A Short Memorandum on Law, Regulation, and Consumption
Dr. Bronwen Morgan

A. Standard Economic Approaches

A highly simplified standard (neoclassical) economic account of the relationship between law, regulation and consumption would posit that, first, the arena for consumption is constituted at a background level by law. General legal rules of contract provide the framework within which consumption choices are made, while general legal rules of tort, or wrongful harm, provide a post-hoc means of remedying a range of the possible damage or harm that might flow from consumption choices.

Regulation enters the picture in both specific and general ways, all of which aim essentially to pre-emptively correct market failures that might harm vulnerable consumers. General statutory consumer protection rules (for example prohibiting certain terms in standard contracts, or unfair pressure in situations of unequal bargaining power) are supplemented by sector-specific statutory attempts to mitigate or prevent particular harms and risks that might be suffered by consumers, whether through poor water quality, contaminated food, morally offensive publications for children or the like.

In this picture, regulation is the skeleton that gives shape and structure to a well-functioning market society. Regulation, as Karl Polanyi argued so eloquently many decades ago, constitutes the market. Neoclassical perspectives have in recent years adopted the Polanyian appreciation of the importance of institutions and in so doing have come to recognize the constitutive role of regulation much more fully than laissez-faire stereotypes might suggest. But the Polanyian resonance ends there, for the neoclassical image of regulation’s constitutive role is that it facilitates the development of an ‘active consumer’, mandating the provision of information and incentive frameworks that the