Unit 5: Ethics and the Environment | Unit 6: The Ethics of Consumer Production & Marketing
MODULE III: THE MARKET & BUSINESS AND ITS EXTERNAL EXCHANGES

Unit 5: Ethics and the Environment (Chapter 5)
Introduction | Objectives | Key Concepts | Study Directory | Assignments | Summary | Self-Test

Introduction

Pollution and resource depletion due to the accelerating industrialization of the world and accompanying world population explosion threaten to overtax the carrying capacity of Earth.  The unlimited resources view of the past regarded that carrying capacity as unlimited and the earth and waters as “free goods” but this cannot be sustained in the face of present environmental challenges.  We need a new environmental ethos. Candidates for that office include the following:

  1. Ecological Ethics: recognizes that ecosystems have inherent rights and we have direct duties to them.
  2. Ecofeminism: adds a critique of paternalistic patterns of domination at the root of environmental and other forms of exploitation.
  3. Blackstone’s proposed right to a livable environment.
  4. Utilitarian diagnosis & remedy: externality of environmental costs causes environmental overexploitation: internalize these costs.
  5. Rawl’s justice-based obligation:  to “leave the world no worse than we found it.”

Velasquez seconds Rawl’s conclusion while sympathizing with the Utilitarian diagnosis and remedy.  An obligation to leave the world no worse than we found it entails commitments to sustainable levels of economic and population growth: levels of growth which don't overtax the carrying capacity of Earth.  The alternative is the Doomsday Scenario in which rising death rates slow or reverse population growth and economic growth is slowed by chronic economic malaise or reversed by economic collapse.

Learning Objectives

  1. Understand the environmental dangers posed by the accelerating industrialization of the world together with the world-wide population explosion.
  2. Consider the challenge that current economic growth trends are not environmentally sustainable and Velasquez's argument for conservation.
  3. Comprehend the various dimensions of pollution and resource depletion, appreciating the permanent character of depletion as opposed to pollution and how pollution may, otherwise, be viewed as "a type of resource depletion" itself.
  4. Confront the "unlimited resources" view of the past with present realities and probable future trends.  Grasp the rudiments of ecological ethics including Blackstone's environmental rights approach note the challenge of ecofeminism.
  5. Understand the utilitarian view of environmental problems as "market defects," the central ideas of private cost, external cost, and total social cost (= private cost + external cost), and the proposed utilitarian remedy of internalizing external costs.
  6. Consider how controversy about the rights of future generations bears on various arguments for conservation.
  7. Consider John Rawls' justice-based case for leaving the world "no worse than we found it" and how utility-based and care-based considerations tend toward a similar conclusion.

 Key Terms and Concepts

  1. Resource depletion: the consumption of finite or scarce resources. (210)
  2. Pollution: undesirable contamination of the environment by the manufacture or use of commodities. (210)
  3. Conservation: the saving or rationing of resources for future use. (242)
  4. Private costs: costs of production borne by the producer. (232)
  5. External costs: costs of production not borne by the producer.
  6. Social cost of production: = private costs + external costs.  (232)
  7. Internalization: proposed utilitarian remedy for pollution and resource depletion: make producers bear the total social cost of production. (234)
  8. Ecological ethics: ethical theory which recognizes ecosystems as having inherent rights or interests and us as having direct duties to them. (227-8)
  9. Ecofeminism: socio-ethical theory which combines ecological ethics with a critique of paternalistic patterns of domination (top down hierarchical authority structures) in our political and economic institutions as contributing to environmental exploitation. (241)
  10. Unlimited resource view: view encapsulating the attitude of bygone times which regarded the earth’s carrying capacity as unlimited, and air and water as "free goods." (226)
  11. Global warming: warming of the earth due to rising concentrations of CO2 and other “greenhouse gasses” in the atmosphere creating a greenhouse effect. (210)
  12. Sustainable growth: a level of economic and population growth which enables each generation to hand down a world no worse than it inherited to succeeding generations, which avoids the Doomsday scenario. (246-7)
  13.   Doomsday scenario: scenario in which population is controlled by rising death rates and economic growth is limited by economic collapse. (247-8)
  14. Direct duty: a duty rooted in the rights or interests of the individual to whom the duty is owed.  To say we have a duty to protect ecosystems for their own sake, as ecological ethics does, is to proclaim a direct duty rooted in rights or interests of the ecosystems themselves. (227)
  15. Indirect duty: a duty rooted in rights or interests outside the individual to whom the duty is owed.  To hold that we have a duty to preserve ecosystems for the sake of our children, e.g., is to proclaim an indirect duty since it’s rooted in the rights or interests of the children. (227)

Page numbers given are not always the only pages on which the terms are found in the text.  Many of theses terms will appear on the module exams.  You should write a definition of each term as you encounter it in  your reading for use as a convenient review.

Study Directory

Self-Diagnostic Exam Items

Textbook Pages

Objective

1

209-10

1

10

248

2

2

210

3

3, 4, 7

226, 229-31, 226-9 & 241

4

5, 6

231-4, 234-5

5

8

243-4

6

9

244-6

7

 Assignments

Summary

The accelerating industrialization of the world together with the world population explosion threatens to overtax the carrying capacity of Earth.  Indeed some, like William Pollard, believe that our accelerating pollution of the environment and depletion of resources have already taken us so far down the road to environmental disaster that, even if we had the will (which we don’t), we lack the wherewithal to avoid the impending catastrophe.  Is this true?

