Moral implications of preference change

MORAL IMPLICATIONS OF PREFERENCE CHANGE

David George One of the corollaries of marginal utility theory, as it came to be called, was that consumer

choice ceased to be a moral category: it did not matter whether the good desired was good or bad, just that the consumer was willing to pay for it.

--Regenia Gagnier, The lnsatiabili~ of Human Wants." Economics and Aesthetics in Market Socie~.

" • q e n the topic of markets and morals is raised, uestions of distributive justice are usually the

first to be raised. Do markets reward labor fairly? Are wealth inequalities morally defensible? Should we accept the market determined distribution of income or rely on the tax and transfer powers of government to create a more equal distribution?

A second frequently raised issue concerns the effect that the market experience has on the moral character of people when away from the marketplace. Does bot- tom line thinking infiltrate the household and worsen the marriage relationship? Do decisions to have children begin to be treated as similar in nature to decisions to purchase expens ive commodi t i e s? As Alber t Hirschman has described, there have been periods in which the case made for free markets rested in part on the assertion that the moral fabric of society would be thus improved and other periods in which the dominant argument was that market forces were prone to infiltrate realms outside their usual domain and to under- mine important moral safeguards by so doing.

Here I will address a moral issue that fits neither of these broad categories. My concern will be neither with issues of distributive justice nor with the market's effect on the thinking and the behavior of sellers and buyers when outside the marketplace. I will instead focus on a less contested issue of commutative justice within the buyer-seller relationship itself, namely, the morality of the "freedom to persuade" that is so central to a market-based economy. On the face of it, the issue that 1 raise might seem to be a hard one to challenge. With civil liberties that are closely associated with economic liberties, the freedom to persuade might seem to consti- tute a subset of freedom of speech. While not all speech seeks to alter the actions of others, all advertising and marketing does. And while there may be a slippery slope

between finding fault with the latter and placing re- strictions on more broadly defined persuasive speech, I intend to demonstrate that there can indeed be something morally problematic about certain persuasive activities that lie at the core of market economies.

John Kenneth Galbraith's attempt of nearly fifty years ago to cast doubts on the legitimacy of tastes that are created by the very businesses who stand ready to sat- isfy them was greatly weakened by Frederick Hayek's observation that tastes instilled in us by others can be among those that we value most. Critics of taste formation ever since have tended to bring distributive justice issues into the discussion as a means of finding fault with the market's preference-shaping capacities. Thus, Cass Sunstein observes that "a society in which people 'prefer' to become drug addicts, or violent criminals, has a serious problem," and goes on to conclude that "a society should be concerned not simply and not entirely with satisfying the preferences that people already have, but more broadly with providing freedom in the process of preference-formation."

Following a tradition extending at least back to the work of Herbert Gintis, it is the disadvantaged who are offered as the victims of preference creating patholo- gies of the market, not the average citizen. In contrast to this, my intent here will be to show that the problem of "preference pollution" is as applicable to a society of fully equal agents as it is to a stratified society. My focus, in other words, will be quite independent of the issue of inequality of status and wealth.

That unmitigated market forces can have harmful effects in certain cases would probably be denied by no one. Indiscriminate selling to minors is universally con- demned, though just where the line should be drawn is, not surprisingly, subject to considerable debate. Selling of intoxicants to the young is seen as sufficiently wrong

MORAL IMPLICATIONS OF PREFERENCE CHANGE 33

to be illegal across practically all societies. The issu- ance of credit cards is a more recent development but resistance to this practice appears to be growing.

Even when age is not a factor, there are instances when it is still judged as wrong for sellers to simply deliver to buyers that which they were freely willing to purchase. In the professions, in particular, providers still have obligations that preclude their simply providing services as demanded. With sellers clearly knowing more about the service than buyers, professional ethics requires the sellers to provide information whether sought or not. In the case of education, there is an addi- tional reason for concluding that simply "meeting demand" would bc unprofessional. Since a high percent- age of students are more interested in receiving formal testimony of their knowledge (i.e., a degree) than in receiving the knowledge itself, there is the alarming conflict of interest that faces teachers. To the extent that the student is a customer, passing courses with im- pressive grades for all would appear to be what the market demands. But to the extent that the wider public is the indirect "'customer," helping to support the education and assessment services which will later provide a screening device for any later decisions that need to be made, then giving the immediate customer what he or she wants spells trouble indeed.

