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Economics, Ethics and Green Consumerism

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Economics, Ethics, and Green Consumerism
Jouni Paavola, OCEES, Mansfield College
Published in M. J. Cohen and J. Murphy, eds. (2001) Exploring Sustainable Consumption: Environmental Poli-
cy and the Social Sciences. Amsterdam: Pergamon Press. Pp. 79-94.

This article examines green consumerism or the making of consumer choices at least

partly on the basis of environmental concerns. It has two different goals. First, the article

aims to clarify the promises and pitfalls of green consumerism as a way of transforming our

current consumption patterns towards a more sustainable direction. Second, the article seeks

to demonstrate that an economic approach is useful for understanding social and environmen-

tal dimensions of consumer behaviour.

Green consumerism is an interesting and important object of analysis for several reasons.

First, consumer choices have a significant effect on the environment and, therefore, also a

potential to alleviate environmental problems. Secondly, green consumerism and lifestyles

(see e.g. Elgin, 1993) are becoming fashionable and the belief in their ability to improve envi-

ronmental outcomes is increasingly widely shared. Finally, attention in both scholarship and

international policy arenas is moving toward consumption. It is increasingly felt that the po-

tential of regulation of production is either not sufficient to remedy environmental problems

or is already largely exhausted (see e.g. Cogoy, 1999; Crocker and Linden, 1998; Georg,

1999; Jackson and Marks, 1999; OECD, 1997a, 1997b, 1998; Røpke, 1999).

Economics is not by any means an obvious candidate for other social scientists to gain

deeper understanding of consumer behaviour. After all, economic theorising in its usual form

is based on narrow and counterfactual assumptions concerning human behaviour, which ren-

der consumption as an object of analysis devoid of symbolic and social dimensions. In es-

sence, the traditional economic approach has viewed consumption as a string of rational

choices that individuals make to maximise their personal welfare without regard to the con-

sequences of their choices for other humans and non-humans and without regard to the choic-
 2

es made by others and their consequences. Even economists themselves have sometimes con-

sidered the theory of consumer choice as an area of research, which has not developed essen-

tially since the mid-20th century (reference, 19xx).

Yet some relatively recent developments in economics promise to make it more amena-

ble and fruitful for the kinds of inquiries into consumption that interest other social scientists.

These developments include the recent revival of the interest in the study of interdependent

consumer choices, originally pioneered by Thorstein Veblen at the turn of the 20th century

(see e.g. Corneo and Jeanne 1997; Frank 1985, 1991; Veblen 1899). Another area of research

in the interstices of economics and philosophy has made space for non-welfarist behavioural

motivations and examined their implications for economic analysis (see e.g. Sen 1977, 1979;

Anderson 1993, Kavka, 1991, 1993). Finally, the ever more popular game theory provides a

heuristic framework for integrating these new trends in economics.

In essence, as I will seek to demonstrate below, at its best economics enables us to ana-

lyse consumer choices as choices of agents that have plural values and act on socially con-

structed identities and knowledge. Often their choices are interdependent, that is, moves in

games for distinction in a context in which different agents have internalised different rules

for distinction. Some agents may thus seek to display their wealth in the Veblenian (1899)

fashion, while others may seek brownie points in their subcultures by resorting to green con-

sumerism or lifestyles, for example. The paper also demonstrates that we can infer policy and

other lessons from analysing consumption games that are characterised by plural motivations.

These lessons indicate, inter alia, that green consumerism may need to be supplemented with

public policies to ensure the achievement of desirable environmental outcomes.

In what follows, the first section describes the usual understanding in economics of con-

sumption as a series of independent and welfare-seeking consumer choices, and the limited

role green consumerism can play in this model. The second section demonstrates how this
 3

standard model can be expanded to accommodate plural values and a broader notion of green

consumerism. The third section examines the significance of the interdependence of consum-

er choices in a game-theoretic framework, and the fourth section works out the implications

of value pluralism for interdependent consumer choices. The fifth section examines in greater

detail the implications of green consumerism when value pluralism prevails. The conclusions

will summarise and elaborate upon the arguments of the previous sections.

I. THE STANDARD MODEL OF CONSUMER CHOICE

The model of rational choice (see e.g. Hargreaves Heap et al., 1992) is a useful starting

point for understanding how economics has traditionally approached consumption and how it

understands green consumerism. The rational choice model has it that consumers are interest-

ed exclusively in their own utility or welfare and that they rank choice alternatives according

to how choosing them would enhance their welfare. The model also assumes that consumers

have limitless cognitive capabilities so that they can obtain perfect knowledge about the

choice alternatives they face and that they make choices that do maximise their welfare. Fi-

nally, consumers are not understood to have any control over what alternatives are available

for them: market forces generate the menu of choice alternatives they face.

Three different views of items of consumption and their relation to the utility or welfare

of the choosing agent coexist in economics. The first view that is embodied in the standard

microeconomic approach assumes that the items of consumption somehow directly translate

into enhanced utility or welfare: this “naïve” view collapses consumption into acquisition.