Resource depletion involves the consumption of finite or scarce resources.  Pollution involves the undesirable contamination of the environment by the manufacture or use of commodities.  Since clean air and water can be considered resources and pollution diminishes their useful qualities, pollution can be viewed as a form of resource depletion itself.  It is generally distinguishable from other forms of resource depletion, however, in being relatively impermanent.  Polluted resources eventually cleanse themselves, once we stop polluting.  Other forms of resource depletion are permanent: once nonrenewable resources are used, they're gone forever.

The dimensions of our pollution and resource depletion are staggering.  We pollute the air with carbon dioxide (CO2) and other greenhouse gasses: causing global warming.  Chlorofluorocarbons (CFCs) deplete the ozone layer that protects us from harmful ultraviolet (UV) radiation.  Nitrogen and sulfur oxide emissions react with water in our atmosphere to cause acid rain that kills fish and vegetation in lakes, and causes deforestation.  Assorted airborne toxins and particulates contribute to respiratory disease and cause cancer.  We pollute our water with phosphorous compounds from detergents and agricultural fertilizer runoff, causing explosive algae growth in lakes.  Organic wastes from sewerage and runoff from animal feedlots also contribute to algae growth as well as oxygen depletion in lakes, and directly endanger human health.  Toxic inorganic pollutants such as heavy metals find their way into aquatic food chains and our drinking water.  Oil spills kill wildlife, are detrimental to tourist and fishing industries, and require expensive cleanup.  Even heat can pollute: use of water as a coolant in nuclear reactors and industry, for instance, disrupts marine habitats.  Our oceans are the end recipients of the pollutants that go into our lakes and rivers, and have been used as disposal sites themselves.  Groundwater supplies that provide more than 50% of U. S. drinking water are at risk from runoff from landfills, waste piles, and surface reservoirs.  Toxic substances that cause increased mortality rates or irreversible or incapacitating illness include acids, pesticides, heavy metals, flammable solvents.  Our use of such substances increased tenfold from 1970 to the mid 80s and poses a multitude of health risks difficult to assess.  Solid waste from residential and industrial sources, likewise, poses health risks from direct human exposure, and contributes to groundwater contamination.  "High-level," "transuranic," and "low-level," radioactive wastes pose severe health risks, including death, cancer, sterility, and genetic mutation.  At present no safe method of disposing of high-level nuclear wastes – which remain dangerously radioactive for thousands of years – is known.  Nuclear power poses security risks as well, since plutonium (used in nuclear reactors) can also be used to make atomic bombs.  There has been a moratorium imposed on new plant construction in the U. S., but the many still in operation continue producing high-level wastes we still don't know how to safely and permanently dispose of.  Nevertheless, some environmentalists believe this moratorium needs to be reconsidered in light of the graver and more imminent threat posed by global warming.  Depletion of species is occurring rapidly due to pollution and deforestation.  Depletion of fossil fuels (petroleum, natural gas, and coal) is of concern since our industry is so dependent on them.  Proposed substitutes either have drawbacks of their own, or are still experimental.  Depletion of minerals is similarly worrisome: even 100% recycling would not supply the needs of a growing economy, and substitution of manufactured materials, e.g., plastics, has drawbacks.  Their manufacture contributes to pollution, and since most plastics now in use are petroleum based, substitution of these will contribute to depleting petroleum reserves.

Given the staggering dimensions of pollution and resource depletion, yesteryear’s "unlimited resource" view of the environment – which regarded its carrying capacity as unlimited, and air and water as "free goods" – must give way to an ethic of conservation.  Towards this end, different schools of thought make different proposals.  Ecological ethics holds that we have a direct duty to recognize and protect ecosystems for their own sake: the planetary ecosystem, according to ecological ethicists, is not only our life-support system on "spaceship earth" but may be viewed as a living being in it's own right.  Given such a direct duty, plus the indisputable fact of decreasing biodiversity due to the toll we are taking on nature, ecological ethicists maintain that drastic steps need to be taken to arrest and possibly even reverse this trend.  Proposed steps include decreasing the human population; ideological change away from the capitalistic ethos of materialistic consumption; even shrinking – rather than constantly growing – the economy.  Ecofeminism is a related approach.  Ecofeminists call for a change of attitude toward nature; a change away from viewing nature as a thing to be dominated, and toward viewing it as an other to be cared for.  Ecofeminists characteristically oppose hierarchical structures (characterized by chains of command, as in most business and government organizations) as part of the problem.  Democratization and decentralization of our institutions, they maintain, would help foster a similar attitude of cooperation with nature in place of the current emphasis on domination over it.  Ecological ethical and ecofeminist approaches are commonly criticized for being utopian and impractical.  Some utilitarian environmental ethicists, like Peter Singer, take a less radical view acknowledging inherent interests and rights of nonhuman animals, but not ecosystems.

William T. Blackstone's proposed human right to a livable environment has enjoyed some recognition under law, as Blackstone proposed it should.  However, like all absolute rights based ethics, it leads to an approach that seems too inflexible to consider "trade offs" with utility and other rights and unable to give "nuanced guidance" in complicated real world situations.  The need for a more nuanced approach enabling us to assess trade offs suggests the desirability of attempting to balance environmental benefits against economic and other human costs along utilitarian lines.

