THE RATIONAL CHOICE OF FAIR TRADE

THE RATIONAL CHOICE OF FAIR TRADE

Economists often believe that a rational choice will predict the actual choice.  Rational choice theory is based on the assumption that people work in their own best interest, striving to maximize their position, and making decisions for their own maximum benefit.  Never-the-less there are plenty of instances where the rational choice is not the actual choice made, or may not seem to be to the observer.

Herbert Simon writes of “bound rationality” where due to a lack of information or one’s inability to focus or understand the information available, one may not make the fully rational choice, but rather settle for something that seems to be good enough (1955).

Greek philosophers coined the term, akrasia, which means “weakness of will,” to refer to instances, such as over-eating, when one may know what the rational choice is but fail to follow it.  Economists sometimes call this behavior “bounded willpower” or insufficient self-command” (Sen, 2009, p. 117).

Though one might choose not to be rational all of the time, one is able to, “reason and scrutinize their own decisions and those of others.” (Sen, 209, p. 178)  And whilst one may occasionally stray from the “demands of rationality,” he or she does not go far.  Just as one is able to apply rationality to their own behavior, they can also apply rationality when thinking about bigger things, such as the nature of justice.

Rational Choice Theory (RCT) as mentioned earlier, is the common economic belief that people will always act rationally and in their own self interest.  An individual may show empathy for a sad person, but the motivation for showing the empathy (in the spirit of RCT and Adam Smith’s definition of “self love”) is not to specifically make the person feel better, but to make themselves feel better buy lessening the sadness of the perpetrator.  This is just one dimension of human motivation, and a very limiting understanding of rationality.

The rationality of choice however, is more liberating, and shows that reasons for what may appear to be irrational choices, are actually quite rational and sustainable after scrutiny.   For example, an avid consumer of fair trade coffee insists on buying a small, one-pound bag of coffee each week from his local grocery.  He knows that a five pound bag costs less and would reduce his number of trips to the store, saving time and money, yet the consumer instead, apparently less rationally, chooses to buy the small quantity more frequently, at a higher price. 

What might not be apparent here, is that the consumer rides his bike to the grocery and can not carry the larger bag of coffee home on his bicycle.  One also does not know that pedaling to the grocery is an important part of the customer’s exercise routine.  So though spending more time and money on coffee purchases may at first seem irrational, when understood in the context of the choices made, it is perfectly rational.  The consumer has engaged “sustainable reasoning” in his choice process.  This mean that he does not re-engage this rational/un-rational questioning ever time he goes to the store, instead he does it automatically and without thinking.  It becomes a habitual choice (Sen, 2009).

Besides having varying degrees of rationality based on self interests, there are also motivations beyond self interest for rationality.  Adam Smith, in his Theory of Moral Sentiment,  lists these as sympathy, generosity, and public spirit.  Sympathy is helping someone who is sad, only because you want them to feel better.  Generosity is the sacrifice of one’s interest for someone else’s enjoyment of that interest, and acting in the public spirit is based on comparing things from the perspective of, “the nation he fights for” (Smith, 1790, p. 191).

Other motivations, such as feelings of shared humanity or justice, may influence someone to choose to pursue a goal that is not “exclusively confined to their own self interest.” (Sen, 2009, p. 191).  This behavior is not particularly unusual and is present in many who choose to engage in fair trade.

THE RATIONALITY OF FAIR TRADE CONSUMPTION

Fair trade is arguably not a particularly rational choice for consumers working in their own self interest.  Fair trade products are often not easily available or identifiable.  Often the consumer has seek out products online because they are not available in the local community, or they have to take time to research and determine a product’s fair trade-ness.  Fair trade products are often more expensive then conventional ones (Shaw, Hogg, et. Al, 2006; Low and Davenport, 2007; Cailleba and Casteran, 2008).  Never-the-less, as demonstrated by the tremendous growth in demand for fair trade products, consumers are making this choice - though not consistently, nor over long periods of time. 

Fair trade products need to be of a good quality, fashionable, identifiable, and readily available in mainstream markets for maximum consumer participation (Shaw and Duff, 2002; Tomolillo and Shaw 2004).  This is often difficult to achieve as fair trade does not have the scope and coverage that conventional trade products enjoy.   Fair trade labeling and criteria change across product categories, making some fair trade products such as manufactured goods, handicrafts, and clothing, more difficult to identify.  (Shaw, Hogg, et. al, 2006).

A study of fair trade coffee consumption by French consumers painted a fickle market driven by a passive consumption of fair trade, based largely on purchases made during events or as gifts for others.  On the basis of 7,587 transactions, fair trade coffee showed lower customer retention rates than conventional coffees.  In addition, while fair trade customers tended to engage in fair trade coffee purchasing for three years, conventional coffee drinkers had much longer commitments with their brand loyalty extending to an average of five years.  The study also found that fair traders were not necessarily heavy coffee drinkers and consumed fair trade and non fair trade coffee rather indiscriminately (Calleba and Casteran, 2008). 