The second, more realistic view has it that the items of consumption have characteristics that

are useful for consumers (see Lancaster, 1966). This approach is able to treat the act of con-

sumption as distinct from the act of buying, but it still usually incorporates a narrow and

problematic notion of consumption as an isolated and individual activity. Finally, the third
 4

view is that the items of consumption such as steak, wine and candles generate utility only

indirectly after being transformed into final goods such as candlelight dinners by household

production (see Becker, 1976; Stigler and Becker, 1977). This view would enable a rich and

elaborated view of consumption if it would be accompanied with a notion of socialised agents

acting on plural motivations. This is not usually the case. Quite the contrary, scholars in this

tradition usually consider preferences as extraordinarily pre-existing, immutable, and funda-

mentally centred on the agents’ welfare (see e.g. Stigler and Becker, 1977).

More broadly, all traditional economic theories assume the consumers to be motivated by

the improvement of their personal utility or welfare only. These traditional theories also usu-

ally fail to make a distinction between utility and welfare and assume that whatever values

inform agents’ preferences, the choices made on the basis of these preferences must improve

the choosing agent’s welfare. Early economic theory indeed warranted this close association

of utility and welfare. It provided a strong link between the utility, welfare, and preferences

of agents by associating utility with pleasure or usefulness: agents simply preferred things

that made them happier and better off (see Georgescu-Roegen, 1968; Sen, 1991). However,

in the early 20th century utility was redefined as the satisfaction of an agent’s preferences,

whatever they are (see e.g. Broome, 1991; for the original argument, see Hicks and Allen,

1934). This redefinition left utility without substantial content and severed its connection to

the choosing agent’s welfare (see Sen, 1973).

Therefore, there is no reason why agents’ choices should improve their welfare when the

broad notion of utility is accepted: agents may deliberately choose to forward some other

goals than their personal welfare. For example, these kinds of motivations are likely to ex-

plain at least some agents’ engagement in green consumerism. This article cannot adopt the

broad notion of utility as the satisfaction of preferences, because it aims at understanding the

implications of different ethical values for preferences and choice, and thus needs to be able
 5

to distinguish between them. In what follows, utility will be understood in the classic sense as

a pleasure or usefulness that is closely connected with a narrow understanding of the agents’

welfare. To put it differently, the agents of the standard model can be thought to be informed

by self-centred welfarism, a form of utilitarian ethical values.

Although the rational choice model understands that the consumers choose between al-

ternatives so as to maximise their welfare within the constraints of their budgets, this does not

necessarily render the agents short-sighted hedonists. In the contemporary scholarship, agents

are usually understood to seek to maximise their utility or welfare over their whole life spans

(see e.g. Deaton and Muellbauer, 1980). Sometimes this may entail postponing consumption;

when saving for a home before buying one, for example. At other times, it may be best to in-

cur debt and save in the future to buy a home. While utility or welfare maximisation over

agents’ life span provides a richer view of consumption than a view that does not consider

agents as forward-looking planners, it also overestimates their actual capabilities and down-

plays the role of mistakes in their choices.

The standard model has also another noteworthy feature: no effects are seen to prevail

between one agent’s consumption and another agent’s welfare. These kinds of inter-personal

effects are called consumption or positional externalities (see e.g. Frank, 1985, 1991; Hirsch,

1995; Leibenstein, 1950). The assumption of independent consumer choices is unrealistic.

We all know that relatives, neighbours, and peers do care about each other’s consumption:

they may feel better or worse off depending on whether they do or do not have the items of

consumption possessed by others, for example. We start with the assumption of independ-

ence, because independent consumer choices form the necessary first step in understanding

and expanding the economic analysis of consumption.

No matter what the preferences of self- and welfare-centred consumers are, the alterna-

tives they face, and the budgets within which they operate, they are always better off by ex-
 6

hausting their budgets, either by consuming now or in the future. Moreover, it is best for

them to spend their budgets on baskets of items of consumption that maximise their welfare –

no matter what are their effects on other humans and non-humans. This does not mean that

the consumers of the standard model of rational consumer choice could not engage in green

consumerism: personal welfare and environmental protection are compatible in a number of

choices. For example, consumers may well choose environmentally benign non-material ser-

vices, such as going to an art exhibition or theatre, if they think doing so would improve their

welfare more than material consumption. Consumers can also choose environmentally friend-

ly products, such as organically grown produce or vegetarian meals over ordinary ones if they

believed that doing so would improve their welfare.

To put it differently, the rational choice model assumes that all agents revealing envi-

ronmental preferences obtain welfare gains from expected improvements in environmental

quality. It also understands that the seeking of these welfare gains exhausts motivations for

environmentally friendly behaviour, such as engagement in green consumerism. Monetary

valuation of the environment is based on this idea: rational consumers are thought to be will-

ing to pay at least the value of changes in environmental quality to secure these changes for

themselves. This line of reasoning suggests that the value of environmental quality or its

change could be determined by measuring the consumers’ willingness to pay for it.