The dominant utilitarian approach views environmental problems as "market defects."  When a firm pollutes, for instance, the market price of their commodities no longer reflects their true price due to the market price's failure to incorporate hidden environmental costs not borne by the producer.  The total social cost of production equals the private costs (i.e., those borne by the producer) plus these external costs (not borne by the producer), and the solution to pollution (and other environmental ills), accordingly, would be to insure that the market price of commodities accurately reflects their total social cost.  The remedy that utilitarians propose in this connection is to internalize external costs; though how to go about this is controversial.  The "polluters pay" plan would have polluters pay all those being harmed an amount equal to the costs imposed on them by pollution.  Drawbacks to this plan include the difficulty of assessing what damages are due to whose actions where there are several polluters involved, and the after-the-fact nature of repayment.  Prevention plans, wherein producers bear the cost of preventing pollution by the installation of pollution control devices seem preferable on both counts.  Furthermore, internalizing costs seems consistent with the demands of distributive justice, since the external costs of pollution are borne unequally (mainly by the poor) without justification; and also with the demands of retributive and compensatory justice which maintain that those who are responsible for and benefit from the injury to the environment should bear the burdens of rectifying the injury and compensating the injured parties.  The nuanced guidance utilitarian approaches are capable of providing is well illustrated by the issue of how much pollution control to implement where the law of diminishing returns makes complete elimination of pollution impractical.  Here, the utilitarian approach suggests that the right amount of pollution control lies where the total cost of the control measures equals the expected social benefits to be gained: up to that point pollution control will be a winning proposition, after that point a losing proposition, in terms of total social welfare.  Criticisms of the utilitarian approach are the same as those leveled against utilitarianism more generally: daunting difficulties stand in the way of accurately weighing benefits and costs, and there are troubling moral issues due to utilitarianism's neglect of justice and its potential violations of the rights of individuals who may be adversely affected by decisions deemed socially beneficial.

Conservation is the saving or rationing of resources for future use.  In this connection it is useful to contrast depletion with pollution.  Polluted resources are for the most part renewable (once we stop polluting) and pollution (with the notable exception of nuclear waste) mostly affects present generations.  Depletion is concerned with nonrenewable resources whose depletion will, for the most part, affect future generations.  Several would-be arguments for conservation cite the supposed rights of future generations to an equal share of these resources, but these arguments are vulnerable to objections on several scores.  It may be denied that nonexistent individuals (such as future generations) have rights.  It may be argued that given the virtually unlimited number of generations that may follow us, the share of the world's resources we are entitled to exploit will be virtually nil.  It may be pointed out that it is extremely difficult to anticipate what interests distant future generations will have (if any at all) in these resources.  Velasquez replies that even if all these criticisms are granted, we may have obligations to future generations that are based on demands of justice, without appeal to any supposed rights of future generations.  How much conservation justice requires of us may be determined in the way John Rawls suggests: if we imagine we do not know to which generation we belong, the present or some future one, then whatever degree of conservation we would choose from behind this "veil of ignorance" will be approximately just: neither imposing disproportionately heavy conservation burdens on the present generation (which would be unfair to this generation), nor leaving virtually nothing for future generations (which would be unfair to them).  Velasquez follows Rawls in urging that the happy medium such considerations would lead us to would be the point at which we hand over to the next generation a situation no worse than the one we received.  Considerations of care would seem to second this opinion, since we have a more direct relationship to immediately following generations than to far distant ones.  Utilitarian considerations which counsel us to discount consequences in proportion to their uncertainty would also seem to argue that our most compelling obligations are to immediately following generations, since the further into the future consequences are projected the less certain the projection becomes.

Markets are "live for today" kinds of mechanisms, responding to the effective demands of present participants and the actual supplies currently available: future demands and supplies tend to be so heavily discounted that they hardly affect prices at all.  Consequently, market mechanisms seem inadequate for encouraging conservation and need to be supplemented by voluntary or legally enforced policies of conservation.  Velasquez urges such measures be adopted to preserve wildlife and endangered species, to ensure that rates of consumption of fossil fuels and minerals does not continue to rise, to recycle nonrenewable resources, and to search for substitutes for materials we are too rapidly depleting.

A fundamental question must be faced: For how long is a pattern of continuing economic growth environmentally sustainable?  The anti-growth argument holds that this pattern poses so great a threat to the quality of life of future generations that we are morally obliged to scale down our pursuit of economic growth to sustainable levels (probably below current levels), and scale down human population growth to sustainable levels (probably below current levels) as well.  The threatened alternative is cataclysmic collapse of our growth based economies in the near future, when resources are depleted to the point where they are insufficient to sustain continued growth.  At this point the goals of decreasing population and diminishing consumption of resources will be accomplished the hard way: population levels will be drastically and rapidly reduced by skyrocketing death rates.  Consumption will be drastically and rapidly reduced by economic collapse.  While critics of this Doomsday Scenario dispute its assumptions about future population growth, productivity rates, our inability to find substitutes for depleted resources, and the limits of recycling, nevertheless, Velasquez maintains, given the uncertainties of the situation, commitment to conservation is imperative.  Even if optimists critical of the Doomsday Scenario are right, and Doomsday can be avoided – if population stabilizes, productivity increases, we find substitutes for depleted resources, and we effectively recycle – concede it won't be avoided unless we do these things.  Whether wholesale transformation of our economy is necessary for civilization to survive, and whether Americanization of the world represents a sustainable vision for the future, are questions Velasquez thinks remain open.  Currently, the U.S., with only 6% of the world's population, accounts for 25% of the world’s energy resource consumption.  Besides the issue of the sustainability of worldwide development on the American plan, these inequities of resource use raise issues of exploitation concerning "whether a high-consumption nation is morally justified in continuing to appropriate for its own use the nonrenewable resources of other [low consumption] nations that are too weak economically to use these resources or too weak militarily to protect them" (p. 297).  Are we unfairly and selfishly using up their resources to sustain our standard of living?

