Ethical tacos

Mr. JE of New Orleans, Louisiana, asked me about this article, which is a libertarian commentary on a boycott of Taco Bell. The story is one we've heard a hundred times before: workers are mistreated, in this case the Immokalee Indians of South Florida who harvest the tomatoes, then liberal college students hear about it and a boycott is organized, causing a couple of college campuses to close their Taco Bells and many a chalupa to not get sold.

The libertarian response is predictable: the boycott is interfering with the market, which only hurts the people whom it is intended to help. "It is an attack on capitalism and an attempt to impose moral connotations to simple purchasing actions of consumption goods. [...] Prices are not set by arbitrary moral standards, but rather by available levels of supply and demand in the market."

But the people who are boycotting Taco Bell are the market. The first piece of confusion in the libertarian view is the belief that there are millions of perfectly atomic consumers within the market, who don't interact, and then there are these Jesuits and labor unions who come to them, from outside the market, and stick a screwdriver in the works. But the students who boycott are as much on the demand side of the market as the guys who still buy their tacos from TB, and it is an error to suddenly exclude somebody from a model of the market because they care about ethics. The above article acknowledges this: "Boycotting Taco Bell lowers the demand for tacos" and in the same paragraph denies it: "Staging a boycott against Taco Bell does not change the guided self interest of taco eating teenagers."

Why would a libertarian make such selective inclusions and exclusions? The root problem is in the narrow-path presumption that a person's utility function may only include a limited set of elements. Taste, convenience, price: OK. Ethics, affect, peer influences: forbidden. Academic economic models facilitate this, since price is much easier to model than ethics, and it's generally true that ethics really don't enter into most people's utility functions as strongly as price.

But ethics do matter, for everyone. I believe that every one of us could think of one product out there that they would never buy, whose production is somehow repulsive: maybe Metallica CDs, snuff videos, copies of the Communist Manifesto, or Krupps coffee makers. I'm a fanatic vegetarian, so I've got my list. It would be silly to put these considerations outside of the market mechanism: my utility from a Taco Bell taco stems directly from the fact that many franchises use animal fat in their rice (according to this source. Last time I saw an official ingredients list, it listed chicken stock in the rice, but that's apparently changed). To the extent that I'm a part of the market, the demand curve is directly affected by my ethical beliefs.

An interesting feature of ethics is that the vast majority of people don't care, but for those that do it's a deal-breaker. This is hard to model for the economists, and hard to deal with for the companies: do you alienate a thousand people for the sake of saving a penny on a million units? Part of the equation is the contagion problem, that if a person is sufficiently alienated then they will not only stop consuming, but they'll complain about you to all of their friends, which could hurt sales still further. The cost/benefit analysis would be different for every case: it's surely true that a company would have to shut down if it tried to satisfy all the ethical qualms of all of its consumers, but it's also surely true that a company which ignores the ethics of all of its consumers shoots itself in the foot.

Affect also matters. The clearest proof of this is that companies like Taco Bell spend billions of dollars a year on it. The narrow-path economists insist that advertising exists only to inform the consumer of new products or perhaps demonstrate the company's stability, but people who actually work in advertising would laugh at this: most advertising is about making the product emotionally appealing, by implying that attractive and desirable people use the product, or otherwise making you feel warm and fuzzy when you see their logo. If you can get people to have an emotional attachment to your product, then you can charge more for the same product---that is, emotional attachment is the best investment a perfectly rational producer can make.

The academic economists downplay affect for the same reasons they downplay ethics: hard to model, and price generally matters more. Many will argue that it's reasonable to ignore it in the design of an academic model, since many of the features of emotional attachment can be explained using other things like a desire for consistency or shared preferences between producer and consumer. But regardless of whether it should be included in a good model, it is certainly a real-world issue on which real-world companies spend billions of dollars.

Ethics and affect are tied. My affect toward Taco Bell is based upon all my information, including both the advertisements and my knowledge of how their proverbial sausage is made. The aforementioned libertarian article is happy to acknowledge half of this, by the way, pointing out that much of Taco Bell's demand comes from that frigging dog that says `Yo quiero Taco Bell'. [Better would have been `Quiero el taco bello', meaning `I want the beautiful taco'. But, alas, Taco Bell is named for its founder, Mr. Bell.] I can not explain why our libertarian friends say that demand can be shifted by something as squishy as a talking dog but not from the squishy issues of ethics.