However, views according to which consumers engage in environmentally friendly be-

haviour and support environmental protection only because of the expected welfare gains are

problematic. First, it is difficult to explain all expressions of environmentally benign behav-

iour such as green consumerism as self-interested welfare maximisation, because the im-

provement of personal welfare and desirable environmental outcomes are incompatible in a

number of choices. For example, forgoing the use of a personal car often imposes significant

burdens on those who commit themselves to cycling or the use of public transport only. It is
 7

similarly with dutiful recycling and composting of household and garden wastes. Finally, the

choice of more pricey environmentally friendly products may increase expenditure more than

it can compensate for by any additional welfare benefits. Economists usually explain these

apparent contradictions away by claiming that agents obtain some sort of psychological satis-

faction from what they do. However, this does not do justice to all consumer choices: indi-

viduals do sometimes consider that certain goals are more important than their own welfare.

Moreover, references to “satisfaction” do not improve our understanding what actually moti-

vates agents to environmentally benign behaviour.

The existence of non-welfarist motivations such as doing good for the environment for

its own sake should be taken seriously. Our own intuitions tell us that our choices are not al-

ways determined by deliberations to improve our own lot. There is also evidence of non-

welfarist motivations and behaviour from surveys that aim at establishing the monetary value

of environmental quality: respondents sometimes express strong commitments to environ-

mental protection, while still refusing to offer willingness to pay estimates (see e.g. Jorgensen

et al., 1999; Spash and Hanley, 1995). A number of philosophical and theoretical objections

have also been presented against exclusively welfare-based explanations of and prescriptions

for human behaviour and choices (see e.g. Foster, 1997; Sagoff, 1988; Sen, 1995; Vatn and

Bromley, 1995). Finally, contemporary research on ethics and economics provides a sound

foundation for recognising non-welfarist behavioural motivations.

The next section incorporates plural values into the standard model of rational choice and

examines their implications for understanding green consumerism in economics.

II. GREEN CONSUMERISM AND VALUE PLURALISM

The extension of rational choice model to accommodate plural values requires a redefini-

tion of what is understood with rationality. The usual view in economics of rationality as

strictly welfare-maximising behaviour must be replaced by a wider notion of rationality as

 8

deliberated, intentional action (see e.g. Elster, 1983; Simon, 1978). As agents may well be

thought to base their deliberations and intentions on values other than self-centred welfarism,

value pluralism can prevail under this wider notion of rationality.

I emphasise the formal plurality of values in addition to their substantial plurality. Two

self- and welfare-centred consumers may appreciate taking a bus instead of a car quite differ-

ently and hold different views also with respect to consuming vegetarian meals. Still, their

assessments are based on what they consider as best enhancing their welfare. However, other

kind of values may lead agents to choose in ways that do not improve or may reduce their

welfare (see e.g. Sen, 1977). For example, social welfarists could make personal sacrifices for

the common good, however they understand it. Other-centred welfarists could in turn choose

so as to maximise the welfare of other humans or non-humans, even at the expense of their

own welfare. Similarly, non-utilitarian consequentialists would make personal welfare sacri-

fices to realise the consequences they consider to be intrinsically valuable. Finally, agents

need not attach value to the consequences of their choices at all: they could rather attach it to

acting in a particular way. For example, a rule-following Kantian consumer would not seri-

ously consider certain alternatives because she thinks choosing them would simply be wrong.

Instead of following rules, agents may also consider certain choices virtuous.

Preferences can thus be based on welfarist, non-utilitarian consequentialist, or deontologi-

cal ethical foundations. The preferences of a self-interested welfarist depicted in the standard

model of rational choice cannot induce her to choose in ways that decrease her welfare. How-

ever, the preferences based on social or other-centred welfarism, non-utilitarian consequen-

tialism and deontology could do so. Ethical premises capable of inducing welfare-reducing

behaviour do not influence behaviour towards the environment only: they influence many

choices and especially the institutional ones. For example, the attitudes expressed towards the

freedom of private enterprise or freedom from government interference imply that these free-
 9

doms are often felt to be intrinsically rather than instrumentally valuable. They may thus be

pursued or/and defended even to the detriment of the protagonists’ welfare.

When values are plural, an agent may hold different values that could all inform her choic-

es in a choice situation (see e.g. Kavka, 1991, 1993). It can be thought that agents deliberate

and choose between values when their values are in conflict and would call for different

choices. Anderson (1993) argues that we make these choices in order to pursue an ideal per-

son we want to be. When values are plural, different agents may also choose on the basis of

different values in the same choice situation, and arrive at either similar or different choices

(Anderson, 1993). That is, the choice of an alternative, say a vegetarian diet, may be based on

different ethical premises. Some may choose vegetarianism to improve their own welfare,

while others may base their choice to consideration for animal welfare. Still others may

choose to become vegetarians simply because they consider it a virtuous thing to do. Agents

do choose to engage in green consumerism or to adopt a green lifestyle in a similar way be-

cause of many different ethical premises and values.