Self-Test

The following questions will help you judge your comprehension of the materials covered in Unit 5. Please remember you are responsible for the glossary terms above. You need to check your responses against the key included. 

  1. According to the gloomy forecast of William Pollard that Velasquez quotes at the outset of the chapter, which of the following is true?
    1. We lack the means, or wherewithal, to stave off inevitable environmental disaster.
    2. We have the wherewithal but lack the will to stave off environmental disaster.
    3. Falling water tables provide the best evidence that we are beginning to outgrow the capacity of Earth's ecosystem to support us.
    4. Deforestation provides the best evidence that we are beginning to outgrow the capacity of ecosystem to support us.
  2. Which of the following is true of the relationship between pollution and resource depletion?
    1. Both are equally permanent.
    2. Pollution can be viewed as a type of resource depletion.
    3. Both of the above.
    4. None of the above.
  3. The "unlimited resources" view of the past
    1. viewed environmental "commodities" – e.g., water and air – as "free goods."
    2. has become untenable in the face of exploding population growth and accelerating industrialization and urbanization of the world.
    3. viewed the "carrying capacity" of the environment as "unlimited."
    4. All of the above.
  4. According to Blackstone's environmental rights approach
    1. it is necessary to do a cost-benefit analysis to assess the tradeoffs before undertaking environmental legislation.
    2. there is a fundamental human right to a livable environment.
    3. Both of the above.
    4. None of the above.
  5. On the mainstream utilitarian view environmental problems
    1. are due to failure to count external costs as part of the total cost of production.
    2. are too urgent to allow any "trade offs"
    3. Both of the above.
    4. None of the above.
  6. The principal Utilitarian remedy for pollution is
    1. to internalize external costs of production.
    2. to externalize internal costs of production.
    3. to minimize the total social cost of production. 
    4. to maximize the total social cost of production.
  7. According to ecofeminists and ecological ethicists, which of the following are true?
    1. We have an indirect duty to preserve the ecosystem for the sake of future generations.
    2. We have a direct duty to preserve the global ecosystem for its own sake.
    3. Both the above.
    4. None of the above.
  8. The rights of future generations, according to Velasquez,  
    1. are unquestionable.
    2. provide the best argument for protecting the environment.
    3. Both the above.
    4. None of the above.
  9. With regard to our obligations to future generations, what John Rawls' proposes is
    1. an obligation to leave the world no worse than we found it for the next succeeding generation.
    2. an obligation to insure  all succeeding generations equal rights to the same resources as us.
    3. contrary to the demands of care and utility.
    4. None of the above.
  10. Which of the following conclusions about what to do in the face of the approaching scarcity of energy resources does Velasquez endorse?
    1. Conservation measures are currently an option, but not yet necessary.
    2. Even if those who dispute the Doomsday Scenario are right and disaster is not immanent, conservation measures are still necessary to prevent it.
    3. To undertake conservation measures at this time would be premature and unwarranted.
    4. None of the above.

Self-Test Key

Question

Answer

Objective

Pages

1

A
1
209-10

2

B
3
210

3

D
4
226

4

B
4
229-31

5

A
5
231-4

6

A
6
234-5

7

C
4
226-9, 241

8

D
6
243-4
9
A
7
244-6

10

B
2
248

NOTE:  The questions on the module end examination will be closely based on the self-test you have just taken.  Sometimes the examination will slightly modify the question-part of self-test questions while varying the answers and distracters (A, B, C, D) unchanged.  For example, while keeping the question unchanged, the distracters/answers to item 10 above might be changed to read as follows:

  1. We have an obligation to leave the world no worse than we found it for the next succeeding generation.
  2. Even if those who dispute the Doomsday Scenario are right, and disaster is not immanent, conservation measures are still necessary to prevent it.
  3. The utilitarian diagnosis and proposed remedy for pollution are on the right track.
  4. All of the above.

This makes “All of the above” (D) the correct answer.

CONSEQUENT ADVICE:  The self-test questions can be very useful for studying for the module end examination, but only if used in the right way.  As the example above shows it would not have been completely availing to have studied for the exam by memorizing that the answer to the one about that the answer to the one about Velasquez’s conclusions was “conservation is necessary even if Doomsday is not immanent.”  Nevertheless it will have been of some use, since ½ credit will be given for true answers which are not best or “the whole truth.”  The following points are noteworthy in this connection:

Unit 6: The Ethics of Consumer Production & Marketing (Chapter 6)
Introduction | Objectives | Key Concepts | Study Directory | Assignments | Summary | Self-Test

Introduction 

The “do nothing” or laissez faire approach to product safety seems especially unsuited to consumer markets because perfect information and rational agency conditions are especially ill satisfied in consumer markets.  Three alternatives emerge:

  1. the contract view: according to which consumers are afforded protections by (and limited to) the expressed or implied terms of the sales contract;
  2. the "due care" view: according to which producers or vendors owe an additional measure of care to product safety over and above protections expressed or implied in the sales contract;
  3. the social costs view: according to which producers or vendors assume strict liability for all harm due to product defects, regardless of whether they exercised due care.

These alternatives are listed in order of increasing vendor responsibility: caveat emptor (let the buyer beware) is the watchword on the contract view; caveat vendor (let the seller take care) on social costs; and “due care” is in the middle.  Alternately put, every responsibility owed on the contract view is also owed under “due care” (but not vice versa); and every case in which the vendor is liable under “due care” the vendor will also be strictly liable (but not vice versa).