As important as the moral implications of these examples are, they will not be pursued further here. The focus will instead be on those instances when asymme- try of information and duties to third parties are not at issue, and when the sale of the product has no obvious effects on anyone but the buyer and the seller. In cases such as these, how can the market's propensity to give us what we want possibly be criticized?

The Manufacture of Desire John Maynard Keynes' exposure of the market's

weakness in keeping all factors of production employed focused the at tent ion of market skeptics on the macroeconomy and on distributive justice. But a few years prior to this, in 1932, noted economist A.C. Pigou had exposed a shortcoming of markets that had more to do with commutative injustice. Prior to Pigou, it was at least acknowledged that the buyer and seller were not the only ones affected in some way by a transac- lion. It was obvious from everyday observation that, for example, sellers of wallpaper would be harmed if consumer tastes shifted to paint. Demand for paint would rise, as would its price. Demand for wallpaper would fall, as would its price. While some wallpaper sellers would weather the storm, others would be forced out of business. In short, while a redistribution of well- being might occur, there would be no inefficiencies.

While Pigou did not question the moral rightness of market forces helping some through higher prices for what they sell while simultaneously harming others by lowering the price of their products, he did draw attention to a more ethically complex sort of "externality," namely, that not involving price change but directly experienced benefits or costs instead. When John burned coal, Mary, Rita, and Don might suffer breathing difficulty. When the Smith household allowed their property to deteriorate, neighboring households might experience "visual pollution." While superficially similar to the costs imposed on wallpaper sellers by the paint sellers, Pigou noted an important difference. With non- monetary spillovers, a deadweight loss occurs. Stated differently, the victim's losses exceed the winner's gains, and a case for discouraging such actions follows straight- forwardly. For, at least in principle, the advantages gained by prohibiting the spillover cost creating activ- ity would be great enough to allow thc gainers to com- pensate the losers while still being better off.

It is within this language of externalities that I have argued that markets "pollute" our preferences. A first step in the argument is the introduction of "second- order" preferences, or "metapreferences" into the characterization of homo economicus. While this cardboard caricature of the economic agent is deliberately abstract, stripped of all complex attributes that social reality imposes, to def inc him independen t ly of such metapreferences--something that mainstream theory has not hesitated to do--is to strip him of exactly that capability that the philosopher Harry Frankfurt isolates as the capability that distinguishes him from non-human organisms. The preference rankings that have been so central to the thinking of economists tbr over a century are broadly defined, to be sure. Contrary to what many critics appear to believe, the "maximizing" agent who selects what she prefers is not assumed to be a narrowly self-interested agent. The items that are worth preferring need not be just goods and services going to the agent for her personal enjoyment. They might also be the well-being of others, the good fortunes of the world, or whatever else indirectly is judged as good and worth valuing by the agent.

Lacking from this rich characterization of an agent's preference ranking, however, is the recognition, following Frankfurt, that people have the capacity to be reflective, to assess their tastes, and to feel satisfied or dissatisfied with them. To say that the human agent may or may not prefer the preference that he happens to be experiencing is not a particularly problematic assertion. A little self-reflection reveals to each of us that we are sometimes happy with the preferences that move us to act and sometimes not so happy. To offer just one

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personal example of the latter case, just yesterday evening I would have preferred to have a preference to put the finishing touches on this paper. While thinking just before dinner that I would indeed turn to the task just after dinner, I found myself preferring to use my time far less productively, not always a bad thing in our world of ove rwork , but most de f in i t e ly an unpreferred preference for me at the time. While I did what I preferred post-dinner to bedtime, 1 would have preferred preferring otherwise.