Coffee, in general, is a product that suffers from limited brand loyalty (Srivstava, 2007).  Fair trade coffee consumption and brand loyalty (just like non fair trade coffee consumption and brand loyalty) could be improved through reinforcement, commitment, and satisfaction.  Reinforcement provides a positive reward or stimulus for a behavior.  Commitment is the link between a person and his or her own actions, such as their engaging in ethical consumption.  Satisfaction is the quality of the experience the person had with the product.  The authors noted that, like conventional coffee, different grades of fair trade coffee sold at different price points could also attract a broader range of customers (Calleba and Casteran, 2008). 

The motivation to engage in fair trade coffee consumption seems to be diluted.

Another study of fair trade clothing consumption in the British fashion industry found “words/deeds inconsistencies” amongst fair trade consumers.  Though participants felt committed to fair trade ideals and wanted to purchase fair trade product, often they did not.  The clothing industry, like other conventional trade markets, is rife with corruption and unfair labor practices.  Sweatshops is a term used for factories which employ underage workers, pay low wages, require long work hours, and engage in other exploitive practices (Weadick, 2002).  Fair trade clothing is an ethical alternative to the predominantly sweatshop made conventional clothing options.  The 262 consumers in this study were aware of the differences between fair trade and conventional clothing and although 81% voiced a high intention to make ethical choices and purchase fair trade clothing, only 9% actually did (Shaw, Hogg, et al, 2006). (Shaw, Hogg, et al, 2006)

More than 55% of participants said the poor access was their number one deterrent.  There simply was not an easily identifiable, fashionable and affordable source of fair trade clothes available.  The consumers reported that it was difficult for them to identify if a product was fair trade or sweatshop made since there was not any display information and the sales staff were either uniformed or an unreliable source of data.  There was also a limited amount of fashion options, sizes, and product choices.  High uncertainty and a weak relationship with fair trade clothing sources, led consumers who would normally purchase fair trade products, to make a choice inconsistent with their own beliefs (Shaw, Hogg, et al, 2006).  Researchers attribute this inconsistent behavior partially to the nature of fashion where beyond just being functional, clothing fashion fills a need for belongingness and self esteem (Easey, 2002; Gabriel and Lang, 1995).

A value based label (VBL) is a product label which carries, “explicit value-laden messages relating to a product’s process and quality” (Bargam, 2002).  Various types of VBLs are often found on fair trade products.  A consumer study on food labeling found that 97% of all participants studied read or examine the VBL before making and purchase.  Seventy-one percent of the customers studied relied on the VBL when making product choices and 48% continued to purchase products bearing the same VBL (McEachern, Warnaby, 2008).  Having a clear fair trade message, easy access to product in mainstream markets, and good quality, will help to foster more engagement in ethical consumption, as consumers pursue a more global definition of themselves and see their relevancy in their link to economic justice through trade.

The Ethical Consumer Report defines an ethical consumer as one who embraces the idea of, “personal consumption where the choice of a product or service exists which supports a particular ethical issue – bet it human rights, the environment, or animal welfare” (Cooperative Bank, 2003, p. 7).  The UK’s ethical consumers purchased $28 billion of ethical products in 2002, the time of the publication of the Ethical Consumer Report.  Fair trade goods are ethical products.

Never-the-less, fair trade consumers seems to be a slippery lot driven by their own needs and habits, no matter how much they personally value their global citizenry and value being ethical consumers.  It is difficult for well meaning consumers to, “engage with complex issues of social injustice or environmental degradation” especially when there are not always fair trade options for the products one is seeking, and fair trade products are more costly or of a lesser quality or design.  Making ethical choices, studies show, are important to consumers, but are secondary to the “everyday business of consumption.” (Low, Davenport, 2007, p. 339)  As fair trade products become more available in places of conventional retailing (mainstream markets) the burden of making ethical consumer choices becomes even greater. 

“If alternative products (ie fair trade) enter existing market circuits, their environmental and social qualities become subordinated to their price, as occurs with other commodities” (Raynolds, 2000, p. 299).  In addition, as found in the previously mentioned fashion studies, while mainstream retailers see the benefit of selling fair trade products, they do not necessarily endorse the “radical, transformative message of fair trade,” or even promote the products as being fair trade, especially when other store products are not fair trade.  (Low, Davenport, 2005, 2007).  Essentially, studies have shown that the traditional consumer motivations of “price, quality, brand, and convenience override ethical concerns, even when consumers are aware of ethical issues in the production, use and disposal of products” (emphasis added) (Low, Davenport, 2005, 2007) (other studies: Tallontire, et al, 2003; Boulsridge and Carrigan, 2000; Saw et al 2004). 

More to come soon....