Dollar voting

In some Principles of Economics textbooks of the mid-20th Century, the term was used to describe the process by which consumers' choices influence firms' production decisions. 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. Effectively, according to this analogy, consumers are voting for "winners" and "losers" with their purchases. This argument was used to explain and justify market allocations of goods and services under the catchphrase "consumer sovereignty".

Consumer boycotts have from time to time been proposed as an approach to change producers' behaviour. The goals of selective boycotts, or dollar voting, have been diverse, and have included a desire to see decreased corporate revenues, removal of key executives, or reputational damage.[1]

The modern idea of dollar voting can be traced back to its development by James Buchanan in Individual Choice in Voting and the Market. As a public choice theorist, Buchanan equated economic participation by the individual as a form of pure democracy.[2] Also known as political consumerism, dollar voting's history in the United States can be followed back to the American Revolution, when colonists boycotted several British products in protest of taxation without representation.[3]

Dollar voting has been increasingly thought to be a useful tool in changing producers' behaviour. If voters feel disenfranchised politically, they may turn to using their spending power to influence politics and the economy. Consumers aiming to use dollar voting ultimately hope to impact society's values and use of resources.[3]

The idea of dollar voting has faced criticism for its class implications. In modern America, dollar voting is often seen being 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".[4] These purchases do not affect low-income producers and consumer in the food market.[4] Moreover, dollar voting has been criticized as a form of conspicuous consumption for the well-off, serving more as a display of morality than of actual consumer preference.[4]

Dollar voting has also been criticized for being a sort of consumer vigilantism, as 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.[5]

As more consumer activists find ways to use the power of their dollar, efforts at encouraging corporations and firms to act in environmentally friendly ways have become popular. However, it is unclear whether or not a firm that creates negative environmental externalities will legitimately change its method of production to satisfy such desires.[6] It also has the potential to move citizens away from law making efforts that check unmitigated self interest in both firms and consumers, and instead shifts this responsibility almost completely over to the market.

• Crowd funding
• Demonstrated preference
• Dispersed knowledge
• Ethical consumerism
• Other people's money
• Tax choice
• Consumer sovereignty
• Buycott.com