According to Frankfurt, to exercise a free will is to cause one's preferences to be as one wishes them to be. The act of choosing the preferred option from one's extant preference ranking is understandable, by this account, as "acting upon the will that one happens to have." Since non-humans do not reflect upon their will, animals are said to be unable to exercise a free will (unable, that is, to contribute to the process of forming their preferences) but are only able to act upon the will that nature gives them. I leave it to the philosophers to accept or reject Frankfurt's version of what it means to exercise a free will. More interesting to me, as an economist, is the implication that the mere recognition of metapreferences has upon our assessment of the market's ability to serve us well. Is it prone to aid and accommodate our exercise of free will or to set up barriers to the creation of preferences that we prefer? A fairly tra- ditional exercise of standard normative theory provides us with an answer to such a question.

Air polluters and water polluters impose costs on innocent bystanders in the process of producing their products. Since the polluters do not bear the full costs of their actions, they undertake more of these activities than economic efficiency allows. The situation is similar with preference pollution. Imagine one who enters a restaurant with a preference for a low-calorie, low- fat meal, but finds one's preference changing in favor of a high-calorie, high-fat meal that one proceeds to act upon by placing an order for the latter. If this person preferred to prefer the low-calorie, low-fat meal both before and after the shift in her preferences, she has unequivocally been harmed. Prior, she was in possession of the preference that she preferred to have. After being exposed to whatever it was that the restaurant did to change her tastes, she preferred something that she would rather not have preferred. This is a spillover cost phenomenon, albeit not the typical sort. Our agent has had a "harmful" effect imposed upon her but has not been in a position to extract compensation from the one imposing the harmful effect. Unlike the more typical spillover instances, the spiilover "victim" is not a third party, but one of the parties to the transac- tion. While she is willing and able to pay tor the high-

calorie, high-fat meal that she suddenly prefers, she would not have accepted the preference change that she experienced unless she had received some compensation for the imposition of the "worse" preference. But because property rights in preferences are unrecognized by the courts, there is no possibility of demanding any such compensation for harm suffered. The preference manipulator, in this case a restaurant, is thus too prone to engage in preference worsening activities as long as such activities prove profitable.

But it might be argued that while sellers may indeed alter our preferences, they cannot be said to have caused us to choose what we do. One reasoning thus might further claim that a person can exercise will power and simply refuse to be influenced by the taste altering actions of sellers if indeed unhappy with the tastes being created within her. Such a response defines "'preference" in a way that runs counter to the definition in- tended here. To say that this person prefers X to Y is to say that she will indeed be better off selecting X. If the agent's preference for X is unpreferred this simply means that she wishes her internal state were such that choosing Y rather than X would be "'the best thing to do.'"

Note that the market's affect upon prefcrences is not necessarily negative. Some sellers would be expected to find it in their interest to take actions that change preferences in a direction satisfying to those experiencing the change. Thus, the marketing efforts of weight reduction clinics, to the extent that they succeed, likely cause more people to prefer signing up for weight reduction programs than would have otherwise chosen to do so. The conclusion that market forces fall short in the preference-shaping realm, however, is not compro- mised by acknowledging preference improvement instances such as this. As standard theory demonstrates, activities that produce spillover costs too frequently occur while those that produce spillover benefits too seldom occur. It follows that markets tend to give us too many worse and too few better preferences.

But what are the moral implications of this particular market inefficiency? Does the creation of non-opti- mal preferences hold different moral implications than the better-known instances of spillover costs? Is the act of polluting the air that people breathe any more or less serious of a moral wrongdoing than the act of polluting their preferences? In one sense, it would appear to be more so. If Frankfurt's argument that the capability of having preferences about one's preferences is limited to humans alone it would be possible to set this particular sort of "spillover" on a special plane and treat the moral seriousness of the intrusion as greater than the others. By such reasoning, disrespecting exactly that


preference that nmst be fulfilled if one is to be said to have exercised a free will would be just somehow more of a moral infraction than the act of fouling one's physical space. But if one were to think more like an economist, the fact that one can in principle place a dollar value on the harm done by any external cost impo,~ition whatsoever would seem to suggest that the quantity and not the quality of the spillover cost is what should be at issue in judging the moral seriousness of the external cost imposition. Thus, if a person would agree to accept the same sum as payment for the fouling of one's air as he is willing to accept for the shifting of his preferences in an undesirable direction, then it would appear reasonable to treat the moral seriousness of the respective costs imposed as equivalent.