Objections to the contract view stem from the fact that buyer and seller are very far from being “equal adversaries"; especially in consumer markets where buyers are predominately individuals and sellers are, predominately, large corporate entities.  In the “negotiation” of sales the consumer is badly overmatched giving a coerced quality to consumer “agreement”: sellers, very largely, dictate terms which, consequently, are more likely to actually disclaim responsibilities than to provide additional protections.  For this reason, the contract approach is generally thought to provide inadequate levels of consumer protection.

“Due care” comes in where the contract leaves off and represents an additional level of responsibility for product safety (in design, production, and consumer education) borne by the producer.  Critics from the right and left complain of the vagary of “due care.” Advocates of internalizing the costs of product defects further object that “due care” leaves the costs of unforeseen product risks external.  These last critics advocate holding producers strictly liable for costs due to product defects on the grounds that product costs should reflect the true social costs of their production, which requires producers to pay these costs in full.

Learning Objectives 

  1. Appreciate the nature and extent of costs imposed by consumer product malfunction and misuse, the basis and main claims of the laissez faire approach, and the "false assumptions" criticism of this approach.
  2. Understand the centrality of the question of who is responsible for consumer protection; how three main contending theories – contract, due care, and social costs – respond to this question; and how the theories relate to each other.
  3. Understand the basics of the contract view; the four main moral duties of businesses to customers, compliance, disclosure, true representation, and no undue influence; the moral basis of these duties; and the "unrealistic assumptions" that critics charge against the view.
  4. Understand the distinction between explicit and reasonably implied claims and Sturdivant's summation of the key types of implied claims as concerning reliability, service life, maintainability, and safety.
  5. Understand the basics of the "due care" view; how manufacturers responsibilities extend to the three areas of design, production, and information; and the three problems chiefly alleged against this view.
  6. Understand the idea of "strict liability"; the basics of the social costs view; the utilitarian defense of the view as internalizing external costs; and the four problems critics chiefly allege against this view.
  7. Understand the extent and nature of advertising; moral issues concerning its social effects, effects on consumer desires, and effects on consumer beliefs; and the duties of authors and media, and the rights of audiences, in these regards.

Key Terms and Concepts

  1. the market approach aka laissez faire (from the French for “leave be”): the view that markets are best left unregulated, to their own devices. (262-5)
  2. consumer sovereignty: a feature of free markets whereby consumer demand determines what gets produced. (262)
  3. strict liability: responsibility for consequences which disallows lack of knowledge or intent as mitigating or excusatory: under strict liability product manufacturers would be held accountable for all harms caused to consumers through the use or misuse of their products – whether foreseeable or unforeseeable – regardless of whether the manufacturer exercised due care. (278)
  4. due care: a measure of care owed by producers of consumer products to consumers, over and above fulfillment of the expressed and implied terms of the sales contract. (272)
  5. sales contract: explicit or implicit agreement between buyer and seller specifying the characteristics of the product to be conveyed by the seller to the buyer and the price to be paid by the buyer to the seller. (265-6)
  6. advertising: “communication between sellers and potential buyers addressed to a mass audience and intended to induce some members of that audience to buy some product from the seller.” (281)
  7. Contract view: the view that the vendor and producer responsibility for consumer product safety is limited to compliance with the expressed or implied terms of the sales contract. (265-72)
  8. "Due care” view: the view that vendors and producers responsibilities go beyond compliance to the sales contract to include, also, the exercise of “due care” in the design and production of the product, and in informing the customer about its risks and proper use. (272-78)
  9. Social costs view: the view that vendors or producers, regardless of whether they exercised “due care,” should bear strict liability for harms caused to consumers through the use or misuse of their products, thus internalizing the full costs of consumer protection. (278-80)
  10. Acceptable known level of risk: degree of risk that the consumer freely and knowingly accepts: sellers have an implied contractual duty to provide a product whose risk does not exceed this level. (268)
  11. Undue influence: taking advantage of a buyer’s fear or other emotions to extract consent to an agreement that the buyer would not make if they were thinking rationally. (270)

Page numbers given are not always the only pages on which the terms are found in the text.  Many of theses terms will appear on the module exams.  You should write a definition of each term as you encounter it in  your reading for use as a convenient review.

 Study Directory

Self-Diagnostic Exam Items

Textbook Pages

Objective

1, 6

262-3, 263

1

2, 3

272, 278

2

7

270-2

3

10

266

4

4, 5

277-8, 276-7

5

2, 9

272, 278-9

6

8

281

7

 Assignments

Summary

Consumer product mishaps take a large toll.  Each year more than more than 20 million serious accidental injuries and 100,000 accidental deaths are recorded in the U. S.   More than half involve consumer products.  In addition to these primary costs, additional costs to consumers due to deceptive selling practices and shoddy construction, are very considerable.  The laissez faire approach holds that thanks to consumer sovereignty, product safety features consumers want and are willing to pay for will be produced.  However, the assumption underlying this approach – that consumer markets are, approximately, perfectly competitive – doesn't hold true.  Perfect information and rational agency conditions are especially ill met in consumer markets.  Consumers are commonly ill informed, due to deceptive marketing, or simply due to lack of information and expertise.  Consumers also often make irrational choices, given the information they possess, due to irrational fears, irrational trust, and fallacious probability estimates.  Furthermore, given the prevalence of oligopoly conditions in consumer markets, as throughout the economy, it's questionable whether such markets have the requisite openness and distribution to work as the laissez faire approach anticipates.  Finally, the dimension of the problem, itself, speaks against the adequacy of the laissez faire approach.  Three views emerge offering answers to the question of where responsibility for consumer protection lies:

  1. the contract view,
  2. the "due care" view,
  3. the social costs view.

