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Reflections: Spending

Sovereign consumers
By John Tiemstra

A market economy can be understood as a computer, its purpose to process and transmit information. The key data are prices. When a seller offers a good at a certain price, that price tells us what the good costs to produce and, maybe more importantly, what the resources used in its production would be worth if used to make something else. When a buyer bids on a good, it indicates what the good is worth to her, in the sense of what she would have to pay for the equivalent services somewhere else. A completed sale is a signal to produce more. A failed transaction tells us to try something else. The system’s virtue is supposed to be that it satisfies buyers’ wishes with the most efficient use of resources.

To us Christians, the efficient satisfaction of desires is not the only thing that matters. Since that is the case, we will need some information about the seller or his goods that we do not get from the price. Does the seller care about the environment and try to produce goods in a sustainable way? Does the seller treat his suppliers and workers fairly? Is he committed to the communities where his facilities are located? Does he give to charities? Does he manage the risks of his business to minimize the danger to others?

A lot of this information is available. Some of it may be right there on the package: organic, fair trade, no trans fats, dolphin safe, GMO free, recyclable, recycled content, energy star. It helps that some of these terms have standard definitions in law or practice and that some of them are mandated. Other information has to be sought out from the seller or from government agencies or not-for-profits that issue ratings on these issues. But in any case, buying a product is more difficult than just choosing the lowest-priced alternative, and there may not be any seller that measures up on every possible scale.

In the end, all this investigation is probably not worthwhile for one-off, small purchases. For large purchases, however, like a car or a major appliance, we buyers will likely do some investigating anyway, and looking into  issues other than price is a good idea. The same is true for small things that we buy over and over, like food and fuel. Finding the best seller to deal with is worthwhile in a case like that. By acting on our convictions about important things besides price, we can send a signal to the sellers about how to conduct their business. Even without joining an organized movement, our voices will be heard. In any case, acting on your conscience is always a good thing to do. If you can’t bring yourself to patronize BP or Merrill Lynch or WalMart because of bad decisions they have made in the past, it is good to act with integrity.

Deciding which companies to invest in is a much more complicated business, because there are so many possibilities to investigate. There are “socially responsible” mutual funds, but most of them have very simple screens involving hot-button issues like weapons, gambling and tobacco. There are reasons to think that responsible companies are more profitable in the long run, so funds which are oriented toward long-run, buy-and-hold strategies are likely to make good choices.

Questions for reflection:

  • Are you willing to pay more to buy from companies that are environmentally responsible? Or that treat their workers well?
  • What do you wish you knew about the companies you deal with, but haven’t been able to find out?
  • How do you decide which companies to invest money with?

—John Tiemstra, Professor of Economics, Calvin College

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