Freedom, Capabilities, Human Rights, and Procedures
The previous section has placed consumer law in a broad socio-economic context, uncovering challenges which cannot be fully solved by a legal model, which is focused on economic efficiency alone. Consequently, this section will explore theoretical approaches that might provide different perspectives on consumer protection, market freedoms, and human rights. It will assess, among other things, contributions to legal theory, welfare economics, and human rights. The final section of this chapter will then provide new insights on how a theoretical underpinning may inspire a novel approach to consumer law, based on a broader set of rationales such as freedom, inclusion, participation, and sustainability.
Economic efficiency, freedom, and justice
Friedrich Hayek, who was awarded the Nobel Prize for economics in 1974, contributed to legal theory and has been influential in shaping the policy of several countries during the last century. His approach has also recently been debated as an inspiration for the development of European private law.
One of the fundamental concepts in Hayek’s system is the distinction between two types of coexisting ‘orders’ which mirror the distinction between ‘society’ and ‘government’: the self-generating or ‘spontaneous order’ and the ‘made order’ or ‘deliberate organization’. The ‘spontaneous order’ is the way the society and economy organize themselves, reaching the most efficient allocation of resources and at the same time realizing the liberty of the individuals, who can pursue their own interests. According to Hayek the ‘universal rules of just conduct’ form the foundation of this spontaneous order of the free society. In such an order, an important role of law is to defend rules of ‘just conduct’, instead of formulating ‘specific commands that deprive its members of the possibility of using their knowledge for their purposes’. Conversely, in the ‘deliberate organization’, individuals have to follow the commands of an authority (the government), which, may conflict with the interests of the individuals.
The firm belief in a spontaneous order is the basis of Hayek’s liberalism and his aversion towards the concept of ‘social justice’. This latter is, in his own words, an ‘empty phrase without determinable content’ and even ‘the Trojan Horse through which totalitarianism has entered’ [society]—with clear reference to fascism and national socialism on one side, and to communism on the other, which both undermine individual liberties. Similarly, Hayek criticizes the economic and social rights recognized in the 1948 Universal Declaration of Human Rights, arguing in particular that these rights conflict with the traditional civil rights and lamenting their soft or vague nature which, according to him, may undermine the respect and legitimacy of the whole rights system.
Hayek’s theory has sparked debate about its potential to inspire EU private law. Several scholars have argued that such an approach could encourage
European private law to develop in a liberal direction as a ‘spontaneous legal order’ with limited interference from the EU. Others instead have contested the use of Hayek’s approach as a general theoretical framework for European private law, because it is too ‘absolute and deterministic’ and does not leave room for intermediate approaches reflecting the EU ‘mixed economy’.
This raises the question of how Hayek’s theory would influence the particular field of European consumer law. A careful reading of Hayek’s own writings reveals that he did attribute a specific role to the government and, interestingly, in the area of consumer protection. For example, in his book on Law, Legislation and Liberty, he recognizes a role for governments to protect consumers, albeit only briefly. In particular, he recognizes the need to establish a certification system, managed by the state or by other organizations, on the quality of products and services, to facilitate the choice of consumers. He also highlights the importance of health and safety regulation (in particular, minimum hygiene standards for food products) and the need to restrict dangerous products. However, in line with his liberal views, Hayek argues that such protection is necessary to facilitate consumer choice and promote market functioning, and not to promote ‘social justice’ which he sees as rhetorical at best.
Hayek’s discussion of consumer protection is only tangentially related to his main discourse, as these issues are touched upon only in order to provide examples of the role of the government. Two points are, however, particularly interesting for our analysis of consumer law. First, Hayek argues that the government functions should as far as possible be undertaken at the regional or local level. Central government should limit itself to enforcing law and order through general rules, while the ‘positive services’ should be provided by smaller governmental organizations. In the context of EU consumer law, this can be seen as an argument in favour of minimum harmonization and in defence of national regulation—which is by definition more ‘regional’ than EU regulation. Secondly, Hayek is acutely wary of the limits of human knowledge, which, he argues, make it difficult to impose centrally planned regulatory measures. In the spontaneous order, law has instead developed over time, adjusting to the requirements of particular society contexts. Translated into the EU current situation, this would suggest that EU consumer law should be closely built on established national legal traditions and on the international law model—which is the result of an interaction between peers (nations) and hence, Hayek would argue, is the fruit of a ‘spontaneous’ order.