The degree of moral culpability for acts of preference pollution is naturally complex. There is one reason for concluding that such acts may be more morally objectionable and another reason for believing that they may be less so. For most forms of air and water pollution, the act of the polluting individual is inconsequen- tial when considered in isolation. Few of us have any qualms about driving our cars to the degree that we do since the counterfactual world in which we had not driven at all would probably not be noticeably different. Our individual act of driving creates no victims, while the summation of our individual ac~s can. Thus, it is not hypocritical that we drive while at the same time supporting legislation designed to discourage just such driving. An act of preference pollution, in contrast, necessarily has specific victims. The advertiser who constructs the 30-second TV spot for fast food that is willingly paid for by the fast food company comes equipped with evidence that more sales will be the result. Implicitly, there are thus specific individuals whose preferences will be affected by the 30-second spot. To the extent that the changed preferences are unpreferred, a wrong has clearly occurred. Thus, the conclusion: the act of creating an unpreferred preference represents a more serious moral wrong than the act of contributing inconsequentially to most other sorts of "pollution."

There is, however, another contemporary feature of preference polluting activities that suggests that those responsible should be held less responsible for their infringements on others. If the agent who carries out the act of preference worsening is unaware of the harm being done, then assigning moral responsibility becomes problematic. William Leach characterizes the broker's personality as an amoral personality that stands ready to give the customer whatever he or she is willing to buy and places no evaluation on the tastes of his customers. For Leach, this reveals sellers without values, but I believe he misses the implicit moral sense that

drives such "brokers.'" Modern sellers often treat it as their social duty to offer for sale that which is "most wanted." Thus, it is that television producers often hesi- tate to offer "higher quality" shows not out of any pre- occupation with profits over quality, but because of a failure to recognize second-order preferences and to assume that the act of giving customers what they want, ex-post of its availability, is their duty. So, f0r example, a news director reasons that "[c]rime is what the audience wants," and with a certain modesty goes on to ask "[w]ho am I to second-guess the audience." (Michael Winerip, "Looking for an Eleven O'Clock Fix." New York Times Magazine, January I1, 1998: 32). And thus, as another example, an executive in the industry can contend that "[t]he people are the boss. We listen to the audience, see what they want, and try to accommodate them" (James B. Twitchell, Lead Us into Temptation: The Triumph of American Materialism. New York: Columbia University Press, 1999: 102).

Unlike the air polluting driver who fully recognizes the harm that driving causes but is only willing to act if others do so as well, television spokespersons such as these appear to believe that they are doing no harm at all, and might be said to feel as though they are carry- ing out a moral duty by giving the viewing public what it wants, albeit not that which the viewer thinks they ought to want. The possibility that the availability of the offering might create the taste to watch it and that this taste might be unpreferred by one experiencing it is simply not part of contemporary folk morality.

Morality of Unpreferred Preferences In none of my previous writings on second-order

preferences have I speculated about the morality of an agent's unpreferred preferences from a third-party per- spective. In other words, the inferiority of these preferences relative to those that were preferred was due strictly to the agent's discontent over having them, not to their impact on the broader society. If any generali- zations about the characteristics of preferences that are preferred vis-a-vis those that are not has been attempted, the focus has typically been on how the flow of costs and benefits tend to be related to the preferability of one's preferences. Holding other things equal, the more in the distance are the costs relative to the benefits, the more likely is a preference not to be preferred. The classic vices share in common a mismatch between benefits and costs. Benefits tend to be close to the time of decision while costs tend to be experienced later,

With the advance of market capitalism, production for oneself decreases in significance while production for the market rises, and this, in turn, has contributed to a decrease in the time separating one's decision to

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own something and one's actual ownership. The transi- tion from residing on farms to residing in cities where one purchases one's food provides one example of this. And during the period of urbanization, the shift from preparing food for one's self and family to eating in restaurants has clearly lessened the time still more.

