Tuesday, January 2, 2007

On Ethics, Economics, Advocacy, and Charlevoix Ice Cream

Posted by Jeff Lipshaw

There's an interesting set of comments to a blog post over at Conglomerate (full disclosure:  I wasCharlevoix responsible for one moderately inane contribution).  Gordon Smith posted a snippet from an article by Benedict Sheehy, (University of Newcastle - Australia), entitled "Corporations and Social Costs:   The Wal-Mart Case Study."  Professor Sheehy argues Wal-Mart is responsible for social waste by causing its suppliers to put too much in the packages, thereby underpricing the goods,and causing lots of stuff (in this case, Char3 pickles) to be thrown away. 

I have to admit I was scratching my head over this one even before neo-classical economists and empirical scholars far more qualified than I jumped in to point outOverlookweb252x189 the holes in the thesis (most of which are testable, like:  does Wal-Mart really have the market power to control the size and pricing of pickle packages?)  My own experience with oversizing was in our little lake resort town of Charlevoix, Michigan (above and right),* which, during the summer does a thriving trade in fudge (a Northern Michigan specialty) and ice cream cones.  I realized at some point that the store owners had figured out that you could double your business by increasing the size of a cone and charging more for it.  So, effectively, single scoop cones went by the wayside, and you had to spend four bucks on this huge glob of ice cream.  Now the locals (and the quasi-locals like me) know how to deal with this (and we leave the Bridge Street shops to the "fudgies" and "coneheads," as summer tourists are known).  You troop a half-mile down the main drag to the Dairy Queen, or stop in Oleson's market and buy a half-gallon of Edy's and take it home.

What stopped me in my [Edy's fudge] tracks was this from Professor Sheehy:Fudge_tracks

While Wal-Mart is not the creator of consumerism, its dominance creates a large responsibility to inform consumers about the real costs. By under-pricing, Wal-Mart is misinforming the consumer encouraging over-consumption, and to do so in the planet's current state is nothing less than perverse. Because of its market dominance, a strong argument can be made for its bearing considerable corporate responsibility to inform consumers about costs by pricing correctly.

Perhaps this is the nature of the legal academic beast, but David Hume's observation about the conflation of the "is" and "ought" seemed apropos (or, as Professor Childress would say, aproposner): "[T]he author proceeds for some time in the ordinary ways of reasoning, and establishes the being of a God, or makes observations concerning human affairs; when of a sudden I am surpriz'd to find, that instead of the usual copulations of propositions, is, and is not, I meet with no proposition that is not connected with an ought, or an ought not."  I have often suggested that the economic approach to law and policy (and everything else) fails to make clear its implicit consequentialist morality, but despite my occasional jibing of law-and-economics on this point, there is also a fundamental epistemology of freedom that goes with market economics, and on that point I too take a neo-classical position.

Wal-Mart puts it on the shelf and compels NOBODY to buy it.  Murdick's Ice Cream scoops it and compels NOBODY to buy it.  As the commenters over at Conglomerate point out, the argument that Wal-Mart has market power in the grocery business is attenuated; if so, I suppose Murdick's and Kilwin's (below), the two ice cream shops on Bridge Street, have the power to force chocoholics to forkKilwin over four bucks for the oversized ice cream cones.  (Wal-Mart is big and Murdick's is small, but mere size has no relationship to market power - ask KMart or Sears.)  It seems to me that consumers have some responsibility to decide what makes sense and what does not.  But I acknowledge that is my "ought" and I don't conflate it with an "is."

One final note on advocacy tactics (or the dangers of the discovered half-truth - see my article somewhat related to this subject).  Mr. Sheehy appeared in one of the later comments to defend his work by noting that it was "sufficiently rigorous to be published by Northwestern."  Most would, I think, decry publication in any student-edited journal as an indication of scholarly rigor, but as Gordon noted in a later comment, "the Northwestern Journal of International Law & Business is quite a different thing from the Northwestern University Law Review, which is what your reference would imply to an American legal academic."  Ouch.

* In the spirit of unbridled capitalism, I should note this lovely house is available for weekly rentals.


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