The incorporation of value pluralism into the model of rational choice is relatively

straightforward at a general level. In the standard model, an agent’s preferences can be under-

stood as that ranking of choice alternatives that maximises her welfare (see e.g. Sen, 1973).

When the motivational basis of human behaviour is broadened, it simply means that an

agent’s preferences do not reflect exclusively her personal welfare anymore: they reflect her

moral convictions, whatever they are. A consumer that is rational in the wider sense thus

chooses so as to realise her values (see Anderson, 1993).

The acknowledgement of non-welfarist behavioural motivations in the expanded model of

rational choice gives green consumerism more depth. The consumers of the expanded model

are sometimes willing and capable to make choices, which do not improve or may reduce

their welfare. Many of these choices are not dramatic or extraordinary in any way. For exam-
 10

ple, consumers sometimes choose environmentally friendly products, which are costlier than

ordinary products. Their choices may not bring about such welfare improvements as would

compensate for their diminished ability to spend on other items of consumption and to obtain

welfare gains promised by them. Still, consumers could make these welfare-reducing choices

deliberately, to realise their non-welfarist values. Green consumerism would thus be more

potent when values are plural. Consumers would choose in an environmentally sounder way

more frequently under value pluralism than when everybody minds only about his or her own

welfare. Some consumers would also diminish their ability to consume as the result of the

choices they make at the expense of their personal welfare.

However, green consumerism still remains problematic strategy for reducing the envi-

ronmental impacts of consumption. First, green consumerism realises environmental im-

provements at the cost of those, who most care about them. Yet there is no conclusive justifi-

cation for this allocation of costs. The agents engaging in green consumerism because of non-

welfarist reasons do not necessarily obtain welfare improvements in return for the costs they

incur. Moreover, the most concerned agents quite likely are not the ones who are most re-

sponsible for the degradation of environmental quality, so leaving them to finance environ-

mental improvements for all would relieve responsible parties from liability and violate the

“polluter pays” principle. Secondly, although agents may engage in green consumerism be-

cause of non-welfarist reasons, their behaviour may confer welfare benefits on both non-

welfarist and welfare-centred agents. There is again no conclusive reason why agents should

not pay or make other sacrifices for the benefits they obtain. Thirdly, green consumerism re-

quires widely shared environmental concerns to have an impact on the environmental out-

comes. Fourthly, public policies could reduce the environmental impacts of consumption at a

lower cost than individual consumer choices. Fifthly, an exclusive reliance on green consum-
 11

erism to reduce the environmental impacts of consumption would not allow agents to agree

collectively that they do not wish to repeatedly confront certain moral dilemmas.

On the other hand, when value pluralism is accepted and honoured, the ability of some

agents to realise their values (for example by taking individual responsibility for the envi-

ronment instead of being made responsible by a government policy intervention) may have

intrinsic value for them. Yet values often conflict in real societies. One groups’ ability to take

personal responsibility may leave other groups into positions in which they do not wish to be.

For example, if choices over the mode of transport used for going to work remain the indi-

viduals’ prerogative, some agents may well start cycling or to work in/from home in accord-

ance with their preferences. However, this may coerce those whose budgets or other con-

straints do not enable them to choose according to their preferences. For example, working

increasingly from home or cycling to work does not expand the range of choices for those,

for whom public transport is the only alternative for a car. As Isaiah Berlin said, “freedom for

the pike is death for the minnow (reference, 19xx).”

The next section will examine the implications of interdependence of consumer choices.

III. CONSUMPTION FOR DISPLAY AND DISTINCTION

When one consumer’s choices or welfare are affected by how others choose, consumer

choices are said to be interdependent. The departure from the standard consumer theory by

recognising the interdependence of consumer choices adds realism to economic analysis, be-

cause a number of our consumption decisions are actually affected by how others choose.

The interdependence of some choices also influences choices that are not. For example, Rob-

ert Frank (1985) has argued that people spend more on items of interdependent consumption

such as cars and houses and save on items that are not readily observable by others, such as

food. This kind of behaviour is not by any means irrational from the individuals’ viewpoint,
 12

because one’s relative position in certain areas of life may have important consequences. For

example, even if one has good education, it may not be enough for success if others have

even better one. One’s looks, appearance, and dressing also often serve as proxies of skills

and prowess. Poor relative performance in any of them may eliminate opportunities and

prove costly. Yet from the society’s viewpoint, competition for relative position may result in

excessive investments in education or appearance, for example.