In the order just listed, these three views depart further and further from the laissez faire approach.  The contract approach leaves responsibility mainly with the consumer: caveat emptor – "let the buyer beware" – is the watchword of this approach.  At the other extreme, the social costs approach places responsibility for consumer protection entirely on the producer: caveat vendor – let the seller take care – is the watchword here.  The "due care" approach seeks a middle ground, acknowledging more care to be due from the vendor than under the contract approach, while still apportioning considerable responsibility for consumer protection to consumers themselves.

On the contract view of businesses' duties to consumers, when a customer buys a product they (implicitly or explicitly) enter into a "sales contract" with the vendor: the vendor freely and knowingly agrees to give the buyer a product with certain characteristics, and the consumer freely and knowingly agrees to pay the vendor a certain sum of money for the product.  Out of this agreement arise a duty on the part of the vending firm to supply a product with the specified characteristics, and a corresponding right of the consumer to receive such a product.  The moral authority of contracts being rooted in the free agreement of the parties explains why three moral conditions limit contractual obligation: full knowledge (of the terms), faithful representation (of the situation), and absence of undue influence.  From these three conditions four main moral duties of businesses to consumers arise:

  1. a duty of compliance with the terms of the contract;
  2. a duty of disclosure regarding the nature of the product;
  3. a duty of true representation of the nature of the product and the terms of the agreement;
  4. a duty not to exercise undue influence in persuading the customer to enter into the contract.

The duty to comply includes any reasonably implied claims which formed the customer's understanding of what they were purchasing and led them to choose to contract to buy it.  Four main types of implied claims concern reliability, service life,       maintainability, and safety.

Reliability concerns whether the product will function as the customer has been led to expect: notably, where devices have many interdependent components, producers have a responsibility to insure all components have very high degrees of reliability.  Service life concerns the length of time the product will continue to function effectively in the manner in which the customer has been led to expect: the customer is expected to understand that service life will depend on use (wear and tear); manufacturers and sellers are expected to reliably abide by the terms of their explicit guarantees; and sellers who know that a product will become obsolete have a duty to correct any mistaken beliefs the buyer may entertain on this score.  Maintainability concerns how easily the product can be kept in operating condition and repaired: under this heading businesses, again, are expected to abide by the explicit terms of their warrantees and to make good on implied claims of continued maintainability after warrantees expire.  Product safety concerns the degree of risk associated with using the product.  Since no product is absolutely risk free, acceptable known level of risk is the operative concept: the seller has a duty to provide a product with a level of risk no higher than the customer freely and knowingly agrees to assume.

The duty of disclosure is a duty of the seller to inform the buyer of both the terms of the contract and to provide any information about the product that might reasonably influence the customer's purchase decision: this includes risks, on all accounts, and on some (more stringent accounts) performance characteristics, costs of operation, product ratings, and applicable standards, besides.  The duty of true representation is to the duty of disclosure as omission to commission: nondisclosure is not telling; misrepresentation is telling lies.  A seller misrepresents a product or agreement when they represent it in a way intended to get the buyer to believe something about the product or agreement that the seller knows to be false.  Misrepresentation may be implicit as well as express and includes such tactics as brand name look-alikes, fronting expensive ingredients, fictitious "regular" pricing, charging higher prices than advertised, "bait and switch" tactics, and paid testimonials.  The "no undue influence duty" is a duty of the seller not to coerce the buyer's decision to buy.  Undue influence is exercised, typically, when the seller plays on a buyer's emotions to extract an agreement that the customer would not agree to if thinking rationally: in this connection the seller has a duty not to exploit the fears, stress, gullibility, immaturity, or ignorance of the buyer.

The chief criticism of the contract theory is that it is based on unrealistic assumptions.  Principally the following:

  1. that manufacturers who really know the product enter into direct agreement with the customer;
  2. that sales contracts naturally provide protection to the customer; and
  3. that buyer and seller meet as equals in the sales agreement.

In reality, critics contend,

  1. there are usually many levels of middle-merchants who may know even less about the product than the customer
  2. sales contracts, through the use of disclaimers, serve more to nullify than to provide protection to customers; and, perhaps most importantly,
  3. that buyer and seller are very far from being equal "adversaries" in the negotiation of sales.

Customers have less knowledge of the product and may have to rely on sellers for information.  They are further disadvantaged with regard to their understanding (and their ability to affect) the terms of the contract, allowing sellers to dictate terms favorable to themselves that the buyer may have little choice but to accept.