Political and economic ideologies have had little to do with lessening the time between decision and ownership in this case or in many others. In short, special- ization is a cause and consequence of economic growth, a shared value of all economic systems. Thus, it might be said to be capitalism's very success at growing faster than planned economies that has exposed its people to decreasing time between "decision to own" and actual "ownership" and with it has created a condition for the occurrence of preferences that people would rather not have.

But ideology has also been at work, particularly in the last quarter century. Consumer loans are a relatively recent historical phenomenon and in its early stages "buying on time" was the accepted practice. For big ticket items such as autos and refrigerators, the 1920s consumer was suddenly able to pay for the services pro- vided by a good over precisely the same period that they were "using up" the good. While this indeed brought benefits closer to the present, this practice ac- tually made the benefit flow through time more accu- rately match the flow of costs. While using up 25 percent of one's new auto, one was going to be paying just 25 percent of its worth, instead of 100 percent as in the days prior to consumer credit.

In contrast to this is the modern consumer loan re- gime. The products bought on credit are not necessarily (or typically) long-lived goods. The restaurant meal, the vacation, and virtually any other service that is con- sumed as soon as it is "delivered" can be enjoyed in the here and now but paid for in the distant future, as long as one is willing to pay high interest rates for the credit extended. With the benefits following almost immedi- ately from the decision to buy but the payment being simultaneously pushed further into the future, the like- lihood of the preference being an unpreferred one has grown considerably.

In summary a variety of forces have contributed to the shifting of benefits closer to the time of decision and the pushing of costs further into the future. Some of these forces are a consequence of technical advance that have no direct link with the outcomes of free markets. Other changes have more to do with the demise of social practices that previously stood in the way of such time separation.

But what are the moral implications of the observation that market forces move benefits closer to the time

of decision while moving costs further away? That it is wrong to do such things, it', in the process, the seller is creating in the buyer a preference that he would prefer not to have, is obvious enough. The act itself, in other words, is morally objectionable, as already discussed. But is the agent who is doing the choosing being moved to act in immoral ways? This is an empirical question needing systematic study. It will, however, be useful to speculate on the moral qualities of the unpreferred preferences that markets are too prone to create relative to the preferences that would prevail in the absence of market forces.

From a formal standpoint, there is nothing about the inefficient batch of preferences that market forces create that would suggest they are of lower value than the preferences that they replaced. It is entirely possible for a person to prefer to prefer to be nasty and antiso- cial with a proclivity for engaging in activities that would be judged as immoral by any moral accounting system. To the extent that the system imposed worse preferences on such a person, these would be preferences to be a less objectionable sort. But just as surely, it is entirely possible to imagine the reverse, namely, shifting a person's preferences from having morally sound to morally unsound attributes.

The examples of unpreferred preferences that have thus far been raised in this paper have tended to be examples of imprudent, "slothful" behavior rather than what we would not normally classify as immoral behavior. The weight conscious agent found himself preferring to eat foods that were inconsistent with that overarching goal. The agent seeking to set aside cur- rent earnings for future uses found herself spending more and saving less. The TV watcher spent his time concentrating his attention on shows with titillating attributes instead of shows that might yield less immediate pleasure but would result in long-term gains.

While in cases such as these there is no obvious harm being done to others it is, of course, possible that more morally praiseworthy action would have been forth- coming in the counterfactual world of agents having the preferences they preferred. As surely as there are both crimes of commission and crimes of omission, moral behavior can be usefully separated into similar categories. Murder, rape, and theft are crimes (and immoral acts) of commission. Failure to give to charity, failure to save for one's future, and failure to give suf- ficient time and attention to one's children are more in the nature of moral lapses of "omission," and it is likely this sort of immorality that is a byproduct of the market's preference-shaping shortcomings.

