The Myth of the Informed Consumer

One of the primary problems of unregulated capitalism (that is, of the libertarian variety[1]) is the assumption of a perfectly-informed consumer. We do not need regulatory laws, we say, because the market will regulate itself. If a merchant sells shoddy products, he will soon find himself out of business from a lack of customers.

While the assumption an unhappy customer will advertise their experience to their friends is a reasonble one, we tend to equate it with a similar, yet distinct, hypothesis: the number of unhappy customers and their friends will grow so rapidly as to soon form the majority of all potential customers.

What often happens in this global economy is the successful existence of a crappy company due primarily to its wide audience and small throughput. Many of its customers may leave dissatisfied, but it’s of no concern to the company

  • there are plenty more to replace them.

The tool we’ve created to combat this is the online marketplace. Not only does Amazon display user ratings of products, but the people selling them. (Ebay, Etsy, etc. perform similar roles.) We’ve even incorporated this into local (as opposed to global) business, through Yelp. Now when we buy, we buy with confidence we’re getting the best deal.

This system has its flaws, of course. There is the ever-present danger of falsified ratings. Users may make a mistake, or be unqualified to rate an item’s quality. And, one of my personal worst worries, all users may rate a product highly only to find it doesn’t live up to its expected lifetime - but by then, ratings are useless, as thousands have already been purchased, and it has been phased out of production in favor of a newer design.

But there is an even greater problem, one that is far more systemic. As E. F. Schumacher points out early in Small is Beautiful,

Economics deals with goods and services from the point of view of the market, where willing buyer meets willing seller. The buyer is essentially a bargain hunter; he is not concerned with the origin of the goods or the conditions under which they have been produced. His sole concern is to obtain the best value for his money.

Here we run into the problem of the uninformed consumer yet again. If I am interested in not supporting slave labor, how am I to execute this wish in my daily life? I can’t ask many of the merchants I interact with, and those I can have no better clue than I, for they are almost as removed. We have no clear picture available to us of a product’s life prior to the shelf, and who involved in that chain would like to illuminate the matter?

We do see companies provide some information, but it’s certain the market advantage is a considered part of the decision. When Chipotle advertises its open-range pork, what information don’t we know? When Apple advertises its products’ EPEAT Gold status, how many consumers realize they’re purchasing devices with planned obsolescence that fuel wars in central Africa?

At iFixit, we’re friends with the folks at Patagonia. Recently a Patagonia employee came to tell us about their quest for transparency in their product lines. While it’s absolutely awesome they’re doing this, they faced enormous challenges, resulting in much more control over the supply chain than they perhaps would’ve liked. And even with Patagonia, we have to place trust not only in the company’s desire to tell the truth, but their ability to see the whole situation and to correclty judge the reports of all their suppliers.

In short, while we’ve created a good enough system for judging products on a purely-economic basis, we’re absolutely ill-equipped to make purchasing decicions based on any broader criteria.

I believe technology can provide a solution. Just as Amazon and Yelp have helped small businesses to compete with the mega-corporations on values of quality and service, so is there an answer to this supra-economic information scarcity. After all, technology has been responsible for many great forward leaps in information exchange, from the printing press to the World Wide Web.

I don’t know what this solution is. I don’t know what it will look like. I only know that it will come, and it will empower our values to change the world we live in.

[1]: The reader may recall that I self-identify as a libertarian.