Knowledge And Decisions

Consumer rights raise the price paid for products and services, since higher quality, or greater producer liability, both have costs. The question is whether the amount by which the price is raised is more or less than the increased value created by the rights. If the increased quality or enlarged responsibility of the seller were worth it, there would be profit incentives for the producer to raise his quality, responsibility, and price together without consumer protection laws. It has long been common for stores with easy return, money back policies and free repair services to charge more than stores that sell “as is.” Some stores even sell service contracts separately, so that the same physical item can be bought at two different prices from the same dealer with two different levels of dealer responsibility. Those for whom the price differential is sufficient incentive to speculate in consumer appliances can buy without the service contract, and others can substitute money for boldness incrementally. These subjective differences in the costs of risks are ignored when laws in effect prescribe categorically how much liability insurance must be sold with each product. Assurances that the consumer must “really” be better off this way can seldom be checked empirically. One large historical instance of imposed product quality “improvement” occurred when the British Parliament in the nineteenth century imposed higher health and comfort standards on ships carrying Irish emigrants. In view of the foul and disgusting state of the ships at that time, it might seem to be a foregone conclusion that this was a net benefit. Yet the records show that the Irish rushed to get on ships heading out before the law became effective — and the outflow of emigrants slackened immediately thereafter.²⁴ The cost of the higher quality was apparently weighed differently by the Irish themselves than by the British Parliament.

Perhaps the crucial problem involved in creating special “rights” is that they typically involve reducing the set of options available to the transactors, without any offsetting increase in other options. There is no reason to believe that people will generally make a better set of choices out of a smaller set of options, where the larger set includes all the options in the smaller set. If the purpose is in fact to deny the ostensible beneficiaries their choice and substitute someone else’s choice, that is another matter.

Because the negative impact of special legal rights on the recipients is seldom recognized by the voting public, this cost seldom serves as a restraint on political decision making. Indeed, the creation of rights is less constrained than the creation of other ostensible benefits for special constituencies. While political benefits can usually be expected to increase voter support among the recipients, they lose voter support among those who pay the costs — either the taxpayers in general or others on whom the burdens are placed. Rights, however, cost the taxpayer little more than the paper and ink needed for printing them. From a politicians’ viewpoint, rights are therefore a virtually ideal benefit to confer on special constituencies. Where the rights’ social costs consist largely of a reduction in would-be transactions affected by the rights, what matters politically is whether those tangibly benefiting from the improved terms of the transactions (minimum wage laws, rent control) can perceive their offsetting losses from reductions in the number of transactions consummated (unemployment, housing shortages), and whether the other transactor can be publicly discredited (“exploiting” employers or “greedy” landlords). Where the terms are more visible than the number of transactions, and the other transactor is politically vulnerable, there is little constraint on the proliferation of special rights for special groups.

The trade-off between equal rights and special rights is often denied by the same verbal methods used to obscure the trade-off between freedom and other values. The two things being traded off are simply put under one label, so that special rights for special groups are described as simply equal rights in some “larger” or “truer” sense, and instead of a trade-off there is — rhetorically, at least — simply an expansion of the one benefit. This verbal sleight of hand avoids confronting the costs of special rights both to society and to the supposed beneficiaries.

GENERAL RIGHTS