Literature Review on Analytical Frameworks

Background Paper to Creating Confident Consumers

May 2003

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General Conclusions on Frameworks

• The Role of Theory
• No Particular Framework
• Framework Must Be Economically Grounded

Having reviewed what appear to be the major analytical frameworks with respect to consumer policy, it is useful to draw a few general conclusions.

The Role of Theory

Theory (and empirical evidence) represents collective, albeit contestable, wisdom in relation to a particular problem. It can suggest approaches to issues, highlight costs and benefits of a particular approach, reveal aspects where trade-offs and compromises are required, and uncover assumptions, values and linkages.

Consumer policy should be based on the best insights that theory has to offer. Any particular intervention should be supported by and tested against current (and competing) theoretical frameworks. The alternative, to act on "atheoretical intuition" (Schwartz and Wilde, 1983), would seem unsound.

Obviously, however, it does not follow that theory is to be pursued for its own sake. Theory is a tool, not an end in itself, and an aid to, not a substitute for, judgement.

No Particular Framework

It would seem to follow from the above observation that it would be inappropriate, if not impossible, to simply adopt any of the frameworks discussed above, with the intention that they could be applied to any particular problem that may arise. To attempt this would ignore real life considerations (such as political imperatives, institutional arrangements) that affect the goals that are chosen, and the path taken to achieve those goals, with respect to any particular intervention.

It is more likely that a mix of considerations must be adopted, and as Duggan says (1991), the "challenge is to strike the right balance". This will often apply on a case by case basis, although broader, high level themes should be applicable across the range of issues.

Framework Must Be Economically Grounded

While the efficiency framework may be open to criticism on a number of grounds, it remains important that whatever approach is adopted is economically grounded. After all, that is the basis upon which other important institutional players will assess interventions.

What this means is that in formulating consumer policy we should:

• be aware of relevant economic theory
• be able to identify the costs and benefits of the policy, and identify the trade-offs, in economic terms. In particular, trade-offs at the expense of efficiency and competition must be justified
• be cognisant of the dynamic effects of interventions.

This is not to say that economic considerations must always take precedence. Other non-economic values are important, as are insights offered by other disciplines, especially the behavioural sciences.

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