Despite a clear and substantial increase in the amount and quality of information available to the modern consumer through globalisation, and communication advances, we still don’t always make decisions that are in our best interests, particularly in the areas where politicians and lawyers seem to spend a lot of time, such as financial, telecommunications, and even competition policy. So what can policy makers do to at least create an environment of better consumer outcomes?
There are a couple of key questions that arise out of this topic:
Is the current regulatory system adequate in ensuring that consumers make appropriate choices and what exactly is an appropriate choice?
- Where do consumers get information from, and how do they process it?
- How can understanding consumer behaviour assist policy makers in government and business to help people make better decisions?
- Where does marketing fit into the way consumers make choices?
- Do we need something beyond disclosure to assist retail investors to make the right choices?
My plan is to look at these questions in three parts. The first part, which follows, will be a quick examination of the philosophical foundations of our current fixation with systems.
The second part, which will be published in a week, is an attempt to explain some basic theories of psychology, marketing, culture and decision-making.
And Part Three will be an attempt to plant the seeds of a conversation about how we reconsider the frame with which we approach consumer protection, regulation, and better decision-making. However, I don’t plan to go the usual path of offering a few pithy tactical responses or quick fixes. What I want to consider is a couple of broad concepts, and try to explain how mastery of concepts, can help us to make better policy, consumer and even business decisions.
I want to start by taking a broad view. Of consumer behaviour. Of economics. Of business. And of regulation.
And of systems, in general.
I do have to start by laying my cards on the table.
I do have some concerns about the concept of regulation, at least contemporary interpretations of it.
That said, I don’t have a problem with protecting consumers, or of regulation, or legislation, or laws.
My major issue is more about the current interpretation and nature of much regulation. I worry that so much of the legal system is built around reacting to negative outcomes. I’m happy to be corrected, but as a consumer researcher and advocate, the impression I get is that the focus of much regulation is either at the point-of-sale, or related to redressing problems post-purchase.
But it does concern me that regulation tends to be reactive and reductive – focusing in on specific, often individual problems, and then assuming rationality, a desire for utility and an assumption of the operation of logic on the part of the consumer, the legal process, and even the provider.
When it comes to regulation and legal processes, I am often a bit perplexed by how we assume that life is rational and objective.
It’s a big ask, but we need our politicians, and those in the regulatory world, to actually question the “shape” of much regulation. My implication, obviously, is that the current frame is inadequate.
Social philosopher Zygmunt Baumann argues that, “We desperately need a new framework, one that can accommodate and organise our experience in a fashion that allows us to perceive its logic and read its message, heretofore hidden, illegible, or susceptible to misreading.”
To change the way that we talk, and think, about regulation.
To question the underlying ideology, and to examine whether the current regulatory system is inadequate, at a macro-level, to address the complexity of a world that keeps changing faster than our ways of thinking and talking about it can adapt.
But until we address the view that we are rational, utility seeking beings, we won’t be able to recast our thinking.
And we will have to actually question some of the foundations upon which the legal and regulatory system is built upon before we can even begin to offer solutions.
But, first we have to understand how we got here.
Rationality, the Consumer and the Law
Because we have become enamoured with modernism, economics, science, and managerialism, I think we expect too much of seemingly rational systems, such as laws and policy, which in their current form, tend to intervene after the fact, which results in a constant lag effect.
Philosopher John Ralston-Saul describes the dominant power system in the West as being Platonist, “[a] system which functions on highly developed levels of structure and law – [a] school of pure rationality and fear of the undefined and doubt”. These rational systems take on a form of homeostasis, in that they regulate their internal environment, and attempt to maintain a stable and constant condition by restricting the influence of external forces. This internal focus also means that systems are unable to communicate with other systems, because protecting the integrity of the system is a critical component of its efficiency. To some degree, the systems are so internally focused and structured that they are unable to adapt to variables that are not input into the system.
But there are clear historical precedents. The Age of Enlightenment (or Age of Rationalism) came about as a rejection of the divine right of Kings, and a rebellion against the orthodoxy and dominance of religious authority as the controlling force in life. At this time, the intellectual and philosophical developments aspired towards rational discourse, personal judgment, liberalism and the scientific method. And, to some degree, this was very much an enlightened perspective. What the rationalists were rejecting was simply another system – religion – which had, and still has, the potential to be just as circuitous, self-supporting, and pernicious as any management or “scientific” system.
In effect, this shift morphed into a variety of 20th century movements and ideological beliefs. The faith in rationality, systems (including the preeminence of the market as a means of governing the flow of capital), government as protector, and neo-liberalism, are all artefacts of The Age of Enlightenment.
This focus is understandable, because it is a natural instinct to seek simple, “silver bullet” responses, and systems have the appearance of providing simple, rational, and clearly defined answers to many issues.
However, the underlying foundations of the Age of Enlightenment have been debased by modern interpretations of rationalism, and systems based around efficiency and short-term gain, rather than the acceptance of curiosity, creativity, and skepticism as a means of furthering society.
This is because systems and contemporary interpretations of rationality are based upon a foundation of reductionism and efficiency. The major issue here is that any system, whether it is a religious system, a monarchical system, an institution, a legal system, or an ideological system, works on a principle of what Gideon Haigh refers to as “near-rightness” – it works okay as long as we assume that the inputs are also rational.
But the moment you throw humans into the system, we experience something that is not necessarily rational.
And you will notice that I resist using the word irrational, because of its negative connotations. But we have to accept that we are not rational, most of the time. And there is a good reason for this (which I will discuss in Part Two).
In no way am I suggesting that we should not have rules, laws, and regulations to protect our citizens, and maintain control and appropriate behaviour. Nor am I suggesting that we should not have boundaries, policies and processes in business and in society. Boundaries are just as important as freedoms when developing ideas.
So, my next step then, is to give you some examples of how we are more complex than we think, and the most obvious or logical assumptions about what or why we do what we do are often flawed.