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Dollar voting is an analogy that refers to the theoretical impact of consumer choice on producers' actions by means of the flow of consumer payments to producers for their goods and services.
In some principles textbooks of the mid-20th century, the term "dollar voting" was used to describe the process by which consumers' choices influence firms' production decisions.[ citation needed ] Products that consumers buy will tend to be produced in the future. Products that do not sell as well as expected will receive fewer productive resources in the future. According to this analogy, consumers vote for "winners" and "losers" with their purchases. This argument was used to explain market allocations of goods and services under the catchphrase "consumer sovereignty".[ citation needed ]
Consumer boycotts sometimes aim to change producers' behaviour. The goals of selective boycotts, or dollar voting, have been diverse, including cutting corporate revenues, removal of key executives, and reputational damage. [1]
The modern idea of dollar voting can be traced back to its development by James M. Buchanan in Individual Choice in Voting and the Market. [2] As a public choice theorist, Buchanan considered economic participation by the individual to be a form of pure democracy. [3] [ non-primary source needed ] Also known as political consumerism, the history of dollar voting in the United States can be traced back to the American Revolution, when colonists boycotted several British products in protest of taxation without representation. [4]
If voters feel disenfranchised politically, they may instead use their spending power to influence politics and the economy. Consumers use dollar voting because they hope to impact society's values and the use of resources. [4]
Dollar voting has faced criticism in modern America for being class-bound. Dollar voting is archetypically used by middle and upper middle class consumers who spend their money at local farmers markets, community agricultural programs, and the preparation of "slow food". [5] These purchases do not affect low-income producers and consumers in the food market. [5] Dollar voting has also been criticized as a form of conspicuous consumption for the well-off. [5]
Dollar voting has also been criticized for being a sort of consumer vigilantism. While most economists and economic philosophers accept that consumers have a right to their personal moral choices in the market, large-scale movements to influence consumer spending could have potentially dangerous implications.[ example needed ] [6]
Efforts to encourage corporations and firms to act in environmentally friendly ways have become popular. It is unclear whether firms that create negative environmental externalities will actually change their method of production to satisfy such desires. [7] Dollar voting also could dissuade citizens from law-making efforts to check unmitigated self-interest in firms and consumers, instead shifting this responsibility over to the market.
Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the economy as a whole, which is studied in macroeconomics.
Fair trade is a term for an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The fair trade movement combines the payment of higher prices to exporters with improved social and environmental standards. The movement focuses in particular on commodities, or products that are typically exported from developing countries to developed countries but is also used in domestic markets, most notably for handicrafts, coffee, cocoa, wine, sugar, fruit, flowers and gold.
Public choice, or public choice theory, is "the use of economic tools to deal with traditional problems of political science." It includes the study of political behavior. In political science, it is the subset of positive political theory that studies self-interested agents and their interactions, which can be represented in a number of ways—using standard constrained utility maximization, game theory, or decision theory. It is the origin and intellectual foundation of contemporary work in political economy.
In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's activity. Externalities can be considered as unpriced components that are involved in either consumer or producer market transactions. Air pollution from motor vehicles is one example. The cost of air pollution to society is not paid by either the producers or users of motorized transport to the rest of society. Water pollution from mills and factories is another example. All (water) consumers are made worse off by pollution but are not compensated by the market for this damage. A positive externality is when an individual's consumption in a market increases the well-being of others, but the individual does not charge the third party for the benefit. The third party is essentially getting a free product. An example of this might be the apartment above a bakery receiving some free heat in winter. The people who live in the apartment do not compensate the bakery for this benefit.
A subsidy, subvention or government incentive is a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy. It ensures that individuals and households are viable by having access to essential goods and services while giving businesses the opportunity to stay afloat and/or competitive. Subsidies not only promote long term economic stability but also help governments to respond to economic shocks during a recession or in response to unforeseen shocks, such as the COVID-19 pandemic.