Consumers are irrational. We can make up general rules about how they'll behave (like how demand falls with price, though we can't even prove that), but in the end they'll buy what they darn well please to. The role of the companies on the supply side of the market is to work out what those irrational desires are, regardless of where they came from, and cater to them. And the role of the think tank, by the way, is not to wish away those irrationalities or define those people it considers to be irrational as somehow outside of the market, but to discuss how society can best facilitate suppliers meeting those arbitrary demands. This is a hard question when the strong desires of a few (for fair-pay tomatoes) directly clash with the weak desires of the many (for cheap tomatoes), but the article I'm critiquing ignores it, and I must acknowledge that I really can't offer a generalized solution.

For Taco Bell's owners, paying its workers more should be part of the advertising budget. If behaving within the bounds of the consumer's ethical beliefs helps to improve consumers' visceral affect, then it makes as much sense as spending millions on affect-improving advertising, no matter how irrational or arbitrary those ethical rules may be.

In this context, the boycott absolutely makes sense for the laborers, although it is potentially risky. Consumers with certain ethical beliefs will want to maximize the cost to Taco Bell for ignoring those beliefs, which means not buying tacos and convincing as many people as possible to not buy. This works entirely within the market mechanism, by moving demand. To repeat the quote from above: "Prices are not set by arbitrary moral standards, but rather by available levels of supply and demand in the market." This is true, but levels of demand are influenced by arbitrary moral standards, which then influence price. The more vehement the arbitrary moral standards, the more influence they will have on price.

What T.B.'s managers will do about the increasing effect its labor policy has on demand is hard to guess. It may acknowledge that a penny a taco, shifting everybody's demand down a touch, is worth the benefit from restoring lost demand among boycotters and their expanding network. It may also find other means; such as buying tomatoes from some other group of laborers who aren't as organized; or maybe just ignoring the whole thing and reducing tomato purchases, losing money for the workers (which is the libertarian prediction; see below). The boycott has both costs and benefits to the workers, and I certainly don't have the numbers in both columns calculated---but then neither does our libertarian friend. Meanwhile, I have no reason to think the Coalition of Immokalee Workers is run by idiots, and I expect they are aware that sometimes the squeaky wheel gets the grease and sometimes the squeaky wheel gets the shaft. They are aware that Taco Bell's decision will be based entirely on costs and benefits, not the board of director's heart strings---and so they are doing exactly the right thing to convert their ethical complaints into the largest possible shift in demand, which Taco Bell's managers (being rational market actors) will respond to.

A final note: I feel that I should specifically respond to a few points in the article, though they don't generalize very far and won't be of interest except as a rebuttal.

A more effective method of raising the wages of Immokalee migrant workers would be to stage the exact opposite activist campaign. If college students were to buy more tacos and ask for extra tomatoes on those tacos the demand curve would be moved in the appropriate direction, raising migrant workers wages. But this realization seems farsighted from the anti-capitalists.

The Jesuit Volunteer Corps seems to be burning the migrant workers match at both ends. We've seen how the boycott would have a lessening effect on the migrant workers' wage rates, what we have yet to mention is that the JVC regularly encourages college students to gain the cultural experience of being a migrant worker. While lowering the demand for their goods and services, JVC kids travel to south Florida and work along side the migrant workers, in effect challenging them for the very jobs they are trying to spread a message of value for. This action raises the supply of labor and reaffirms the low pay scale.

In this case, I think that it is the author who is being short-sighted [or in economist-speak, is looking at a partial equilibrium model where he should be looking for the general equilibrium]. The goal is to maximize the benefit that Taco Bell gets from paying tomato-pickers more. The obvious way to do this is to provide less labor and demand more tomatoes, as suggested. However, one person's request for extra tomatoes has a small effect, but one person's refusal to buy---and encouragement to lots of friends not to buy---creates a much larger effect. The board of directors is asking, `what is the benefit to paying more for tomatoes?' and it seems obvious that the benefit the board sees is larger in the case of a public boycott that affects the demand decisions of a larger group than the private actions of a smaller set of people.

The Jesuit labor thing is similarly a long-term issue. If we have a person who marginally expands the supply of labor for a summer, and then spends the next decade encouraging others to care more about labor and shifts demand by self and others accordingly, then the long-term marginal shift may dwarf the short-term. Clearly the JVC thinks so.