Consumer choices can be interdependent in different ways. Competition for relative posi-

tion or merit goods was already mentioned (see Hirsch, 1995). Many of us also want to be

fashionable: we sometimes choose a good because others do so and it adds to the value of the

good for us. Witness, for example, how the use of personal palm-held organisers spreads in

certain walks of life just like the use of mobile phones did earlier. This is called a bandwagon

effect in economics (Leibenstein, 1950). Others called “snobs” in the economic parlance de-

liberately choose differently from others: the fact that others choose a good diminishes its

value for them. For yet others, the most important dimension of goods such as Swiss wrist

watches or Italian sports cars is their price, which communicates to others their ability to con-

sume and hence status. This is the Veblen effect (see Bagwell and Bernheim, 1996; Leiben-

stein, 1950), named after Thorstein Veblen who presented a theory of consumption as a be-

haviour primarily concerned with establishing one’s status (see Veblen, 1899).

Different strands of research in economics explain and treat the interdependence of con-

sumer choices differently. For Becker (1976), for example, consumer choices are interde-

pendent simply because an agent’s welfare depends on the income, wealth, welfare, or the

choices of other agents. That is, consumer choices are interdependent because agents have

sometimes “nosy” preferences (see Sen, 1970). However, this approach is unable to treat con-

sumption as a social phenomenon, because it individualises the inter-personal dimension of

consumption: there is nothing outside an individual that explains her having nosy preferences
 13

in the first place. The approach makes it difficult to justify public policies to alleviate prob-

lems that result from interdependent consumption, because it dresses interdependent con-

sumption in the garb of consumer sovereignty: consumers do truly prefer what they choose

when they are interdependent with others and would suffer a loss of welfare if they are denied

an opportunity to exercise their preferences.

Other economists in turn understand that the interdependency of consumer choices results

from the characteristics of certain consumer goods. For example, goods that satisfy our pref-

erences as self-interested, welfare-centred, and independent agents are called non-positional

goods (Frank, 1985). Other goods such cars and dwellings may convey signals about our sta-

tus and wealth and thereby affect the choices or welfare of others. Goods that have this sig-

nalling capacity are called positional goods (Frank, 1985; Hirsch, 1995). Still, as Dugger

(1985) has argued, a good does not by itself communicate anything about the status of its

owner, if it is not signified in the society as a positional good. The bottom line is that con-

sumption externalities are social relations of interdependence.

Some contemporary economists (see e.g. Corneo and Jeanne, 1997) consider that posi-

tional goods do not contribute to the welfare of their consumers. This amounts to a problem-

atic understanding according to which there are altogether superfluous goods that only serve

to make distinctions and other goods that serve “genuine needs” intimately related to the

agents’ welfare. The familiar concepts of “necessities” and “luxuries” reflect this understand-

ing. Yet it is difficult if not impossible to separate the symbolic use of goods from their mun-

dane use for satisfying needs. Therefore, the desire to distinguish oneself should be under-

stood to enter into all consumption choices, including those that primarily seek to satisfy

“needs,” whatever is meant by them. As a result, we spend more on all items of consumption

than would be necessary to obtain their basic services, in order to obtain more of the charac-

teristics that serve symbolic functions.

 14

Paying a premium for the symbolic functions of consumer goods does not alone raise en-

vironmental concerns: it amounts to taxing oneself and cutting back one’s ability to material

consumption. After all, adverse environmental impacts are usually directly related to the

quantity of material consumption. However, the situation is different if consumption for sta-

tus causes more adverse environmental impacts than ordinary consumption. This is true of

many positional goods, such as cars and dwellings. Competition for status also influences the

life span of many goods, such as garments, furniture, household appliances, and vehicles.

Furthermore, it may cause environmentally adverse structural changes in consumption if con-

sumers maximise the public display of their possessions or expenditure (see Veblen, 1899).

Interdependent consumer choices can be analysed as games in which self- and welfare-

centred agents seek to distinguish themselves. The agents are understood to make their choic-

es aware of the alternatives faced by others but without being able to communicate or collab-

orate with them (Kreps, 1990). The competition for status and distinction follows the logic of

the Prisoners’ Dilemma game, which is exemplified below in Table 1. If consumer A chooses

to distinguish herself when consumer B does not, she earns a high pay-off 4 in comparison to

the low pay-off 1 of B, and vice versa. If both try to distinguish themselves at the same time,

they fail to do so and earn a relatively low pay-off 2. Had both decided not to distinguish

themselves, they would have earned payoff 3 and the maximum joint outcome in the game

(see Kreps, 1990; Schelling, 1978, 216-17). This outcome would also have been the most de-

sirable one from the environmental viewpoint, given our assumption that consumption for

status has worse environmental impacts than ordinary consumption.

TABLE 1: Payoffs in the Consumption Game among Self- and Welfare-Centred Agents
 15

A\B Does not signal Signals

Does not signal (A = 3, B = 3) (A = 1, B= 4)

Signals (A = 4, B = 1) (A = 2, B = 2)

The game’s expected outcome is the one in which both A and B try to distinguish them-

selves, because it is the best choice for both of them individually, whatever the other does.