However, Hayek’s profoundly liberal approach has now been surpassed and cannot usefully be applied to fundamental rights and consumer challenges in the EU that have emerged and have been recognized in more recent times. Among these, the distortions caused by unequal bargaining power, incomplete information and externalities, and market failures which cause the ‘spontaneous order’ to deviate from efficiency. Furthermore, even the arguments, for example, about quality certification requirements, have very much the flavour of early views on consumer protection, lacking an analysis of the issues of potential conflicts of interest, balanced representation, and impartiality. In particular, Hayek’s minimalistic view of the state would be unable to address the burning issues of market fairness, sustainability, social exclusion, and participation of vulnerable consumers.
This casts doubts on Hayek’s approach as a model to interpret the present, and to suggest a way forward for a European consumer law model. If the EU law-making process were to follow it too closely it would fail to reflect current consumer challenges, and lose legitimacy.
Another approach is proposed by John Rawls, who in his seminal work A Theory of Justice (1971), set out to reconcile freedom with the seemingly competing principle of equality. To this aim, the American philosopher devised a theory offairness based on two ‘principles of justice’. The first principle states that, in a fair system, ‘each person is to have an equal right to the most extensive basic liberty compatible with a similar liberty for others’. The second principle instead defines the conditions under which ‘social and economic inequality’ can be regarded as just: first, inequality should only be introduced to benefit the least advantaged; secondly, inequality can only be ‘attached to offices and positions open to all under conditions of fair equality of opportunity’.
As the next subsection will discuss, Rawls’ second principle has been taken further by Sen who developed the idea of opportunity into ‘capability’—stress- ing that what matters is not the resources one is given, but the use that can be made of them.
The next subsection explores Sen’s approach to human rights, welfare, and justice which, while focusing on individual freedom, recognizes that the state plays a role in ensuring effective freedom in the market.
-  Regarding the influence of Hayek’s theory in the UK on the approach of the ConservativeGovernment 1979-97,see G. Howells & S.Weatherill, Consumer Protection Law (Aldershot: Ashgate,2005), pp. 80 et seq.
-  F.A. von Hayek, Law, Legislation and Liberty, Vol 1: Rules and Order (London: Routledge andKegan Paul, 1973), pp. 36 et seq.
-  Hayek, Law, Legislation and Liberty, Vol 1: Rules and Order (n 34), pp. 124-5.
-  Hayek (n 34), pp. 50-1.
-  Hayek also referred to the distinction between rules of just conduct and rules of organizationas being equivalent to the difference between private law (including criminal law) and public law;Hayek (n 34), p. 132.
-  F.A. von Hayek, Law, Legislation and Liberty, Vol. 2: The Mirage of Social Justice (London:Routledge and Kegan Paul, 1976), p. 133.
-  Hayek, Law, Legislation and Liberty (n 38), p. 136.
-  Hayek, (n 38), pp. 103-4.
-  J.M. Smits, ‘European Private Law: A Plea for a Spontaneous Legal Order’ in D.M.Curtin, J.M. Smits, A. Klip, and J. McCahery (eds), European Integration and Law (Antwerp andOxford: Intersentia, 2006), pp. 55-107.
-  See also M. Hesselink, ‘A Spontaneous Order for Europe?’ in H.-W. Micklitz & F. Caffaggi(eds), European Private Law after the Common Frame of Reference (Cheltenham: Edward Elgar, 2010),pp. 123-45.
-  See, F.A. von Hayek, Law, Legislation and Liberty, Vol. 3: The Political Order of a Free People(Chicago/London: Chicago Press and Routledge & Kegan Paul, 1979), pp. 62-3.
-  See Hayek, Law, Legislation and Liberty, Vol. 3: The Political Order of a Free People (n 43), pp. 62-3.
-  See also the critical appraisal byA.I. Ogus, ‘Law and Spontaneous Order: Hayek’s Contributionto Legal Theory’, (1989) 16(4) J. Law and Society, pp. 393-409.
-  See also Hesselink, ‘A Spontaneous Order for Europe?’ (n 42), pp. 123-45.
-  J. Rawls, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971).
-  Rawls, A Theory of Justice (n 47), p. 60.
-  Rawls (n 47), p. 302.