The due care theory recognizes the disadvantaged position consumers are in vis a vis sellers.  Huge differences of size and resources between individual consumers and giant corporations aggravate the disadvantages stemming from individuals' lesser knowledge of the products and understanding of contracts.  Consequently, consumers' interests are extremely vulnerable to harm by manufacturers and vendors.  Manufacturers and vendors, therefore, have a duty to take special care to see that their products do not harm consumers.  This duty goes beyond the duty of the manufacturer to deliver a product that lives up to express and implied claims (which exists on the contract view): it includes a further obligation to exercise "due care" to prevent consumers from being injured by the product.  Even if the manufacturer expressly disclaims such responsibility, the manufacturer who fails to exercise due care is negligent.  The manufacturer has a positive duty to take due care to make sure the product is as safe as possible, and the consumer has a corresponding right to products – in the design, manufacture, testing, and labeling of which – due care was taken.  In general the manufacturer's responsibilities extend to three areas:

  1. design: including judging whether the product design poses hidden dangers; anticipating and incorporating all technologically feasible safety features and judging whether products remain safe and useful throughout their intended service life and beyond;
  2. production: including elimination of faulty units, detection of weaknesses, avoidance of cost cutting "shortcuts" that may compromise the final product, and exercise of quality control over materials;
  3. information. Including clear, simple, and prominent labeling of products with warnings about hazards posed by their use and misuse taking into account the capacities of the individuals who will use the product

Manufacturers of potentially hazardous products should not oppose reasonable regulation to help safeguard users against these hazards.  One problem with the due care approach is the vagary of the notion of "due care".  Additionally, critics from the left complain that the due care approach leaves the problem of unforeseeable risks unaddressed.  Critics from the right, on the other hand, complain the approach is too paternalistic and that decisions regarding acceptable levels of risk are best left to consumers themselves.

The social costs theory imposes strict liability on manufacturers and vendors for costs to consumers due to the malfunction or misuse of consumer products.  On this view, the manufacturer should pay the costs of any injuries sustained through the use of the product even when the manufacturer has taken due care in the products design and manufacture, and in informing customers about the risks, and in instructing them in the proper use, of the products.  Under strict liability absence of negligence or lack of knowledge are not excusatory.  Only the resultant harm matters: the only relevant considerations in assessing liability are whether the product caused the injury, and the extent of the injury.  In particular, evidence of misuse is inadmissible.  Utilitarians defend the social costs view as the most effective means of internalizing external costs of production since injuries resulting from products – even if unavoidable – are part of products' total social costs.  Internalizing the costs, it is argued would lead to fairer distribution of costs, market prices that more truly reflect social costs, and safer products.  Critics of this approach say it violates basic principles compensatory justice in holding firms responsible for unforeseeable and unavoidable harms; that it won't reduce the number of injuries because product users, being absolved of all responsibility, will be more careless in their use of the products; and insurance providers, in particular, critics argue, will be unfairly impacted.

Advertising is a massive multi-billion-dollar-a-year industry whose costs are ultimately borne by consumers.  Though consumer surveys show a high degree of disapproval of advertising, nevertheless, it seems advertising works to attract consumers to advertised products.  Defenders of advertising generally appeal to its informative function.  The question is whether advertising, on balance, is beneficial or a waste.  While some of its defenders would like to define advertising as informative, this is misleading: the primary function of advertising is to sell the product, not to inform.  Thus Velasquez (p. 343) offers what would seem to be a more accurate and honest definition according to which an advertisement is a communication between sellers and potential buyers addressed to a mass audience and intended to induce some members of that audience to buy some product from the seller.  Three principle issues regarding the morality of advertising are (1) its social effects, (2) its effects on consumer desires, and (3) its effects on consumer beliefs.

With regard to its social effects the most frequently heard criticisms of advertising are (1) that it degrades people's tastes and values; (2) that it encourages excessive consumption and thus wastes valuable resources; (3) and that it helps create and sustain monopoly and oligopoly power.  With regard to tastes, much advertising is strident, intrusive, repetitive, and vulgar: thus, critics contend, it debases our aesthetic sensibilities.  Worse yet, it debases our moral values by inculcating and reinforcing materialistic conceptions of happiness and success.  It is debatable whether people’s tastes and values are so malleable, or advertising so powerful, as this criticism presumes. With regard to waste, some contend that advertising is a seller's cost that adds nothing to the utility of the product.  Defenders of advertising counter that it provides benefits in the form of information about available products and produces a beneficial rise in the demand for all products.  Different critics, in turn, offer two different rejoinders.  Some say advertising doesn't affect total consumption: it only shifts consumption from one product to another.  Others say it does increase total consumption, and that's a bad thing in light of long range concerns about resource depletion.  Needless to say, these two rejoinders conflict with each other: the first says increasing consumption is a good thing, but advertising doesn't do it; the second says advertising does increase consumption, and that's bad.  Finally critics contend that the resources available to large corporations give them unfair advantages when it comes to advertising, and thus advertising helps consolidate monopoly and oligopoly control of markets.  Defenders of advertising say there is empirical evidence that it does not have this effect.

With regard to advertising's affects on consumer desires, the central criticism is that advertising is manipulative; that it creates desires in people for the sole purpose of absorbing industrial output, without regard for whether it is in people's interests to consume more of these products.  John Galbraith formulates his version of this criticism on the basis of his distinction between physiological desires and psychic desires.  Physiological desires, being physically based, are finite, and difficult to manipulate: psychic desires, being psychologically based, are virtually unlimited, and easily manipulated.  According to Galbraith, advertising manipulates psychic desires; and this is exploitative insofar as it is done without regard for the interests or welfare those whose desires are being thus manipulated.  Furthermore, such manipulation undermines consumer sovereignty: rather than production being molded to fit human desires, advertising molds human desires to serve the needs of production.  Though Galbraith's criticisms may be flawed by their dubious assumptions about the manipulability of psychic desires – again, it is debatable whether peoples tastes and values are so malleable, or advertising so powerful, as this criticism presumes – nevertheless, some advertising is clearly intended to manipulate us in morally questionable ways.  Such morally questionable advertising attempts to arouse a psychological desire for the product without the consumer's knowledge, or in ways, which interfere with the consumer's abilities to weigh whether purchase of the product is in their best interests.  Such advertising is exploitative in that it attempts to circumvent conscious reasoning and hence to undermine the rational agency of the consumer in order to induce the consumer to do what the advertiser wants, regardless of what is in the consumer's best interests.