However, it is the game’s worst outcome in welfare and environmental terms. The self- and

welfare-centred consumers of the standard rational choice model are not able to avoid this

outcome within the constraints of the usual two-person one-shot Prisoners’ Dilemma. The

same applies to a multi-person Prisoners’ Dilemma game that better characterises status-

seeking in real societies (see Schelling, 1978). The consumers can avoid status competition in

an endlessly repeated game (see Axelrod, 1984). However, in this game the players can dis-

cipline those who do not conform with the jointly best strategy by their choices: this amounts

to rudimentary communication and collective action which was ruled out from the two-

person, one-shot Prisoners’ Dilemma game in the beginning.

The recognition of the interdependence of consumer choices highlights problems related

to choosing green consumerism and lifestyles in societies where competition for status is rife.

In the standard model of independent rational choice, individuals informed by self- and wel-

fare-centred values could choose in an environmentally friendly way if it improved their wel-

fare. When we recognise the interdependence of consumer choices, the very same choice by

the same agent may have significant adverse consequences to her. One may face high costs or

forgo important opportunities if one attains a poor relative performance in important areas of

inter-personal competition and comparison when seeking to realise welfare improvements

that are related to the environment. This also means that there may be a number of agents
 16

who would view environmentally benign behaviours welfare-improving for themselves, but

who are discouraged from acting according to their preferences. For these agents, public poli-

cies requiring changes in consumption or lifestyles and eliminating the sanctions of competi-

tive status consumption could be welcome.

In this section, the analysis was based on assuming welfarist values that only give a nar-

row scope for green consumerism and other environmentally benign behaviours. The next

section examines the implications of value pluralism for interdependent rational choice.

IV. INTERDEPENDENCE AND VALUE PLURALISM

The two-person consumption game introduced in the previous section also enables us to

analyse the implications of non-welfarist environmental concerns and value pluralism for in-

terdependent consumer choices. It also helps us to draw some conclusions concerning green

consumerism when agents’ consumption choices are interdependent.

Since we do need two consumers for their choices to be interdependent, there are two dif-

ferent kinds of situations to analyse. First, both consumers may have non-welfarist environ-

mental concerns. Second, one consumer may have these non-welfarist environmental con-

cerns while the other consumer is informed by self- and welfare centred values that are usual-

ly assumed in economic analysis. I will first address the situation where both consumers

share non-welfarist environmental concerns and will then move on to discuss the situation

where consumers have formally different values.

A few modifications are needed to the consumption game introduced in the previous sec-

tion before analysing a consumption game between two consumers that have non-welfarist

concerns for the environment. First, as these two consumers are not motivated by their per-

sonal gain when making their choices, the term “pay-off” is not really satisfactory to describe

the desirability of choice alternatives. It would be better to talk about index values that reflect
 17

the desirability of an outcome from the viewpoint of a player, given her motivations. Second,

the non-welfarist consumers assess and rank the choice alternatives differently than the wel-

farist agents would do, as will be indicated below.

When consumers A and B have non-welfarist concerns for the environment, the best out-

come for both is the one in which neither of them distinguishes themselves. The second-best

outcome for both is not distinguish themselves when the other player does so. The third-best

outcome for A and B is to distinguish themselves when the other does not. The second and

third outcomes are equal in environmental terms, but for a rational agent an outcome brought

about when she acted according to her moral convictions must be preferable to a similar out-

come which was brought about when she did not so act. The worst outcome for both A and B

is the one in which they both try to distinguish themselves. The desirability index values of

different outcomes are depicted below in table 2 by integers 4, 3, 2, and 1, listed in order

from the best outcome to the worst one.

TABLE 2: Consumption Game with Universal Non-Utilitarian Environmental Concerns

A\B Does not signal Signals

Does not signal (A = 4, B = 4) (A = 3, B= 2)

Signals (A = 2, B = 3) (A = 1, B = 1)

Table 2 indicates that consumers who have non-welfarist concerns for the environment

are able to avoid competitive consumption for status and its environmentally adverse conse-

quences in a two-person, one-shot consumption game. Committed agents are able to do solely

on the basis of their individual deliberated consumer choices, without government assistance

or intervention. The result indicates the possible potency of green consumerism to change
 18

aggregate outcomes and partly explains the increasingly widely shared confidence in differ-

ent forms and expressions of green consumerism and lifestyles.

However, the table 2 presents a rather typical analysis in game theory that understands

another set of values to dissolve the relationship of interdependence. Therefore, the above

described one-shot two-person game does not shed adequate light on the potentially problem-

atic consequences of a game for distinction on non-welfarist merits among green consumers.

This game is described below in table 3 with the pay-offs of the standard consumption game

presented in table 1. The index values indicate that this game is likely to lead to undesirably

stoic conduct among competing green consumers, a phenomenon that finds empirical support

from the behaviour of environmentalists: some of them drift towards more extreme positions

in (usually undisclosed) search for status, esteem, and authority.

