Talking about it is good

The production, exchange and consumption of goods often have negative impacts on the environment and on subjects not directly involved in market transactions. Traditional solutions to these problems are often inapplicable due to the complexity of determining optimal policies and political slowness.

As an alternative, market actors can adopt socially responsible behaviors by voluntarily internalizing the negative externalities generated by their activities. A possible tool to encourage these behaviors may simply be to talk about it openly. Public communications campaigns, such as the Fridays for Future movement and the World Economic Forum, aim to promote social responsibility by encouraging market actors to consider and mitigate the harmful impacts of their actions.

A recent scientific article published in the American magazine American Economic Review experimentally explores the effect that a debate on social responsibility can have on market behavior.
Through three laboratory studies with 2,457 participants, the researchers evaluated whether and how public debate can direct market choices towards socially responsible products versus harmful but economically advantageous ones.

Participants, in particular, debate which market behaviors are socially responsible. For example, they debate whether or not it is ethical to choose products that minimize the negative impact on society, even if more expensive to produce, over products that are cheaper but cause damage to society and the environment.

In a first study, the debate effect is tested through three experimental conditions. In the first, called “Velo”, all participants, including buyers, sellers and third parties, debate the topic without knowing their future roles in the market. This approach, based on Rawls's "Veil of Ignorance Theory", aims to encourage the development of narratives that promote socially responsible behavior. The second condition, “Without Veil”, requires that the participants were aware of their role before starting the debate. The third condition, “Exclusive,” limits the discussion to buyers and sellers only, excluding third parties harmed by the negative externalities of the harmful product.
This scenario represents a situation common to many real markets, where those who suffer damages often do not participate in market decisions.

The results show that public debate has a positive impact on social responsibility in all conditions examined. In particular, in the "Veil" condition, the discussion led to an almost total increase in the adoption of the responsible product.
The positive effect of the discussion was maintained even by eliminating the "veil of ignorance" and excluding third parties.

The experimental analysis conducted by the authors provides valuable insights into the potential impact of public debate on market behavior.
Simply debating the issue in a public way can lead to a lasting increase in social responsibility in the market. However, it should be underlined that the effectiveness of the debate seems to decrease drastically if the participation of the actors is optional. This suggests, according to the authors, that the most effective awareness campaigns are those that promote broader and mandatory involvement.
These results underline the importance of promoting inclusive and participatory public debates as tools to address market inefficiencies that lead to negative social and environmental consequences.

Pierluigi Conzo
NP August / September 2024