are many firms of about equal size, 2) all firms produce the same product, 3) each firm can enter or leave the industry when it wants, and 4) all firms and customers are well-informed about prices and availability of products. No industry completely satisfies all these conditions, although some come close. Most industries operate under conditions of imperfect competition. This means they satisfy some but not all the conditions of pure competition.
  6. Productivity: Productivity is essential to the economy, whether it means designing faster microcomputers or better-testing toothpaste. Increased productivity helps offset inflation and keep prices down. Productivity is defined as real output (the value of the product independent of price changes) per working hour, and it is usually written as a percentage.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.