Corporate unaccountability

It is often argued (mainly by marketists) that corporations and other businesses do not need any regulation beyond that provided by their customers: if people dislike how a company does business, they will do business with some other company instead.

This is nice in theory, but in modern society it doesn't seem to be working very well – especially once a business passes a certain size.

Summary

Most consumers either don't care about social responsibility, lack adequate information to correctly choose socially-responsible businesses, or are forced by practical concerns to do business with companies they'd rather avoid.

In other words: The market does not provide any substantial accountability for large businesses except with regard to immediate concerns such as price and product selection.

Details

Personal vs. General Good

Most people don't care whether a business provides value to society as a whole; they only care if it provides value to them personally.

Let's say you have two retail chains serving 1 million people each. One of these businesses (X) pollutes (mostly not anywhere nearby) twice as much as the other one (Y), but also has prices that are 1% lower.

If I'm a new customer trying to decide which place to shop, and I'm not a flaming liberal, I'm not going to worry about the pollution; gimme them low prices, baby!

Even assuming that I'm concerned about the effects of pollution on myself and my family, I have to realize that my refusing to shop there is going to reduce overall retail pollution by at most 2 millionths – not a measurable amount – and anyway, most of this business's pollution isn't anywhere near me, so why should I care?

Ignorance is (Corporate) Strength

Many people aren't even aware of the harmful effects of the businesses they shop at, much less which businesses pollute less, treat their workers better, or whatever element of social responsibility you want to look at. The media does its profit-oriented best to keep us distracted with other things, to make us apathetic and disinterested, or even to make us actively hostile towards such concerns. (Social responsibility cuts into profits, you know, which costs jobs. <insert ominous music and distant scream>)

Feedback Options Are Limited

The number of choices (different businesses one could patronize) is fewer than the number of variables one would like to optimize -- so you always have to compromise on some principle. Statistically, people will choose to compromise in different ways, so the net effect is essentially a complete lack of accountability.

Business A treats its workers like crap, pollutes heavily, and has obnoxious business practices you really hate to support, but they're the only place in the area where you can buy a particular item you need.
Business B treats its workers well and has better business practices, but also pollutes heavily and doesn't have the item you want.
Business C is completely above reproach, ethically – and you can special-order the item you like, but it costs twice as much there as at Business A. As does almost everything else they sell.

So, depending on your budgets for time and money, you might decide to get your special item at C and do the rest of your shopping at B (spending an extra half an hour per trip and substantial quantities of gas, over the course of a month, in pursuit of reducing overall pollution by less than two millionths, whatever that comes to), or just say the hell with it and save yourself gas, time, and money by getting everything at Business A.

This may seem like a very specific scenario, but I think it's a very common phenomenon in general: consumers lack a line-item veto over the practices of the available businesses, so larger social concerns tend to have relatively little impact over immediate concerns like product selection and pricing.

For an even better example, perhaps, think of the number of possible options on various different cellphone plans versus the number of companies who offer cellphone service. One company has the best network, but they charge out the wazoo for data, they supported warrantless wiretapping, their privacy practices are questionable, they put all kinds of advertising crap on their phones, and you really hate the condescending advertisements they plaster all over the place... etc.

So: even among that minority of consumers who place social responsibility over personal value, an even smaller minority will be able to actually support the businesses they'd rather support -- and the rest will be forced by circumstance into various sorts of compromise.

Links

2015-03-28 Pilots on the Germanwings Murder/Suicide: evidence suggests that price overwhelmingly dominates other factors – including safety – in airline competition, and that this is largely due to the unavailability of reliable information ("signals") regarding those other factors rather than being a reflection of rational choice on the part of buyers.

Notes

adapted from Google+