TABLE 3: Payoffs in a Non-Welfarist Green Consumption Game

A\B Does not signal Signals

Does not signal (A = 3, B = 3) (A = 1, B= 4)

Signals (A = 4, B = 1) (A = 2, B = 2)

The game-theoretic result confirming the capability of committed individuals to resolve

the dilemma of interdependent consumption without government intervention is theoretically

and practically important and is replicated in game-theoretic analyses of many other interde-

pendency situations as well. It is also important to recognise that a new set of values may

simply institute undesirable competition towards another direction. Yet these analyses do not

characterise well the interdependency dilemmas faced in actual societies. After all, they do
 19

consist of numerous consumers who have both formally and substantially different values.

Therefore, I will next examine a two-person game in which values are plural and which goes

one step further towards a more realistic understanding of the actual social dilemma posed by

interdependent consumer choices.

Values are plural in the formal sense when consumer A is informed by self- and welfare-

centred values and consumer B would because of her values protect the environment or be-

have in an environmentally benign way even at the expense of her personal welfare. Table 3

describes a game between these two consumers that have different values. Consumer A’s

pay-offs can be obtained from Table 1 and consumer B’s ranking of alternatives is available

in Table 2. The pay-offs and the desirability index values are indicated below in table 4 by

integers 4, 3, 2, and 1 in order from the best outcome to the worst.

TABLE 4: Consumption Game with Value Pluralism

A\B Does not signal Signals

Does not signal (A = 3, B = 4) (A = 1, B= 2)

Signals (A = 4, B = 3) (A = 2, B = 1)

Table 4 indicates that in this game the right column’s outcomes would never be chosen,

because they are inferior for both agents. The game’s worst outcome in welfare and environ-

mental terms could thus be avoided on the basis of deliberated individual consumer choices

even when value pluralism prevails. However, if the self- and welfare-centred consumer A

always seeks to distinguish herself, as she is thought to do under the usual assumptions, she

would bring about of the two remaining alternatives the environmentally more undesirable
 20

one. On the other hand, a good question is whether the green consumer would “qualify” as a

participant in competition for status for consumer A. That is, she might not be able to suc-

cessfully distinguish herself from the green consumer by choosing goods that have signalling

capacity. The choices of A and B may thus discontinue to be interdependent. AS a result,

consumer A could well reassess her valuation of outcomes to reflect their contribution to her

welfare as an isolated consumer. This could mean that consumer A would also choose not to

signal, if doing so would improve her welfare.

To conclude, the analysis of the implications of value pluralism for interdependent con-

sumer choices indicates that the existence of consumers who are committed to non-welfarist

environmental goals could dampen the competition for status by consumer choices. That is,

green consumerism could also influence the choices of those consumers who act on self- and

welfare-centred values, by giving incentives for them to make their choices as isolated indi-

viduals rather than as participants in status competition. Of course, the degree to which this

could actually happen depends on the relative numbers of welfarist and non-welfarist con-

sumers and how the welfarist consumers respond to the non-welfarist ones. The ordinary two-

person, one-shot consumption game does not shed light on these issues.

The next section seeks to remedy the problem by examining the implications of a greater

number of consumers for interdependent consumption choices under value pluralism.

V. MULTI-PERSON GAMES, PLURAL VALUES AND SUB-CULTURES

A multi-person game describes the interdependence of consumers in society more realisti-

cally than the two-person games analysed above did. However, as the multi-person games are

significantly more complex than the two person games and usually entail quite technical

analysis, this section only seeks to draw some heuristic lessons that can enrich the already

conducted analysis. In what follows, the analysis will first be conducted by assuming that all
 21

consumers are informed by self- and welfare-centred values. The implications of introducing

consumers informed by non-welfarist values into the game are discussed in the end.

In multi-person games, the pay-offs of choosing a strategy or an alternative are depicted

with lines or curves drawn against a horizontal axis that represents the number of individuals

making the choice and a vertical axis describing the magnitude of the pay-off (Schelling,

1978). For example, figure 1 below portrays an interdependence situation in which consump-

tion for status yields a higher pay-off (curve S) than ordinary consumption (curve N) no mat-

ter what others do, and in which consumption for status yields a higher pay-off when fewer

consumers choose it. This is indicated by the fact that the right end of the pay-off curve S

yields a higher pay-off than the left end. The collective outcome in welfare terms is shown by

dotted line that lies between the pay-off curves. It indicates that in welfare terms it would be

best if nobody signalled.

Consumption for status is the dominant choice in the multi-person game described in the

figure 1. Correspondingly, the game has an equilibrium that is represented by the left end of

the collective outcome curve: everybody engages in consumption for status to the detriment

of their private and collective welfare. Not consuming for status entails a welfare loss before

a critical number (k) of consumers choose it. The critical coalition size k is indicated by the

intersection of the curve N and the horizontal axis. When more than k consumers withstand

from consuming for status, their choices result in a positive individual pay-off. If everybody

chose to withstand from consuming for status, it would be a better outcome in terms of both

collective and individual welfare than everybody signalling. This is indicated by the fact that

the right end of the collective pay-off curve is at a higher level than its left end, and that the

right end of the curve N is at a higher level than the left end of the curve S. However, this

outcome is difficult to attain as everybody is inclined to consume for status when it is not a

common strategy and yields a very high pay-off.

