Consumer sovereignty

Consumer sovereignty is a term used in economics. It refers to consumers determining the production of goods. The term can prescribe what consumers should be permitted, or describe what consumers are permitted. The term was coined by William Hutt in his 1936 book "Economists and the Public".

In unrestricted markets, those with income or wealth are able to use their purchasing power to motivate producers. Customers do not necessarily have to buy and, if dissatisfied, can take their business elsewhere, while the profit-seeking sellers find that they can make the greatest profit by providing the best possible products for the price (or the lowest possible price for a given product).

To most neoclassical economists, complete consumer sovereignty is an ideal rather than a reality because of market failure. Some economists of the Chicago school and the Austrian school see consumer sovereignty as a reality in a free market economy without interference from government or other non-market institutions, or anti-market institutions such as monopolies or cartels. That is, alleged market failures are seen as the result of non-market forces.

See also

• Austrian School

Citations

• Campbell R. McConnell and Stanley L. Brue (1999, 14th ed.), Economics. McGraw-Hill, p. 68.

External links

• Consumer Sovereignty: the Key to Mises’s Economics, J. P. Gunning
• Persky, Joseph, “Retrospectives: Consumer Sovereignty,” Journal of Economic Perspectives, 7 (1993), 183-191.