A market system is any systematic process enabling many market players to offer and demand: helping buyers and sellers interact and make deals. It is not just the price mechanism but the entire system of regulation, qualification, credentials, reputations and clearing that surrounds that mechanism and makes it operate in a social context. Some authors use the term "market system" to refer to specifically to the free market system. This article focuses on the more general sense of the term according to which there are a variety of different market systems.
In Marxist philosophy, the term commodity fetishism describes the economic relationships of production and exchange as being social relationships that exist among things and not as relationships that exist among people. As a form of reification, commodity fetishism presents economic value as inherent to the commodities, and not as arising from the workforce, from the human relations that produced the commodity, the goods and the services.
In microeconomics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa, violating the law of demand.
A Pigouvian tax is a tax on any market activity that generates negative externalities. A Pigouvian tax is a method that tries to internalize negative externalities to achieve the Nash equilibrium and optimal Pareto efficiency. The tax is normally set by the government to correct an undesirable or inefficient market outcome and does so by being set equal to the external marginal cost of the negative externalities. In the presence of negative externalities, social cost includes private cost and external cost caused by negative externalities. This means the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. Often-cited examples of negative externalities are environmental pollution and increased public healthcare costs associated with tobacco and sugary drink consumption.
Ethical consumerism is a type of consumer activism based on the concept of dollar voting. People practice it by buying ethically made products that support small-scale manufacturers or local artisans and protect animals and the environment, while boycotting products that exploit children as workers, are tested on animals, or damage the environment.
Consumer sovereignty is the economic concept that the consumer has some controlling power over goods that are produced, and that the consumer is the best judge of their own welfare.
Ethical Consumer Research Association Ltd (ECRA) is a British not-for-profit publisher, research, political, and campaign organisation which publishes information on the social, ethical and environmental behaviour of companies and governments and issues around trade justice and ethical consumption. It was founded in 1989 by Rob Harrison and Jane Turner and has been publishing the bi-monthly Ethical Consumer Magazine since. Its office is in Manchester.
In the United States, the Great Depression began with the Wall Street Crash of October 1929 and then spread worldwide. The nadir came in 1931–1933, and recovery came in 1940. The stock market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth as well as for personal advancement. Altogether, there was a general loss of confidence in the economic future.
In economics, a market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services to buyers in exchange for money. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate trade and enable the distribution and allocation of resources in a society. Markets allow any tradeable item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights of services and goods. Markets generally supplant gift economies and are often held in place through rules and customs, such as a booth fee, competitive pricing, and source of goods for sale.
In economics, competition is a scenario where different economic firms are in contention to obtain goods that are limited by varying the elements of the marketing mix: price, product, promotion and place. In classical economic thought, competition causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products. The greater the selection of a good is in the market, the lower prices for the products typically are, compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly).
Cooperative federalism is a school of thought in the field of cooperative economics. Historically, its proponents have included J.T.W. Mitchell, Charles Gide, Paul Lambert, and Beatrice Webb.
In public choice theory, tax choice is an emerging type of citizen sourcing in which individuals or groups of taxpayers decide how to allocate part of their taxes of a municipal or public budget appropriation through a process of democratic deliberation and decision-making. Its proponents apply the theory of consumer choice to public finance. They claim taxpayers react positively when they are allowed to allocate portions of their taxes to specific spending.
An alternative purchase network (APN) is a contemporary commerce channel established as an alternative to perceived consumerism, and the cultural and economic hegemony of the global market. Alternative purchase networks aim to promote ethical shopping behaviour, which has an environmentally friendly approach and considers local realities.
Critical consumption is the conscious choice to buy or not buy a product because of ethical and political beliefs. The critical consumer considers characteristics of the product and its realization, such as environmental sustainability and respect of workers’ rights. Critical consumers take responsibility for the environmental, social, and political effects of their choices. The critical consumer sympathizes with certain social movement goals and contributes towards them by modifying their consumption behavior.
This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.