 22

FIGURE 1: The Consumption Game among N Players

Although this brief analysis of a multi-person consumption game is based on assuming

welfarist agents, it is easy to indicate the implications of value pluralism in it. Signalling is an

equilibrium solution difficult to dispense with: a sizeable coalition of consumers is required

to choose withstanding from status competition before it can become a viable strategy in wel-

fare terms. That is, the environmental vanguards engaging in green consumerism may suffer

significant welfare losses if they cannot enlist enough support. The self- and welfare-centred

consumers assumed in standard economic analysis do not voluntarily choose to the detriment

of their personal welfare. Therefore, they cannot form the critical coalition.

Quite the contrary, the consumers that hold non-welfarist concerns for the environment

are able and willing to make personal welfare sacrifices for the environment. The crucial

question is, are they numerous enough to make withstanding from status competition a pref-

erable choice also for welfarist agents. This is an important question. An outcome in which a

small minority (N<k) of non-welfarist consumers withstands from status competition while a

large majority (N>n-k) of welfarist consumers engages in it may not differ significantly from

“everybody does it” outcome from an environmental viewpoint.

Green consumerism may also result in elitist green sub-markets and lifestyles because of

non-welfarist status competition. In this scenario, deeply committed green consumers make

their choices at the expense of their personal welfare in order to realise their values. When
 23

seeking to earn the brownie points in their own sub-culture by exhibiting non-welfarist envi-

ronmental concerns and consumer choices that are compatible with them, they continually

revise the standards of conduct that confers esteem. Over time, this leads to the widening of

the gap between the green sub-culture and the mainstream consumer culture, making it in-

creasingly difficult to move across the cultural divide.

The emergence of an elitist green culture is a problematic possibility, because demanding

environmental lifestyles and sub-markets may not be able to command enough support to

successfully transform a whole society’s levels and patterns of consumption. Broader use of

environmental alternatives could lower the cost of environmental choices, turn them poten-

tially into welfare-improving choices, and invite consumers who are informed by self- and

welfare-centered values to alter their levels and patterns of consumption.

The analysis raises the question of whether it is wise to leave it to uncoordinated individ-

ual action to test whether a critical coalition of green consumers can be created. Collective

action could modify the alternatives and/or pay-offs so that the agents will realise collectively

the most desirable outcome. For example, one can contrast a consumer boycott of an envi-

ronmentally harmful product versus the establishment of formal institutional rules that pre-

vent offering it altogether. Being able to act morally may satisfy the informed consumer, but

it may not prevent an undesirable outcome that would be preventable by collective action.

VI. CONCLUSIONS

This article examined green consumerism and its implications for human welfare and the

environment. The analysis was based on a simple model of rational choice, which was gradu-

ally expanded in order to take into consideration that some of our choices are not informed

exclusively by our concerns for our personal welfare, and that sometimes our consumer
 24

choices are interdependent with those of others. The aim was in part to demonstrate that eco-

nomics can also yield other than simplistic insights concerning consumption.

The standard model of rational choice and its expansion that takes into consideration non-

welfarist concerns for the environment yield a somewhat optimistic view of green consumer-

ism and its potential to transform our consumption patterns into a more sustainable direction.

In essence, they contribute to an over-optimistic understanding according to which sensitising

the consumers to environmental values and concerns or bringing about a change of values

otherwise would be enough to change their behaviour. The models that recognise the interde-

pendence of consumer choices substantiate the promise of green consumerism perhaps even

more powerfully: we could fundamentally transform our consumer choices if only all of us

shared non-welfarist concerns for the environment.

On the other hand, the models that recognise the interdependence of consumer choices al-

so equally strongly remind us of the fragility of the promise of green consumerism. To begin

with, universally shared non-welfarist values are unlikely in pluralist societies. Moreover, the

models demonstrate that it may be costly for the consumers to change their consumption pat-

terns, as long as relative performance in certain areas of consumption matters. Values would

thus need to change more broadly to bring about any environmentally benign changes in con-

sumption. The other alternative these models of interdependent consumption remind us about

is public policy, which may expand opportunity sets and alter the relative costs and benefits

of alternatives that belong to them.

Perhaps the most worrying prospect of green consumerism is its potential transformation

into an elitist alternative lifestyle, in which what are traditionally understood as welfare sacri-

fices become a sub-culture’s means for distinction. This politics of distinction would exclude

the expansion of the lifestyle and the incorporation of the bulk of consumer households into

it. After all, many of them quite equivocally deserve to consume more, not less. Therefore,
 25

green consumerism might not be able deliver its environmental benefits, although it could

deliver moral satisfaction for the alternative minority.

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