With regard to its affects on consumer beliefs, while advertising can be used to communicate truths, as its defenders insist, frequently advertising is used to hide the truth, or even communicate falsehoods.  Such deceptive advertising is arguably wrong on both Kantian and utilitarian grounds.  On Kantian grounds such advertising may be seen to violate consumer rights to rational self-determination: lying, furthermore, is a nonuniversalizable act.  On Utilitarian grounds it may be said that deceptive advertising breeds a more general mistrust of communication, leads to wrong (more costly, less beneficial) choices, and interferes with the beneficial workings of market by undermining rational agency.  Advertising, like all communication involves three terms – author, medium, and audience.  In light of the immorality of deceptive advertising, its authors have a moral duty not to deceive: in the case of vulnerable audiences, such as children, this includes a duty not to exploit their vulnerabilities.  The media have a similar duty to insure that the advertisements they transmit are not misleading, again taking special care to insure that the vulnerabilities of children and other impressionable audiences are not being exploited.  Audiences, correspondingly, have a right not to be deceived and, in the case of the especially vulnerable audiences, not to have their special vulnerabilities exploited.

Self-Test

The following questions will help you judge your comprehension of the materials covered in Unit 6. Please remember you are responsible for the glossary terms above. You need to check your responses against the key included. 

  1.  Defenders of the laissez faire approach to consumer protection endorse which of the following claims?
    1. Consumer sovereignty means that markets will automatically provide whatever levels of product safety consumers themselves demand.
    2. Requiring levels of consumer protection beyond those consumers demand unfairly forces consumers to pay for safety features they do not want.
    3. Both of the above.
    4. None of the above.
  2. Which of the following is true of the relationship between the contract, "due care," and social costs views on the responsibilities of producers of consumer goods?
    1. Every responsibility on the social costs view is also a responsibility on the "due care" view.
    2. Every responsibility on the contract view is also a responsibility on the "due care" view.
    3. Both of the above.
    4. None of the above.
  3. Which slogan best fits with the social costs view of producers' & vendors' responsibilities to consumers?
    1. caveat emptor – let the buyer beware.
    2. caveat vendor – let the seller take care.
    3. Both of the above.
    4. None of the above.
  4. Which of the following are among the criticisms of the "due care" approach noted by Velasquez?
    1. It ignores the problem of unforeseeable risks.
    2. It is too paternalistic: decisions about acceptable risk are best left to consumers.
    3. The notion of "due care" is too vague.
    4. All of the above.
  5. According to the "due care" view producers have duties to exercise due care
    1. in the design and production of the product.
    2. in informing the buyer about the product.
    3. Both of the above.
    4. None of the above.
  6. A principle "false assumption" of the laissez faire view that consumer sovereignty guarantees that markets automatically insure appropriate consumer protection, according to Velasquez’s criticism, is
    1. that consumers have "perfect information."
    2. that consumer markets are “unsubsidized.”.
    3. that consumer markets are “unregulated.”
    4. All of the above.
  7. Which of the following are among the unrealistic assumptions of the contract view that Velasquez cites?
    1. Buyers and sellers are "equal adversaries" in contracting sales.
    2. Consumer markets are unregulated.
    3. Consumer markets are unsubsidized.
    4. All of the above.
  8. According to Velasquez, advertising
    1. is always informative.
    2. is mass communication intended to induce its audience to buy.
    3. is viewed quite favorably by most people.
    4. All of the above.
  9. Under strict liability, which of the following is true?
    1. Absence of negligence or having exercised "due care" excuses the producer from liability for damages caused by their products.
    2. Absence of knowledge of the product's potential for the harmful effects excuses the producer from liability for these harmful effects.
    3. Both of the above.
    4. None of the above.
  10. Which of the following are among the principal duties of producers to consumers in contracting sales and under the sales contract?
    1. "Due care."
    2. Disclosure.
    3. Maintainability.
    4. All of the above.

Self-Test Key

Question

Answer

Objective

Pages

1

C
1
262-3

2

B
2,6
272,278

3

B
2
278

4

D
5
277-8

5

C
5
276-7

6

C
1
263

7

A
3
270-2

8

B
7
281
9
D
6
278-9

10

B
4
266

NOTE:  The questions on the module end examination will be closely based on the self-test you have just taken.  Sometimes the examination will slightly modify the question-part of self-test questions while varying the answers and distracters (A, B, C, D) unchanged.  For example, while keeping the question unchanged, the distracters/answers to item 10 above might be changed to read as follows:

  1. True representation.
  2. No undue influence.
  3. Both of the above.
  4. None of the above.

This makes “Both of the above” (C) the correct answer since no undue influence and true representation are another two of the four duties mentioned in the original question.

CONSEQUENT ADVICE:  The self-test questions can be very useful for studying for the module end examination, but only if used in the right way.  As the example above shows it would not have been helpful to have studied for the exam by memorizing that the answer to the one about contractual duties was “disclosure”; in fact, it would have been positively harmful if – not seeing “disclosure among the options – it had led you to choose “None of the above” (D) as the answer.  The following points are noteworthy in this connection:

In taking the module end examination it is extremely important that you read the examination questions and options carefully: a little word like not or and can make all the difference between a right and a wrong answer.  Pay attention to italicized words and phrases: italics are for emphasis and often provide clues to the questions being asked and the answers being sought.