A cursory consideration of contemporary advertising should provide support for this claim. A recurrent


theme of the advertising message has been to think more of oneself by thinking more of one's own needs while feeling less hamstrung by socially imposed constraints on such self-expression. Rare is an instance of sales being aided by the seller emphasizing the benefits that would accrue to people other than the purchaser. "You deserve a break today" and similar messages urging the listener to think more of himself are more the norm. To the extent that this message results in not only in- creased sales, but a shift of people's preferences about their preferences, it complicates my analysis considerably, a complication whose full development must be set aside for now.

Preference Pollution and Property Rights A rhetorical act of genius occurred sometime in the

1960s when instances of "market failure" began to be re-cast as acts of "insufficiently well defined property rights." The overabundance of polluted air and water began to be understood not so much as a result of the inability of markets to live up to their promise of maxi- mal efficiency but rather as an indication of a failure to adequately define property rights. In shaping my cri- tique of the market's preference-shaping capabilities, 1 have deliberately sought to appeal to economists raised in a properly rights tradition. But I have not suggested that the problem of preference pollution can be suc- cessfully solved by more vigorous definitions of property rights.

To see why, consider the difficulties that any such solution would present. How could one convincingly demonstrate that one was "in possession" of a preference that was changed for the worse by the particular actions of sellers'? Ownership of physical goods can be documented, but ownership of tastes cannot be. And how would the near universally valued principle of free speech survive such a property rights solution? Nearly everything that is uttered can cause harm to someone. Being "bothered" by what someone else says is usually an insufficient reason to censor the speaker. Would there suddenly be a stronger basis for censoring another if one could convincingly demonstrate that something one owned (one's preference) had been changed for the worse'? This likely gives the reader pause, as well it should. More fully enforceable property rights in one's preferences when coupled with narrowly self-interested agents would appear to endanger free speech more than anyone would even like to imagine.

Without wanting to rule out altogether collective le- gal solutions to the problem of preference pollution, a

better place to begin would be simple education in the harm that preference changes can represent. As the ear- lier quote by the television producer suggests, contemporary consciousness has difficulty in understanding how changing the tastes of others can be inherently harmful or beneficial. It is necessary to turn to nine- teenth-century philosophers to consider the possibility of cultural solutions to the contemporary preference conundrum. As John Stuart Mill has said "A person whose desires and impulses...are the expression of his own nature, as it has been developed and modified by his own culture--is said to have a character. One whose desires and impulses are not his own, has no character." And as Jerry Muller has noted, for Hegel, "a good life...is one in which we are formed by institutions that...function to make us into the sort of people we want to be." For both Mill and Hegel, cultural forces could shape our preferences for the better. But at the time that they were writing, little did they likely suspect the sheer magni- tude of market forces with which other cultural forces would have to contend.

SUGGESTED FURTHER READING

Cameron, Samuel. 2002. The Economics of Sin: Rational

Choice or No Choice At All? Northampton, MA: Ed- ward Elgar.

Frankfurt, Harry G. 1971. "Freedom of the Will and the Concept of a Person." Journal of Philosophy 68: 5- 20.

Galbraith, John Kenneth. 1958. The Affluent Society. New York: New American Library.

Gintis, Herbert. 1972. "A Radical Analysis of Welfare Eco- nomics and Individual Development." Quarterly

Journal of Economics 86: 572-99. Hayek, Friedrich. 1961. "The Non-Sequiter of the

"Dependence'Effect." Southern Economic Journal

27: 346-48. Hirschman, Albert O. 1982. "Rival Interpretations of Mar-

ket Society: Civilizing, Destructive, or Feeble." Jour-

nal of Economic Literature 20: 1463-84. I,each, William. 1993. Land of Desire: Merchants, Power,

and the Rise of a New American Culture. New York: Vintage.

Sunstein, Cass. 1997. Free Markets and Social Justice.

New York: Oxford University Press.

David George is professor of economics at La Salle Uni- versity and author of Preference Pollution: How Markets Create the Desires We Dislike.

38 SOCIETY 'r' ~ JANUARY/FEBRUARY 2006

Moral implications of preference change

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