Consumer Sovereignty: The Australian Experience

Abstract: Consumer sovereignty is a vital assumption in the economics and law of consumer welfare and market participation. Australia’s recent credit reforms present a challenge towards the traditional ‘thin’ neoliberal perceptions of consumer sovereignty and non-interventionist policies. The legislative developments are ‘thick’ versions of consumer sovereignty. They recognise the need to intervene in consumer affairs to enable consumer participation. The thicker concept of consumer sovereignty is used as a comparative standard to critically evaluate present reforms. The paper uses the thicker concept of consumer sovereignty to evaluate present reforms. The evaluation determines if reforms enhance consumer market participation through greater financial inclusion or whether, conversely, consumer participation is unduly hindered. Recent payday lending reforms diverge from both the thin and thicker concepts of consumer sovereignty, due to their incomplete and atypically decontextualised nature.

 

Neoliberalism supports a non-interventionist approach towards consumer markets. To do this, the theory relies upon the assumption that consumers are sovereign, innately rational and therefore the superior decision makers as well puppet masters of the market mechanism. Insights from the school of behavioral economics have placed doubt on the assumption by painting a slightly dimmer, picture of the consumer as an ‘imperfectly rational’ market participant.[1] However, consumer sovereignty is capable dual of classification as both an ‘descriptive observation’ and ‘normative standard.’ In its normative capacity, consumer sovereignty serves as an ethical standard against which consumers’ interest are to be assessed. The consumer finance market is used as a paradigmatic example of how consumer sovereignty, as a normative concept, can better achieve both ethically and economically favorable outcomes. Accordingly, the paper will discharge two objectives. First, it argues that neoliberalism and consumer sovereignty as a descriptive observation offers ineffective framework for achieving consumer interests. Secondly, the paper proposes to introduce the recent Australian credit law