ethical consumerism vs sri

[batbatmanne]

This is a subject that I have stumbled upon in discussions with my leftist friends and we seem to have come to a big disagreement. The problem has to do with our ethical duties as individuals.

Take for granted that individuals have an ethical duty to play their role in not contributing to negative externalities of trade and industry. The question is, does one have more of a duty to avoid consuming goods and services from these industries, and making sure that such consumption is maximally efficient at providing utility when one does so, or is it rather that one has a duty to not invest in such industries? More particularly, do we have an equal duty in this regard or does one take priority?

I have taken the ERE lifestyle as an important basis for a lot of my ethics in these regards, I think. Consider that, as a Canadian, I have very little options to passively invest in anything that would provide the same return and expectations as a basket that emulates the market indices. As such, and because I am working hard to ensure that my own personal consumption involves an efficient use of resources for utility provided, I do not think I have a duty to avoid investing in the oil sector, for example. Part of the motivation here is that I do not think that anybody else is more entitled to profit off of the natural resources of the world any more than I am, although, of course, they ought to be able to reasonably profit from the processing and distribution aspect of production. By reasonable, I mean not being able to make excessive profit due to monopolistic exclusion from others being able to develop the resource.

On the other hand, my friends object to the reasoning that I have provided above. By investing in these industries I am responsible for providing money on which these industries can expand. For some reason, they seem to think that I am more culpable in this regard than they are despite the fact that they lead less efficient lifestyles themselves. They seem to think that such consumption is less objectionable but I cannot put my finger on why. I have my speculations, but they all seem to point to a misconception on their part as to who is actually responsible for contributing to the profits of the industry and the problem generally. From my own perspective, it is clear that a lot of the environmental problems we face as a society is due to the aggregate behavior of people who do not consider the effects of their consumption and have done little to lead more efficient lifestyles in this regard. I consider this to the primary responsibility of individuals.

What are your thoughts?

[vexed87]

A recent thread on ethical Investing:
viewtopic.php?f=3&t=5601&p=89825&hilit= ... ing#p89825

First thing to clear up with your peers, buying shares in the oil industry does not finance their operations. Consumers are making their operations profitable by creating demand. If you don't take the profits, someone else will. The difference is, what good can you do with the capital you gain that someone else will not?

[Dragline]

Questions like this are unanswerable in a vacuum and confuse personal ethics with methods of coercion (usually laws).

You need to know the source of your ethical principles. Then you can decide whether certain behaviors are consistent with those principles. As an extreme example, if your principle is do zero harm to the environment at all costs, your only ethical option is to kill yourself.

Most people get these things backwards. They decide certain behaviors are ethical or unethical based on popularity, belonging to a certain group or their own whims, and then try to find reasons to justify their positions that are not based on popularity, group think or their own whims. This results in the kind of discussions you describe that go nowhere -- it sounds like your friends are in reality just trying to define what you need to do to belong to their group.

Now whether you are allowed or entitled to apply those principles to other people to coerce the desired behaviors out of them is a different matter indeed. In a free society, there is a fair amount of latitude on personal ethics.

[jacob]

@vexed87 - Buying shares does create demand for equity which set the share price which allows companies to finance by issuing more shares instead of obtaining loans. At every point in time corporations have to decide whether to finance operations with equity or loans. Demand for shares makes it cheaper for them to do it via equity. This is also part of why they shift financing from equity to loans when rates are low by buying back shares.

[OldPro]

I see no difference between buying shares in an oil company and driving a car. Both contribute to the continued existence of the oil company although in different ways.

I do however find questions like this to be based more on theory than on reality. While you may be against global warming and say coal fired energy, you still have to heat your house to survive and if all that is available to you is electric heat from that coal fired generating plant up the road from you, then what can you do. That's when the theory doesn't allow for the reality.

It is also when 'situational ethics' comes into play. What interests me about situational ethics is that they can be used both ways. While situational ethics can be applied to heating your house and thus justify buying energy generated by that coal fired generating plant, people can also use incorrectly applied situational ethics to justify just about anything they want to. As in, 'If you don't take the profits, someone else will'.

There is a difference between heating your house in order to not freeze to death and making a profit off shares of that same greenhouse gas generating company. One I can accept as still being ethical under the circumstances. The other I cannot.

[vexed87]

@jacob, thanks, I was clearly shouting from the top of mount stupid. Makes sense about the buybacks, also a concept new to me in recent months

[GandK]

@batbatmanne

I'm with you. It's unquestionable to me that, mathematically, your personal life choices are more globally impactful than your investment strategy in most cases, because almost no one has an investment portfolio that's big enough to move the needle for an oil company. Example: unless one is a multi-millionaire, the waste disposal choices of any grown man over his lifetime will have way more effect on the environment than his minuscule share of culpability for a company like Exxon's bad choices (assuming an investment in Exxon that consumes 100% of the stock portion of his portfolio). To me, though, the person who says investing in an oil company is worse than mindless consumption is like the person who feels smug and self-satisfied about driving a Prius instead of a Tahoe, but would never consider walking... they care enough about the environment to throw money at it, but not enough to actually live differently. Their choices are "green" only when it's status-enhancing or requires little effort. Now, a Prius is better than a Tahoe, of course, but that's the best you can say about it. It isn't good for the environment... it's just less bad than the Tahoe. And it's definitely no reason to be smug.

Ideally, we would neither invest in companies that are environmentally harmful nor make harmful choices in our daily lives. I think we can all agree on that? For most people though, somewhere along the spectrum of environmentally friendly behavior, they begin to feel as though the effort is no longer worth the payoff. In some way, it begins to cost too much to be green. And that point is different for everyone. (Here I agree with Dragline.) Maybe for you, the investment return outweighs the environmental concern, especially if you want to take the proceeds from your investments and put them to environmentally friendly uses. That's still justification, I think is your friends' point. But it's hard for you - and it would be equally hard for me - to listen to an environmental criticism from someone who's living a consumption-oriented lifestyle. Cognitive dissonance would kick in pretty quickly. Hell, I might be hard-pressed to keep a straight face. It would be like listening to a fat man lecture me on overeating.

[jacob]

I'm with you. It's unquestionable to me that, mathematically, your personal life choices are more globally impactful than your investment strategy in most cases,....

Depends on whether you're at 50%+ savings rate or less. For the extreme savers, it depends more on where we invest our monies. For the great majority of consumers, it depends on where the money is spent.

[Ego]

I never liked the simplicity of Eldridge Cleaver's famous saying, "You're either part of the problem or part of the solution," because I believe it is possible to be neither the cause nor the cure. The dualism underlying Cleaver's position led him and many who believe the same, to strange places. Within his lifetime Cleaver morphed from a fugitive Black Panther on the lam in Cuba to a member of the GOP.

Of those three choices (fixer, neutral, causer) I prefer the first two. I don't feel good about myself if I am part of the problem and try, whenever I can, to avoid having a hand (any hand) in the cause.

But I do drive a car and fly in an airplane on occasion so I'm imperfect. I do not see my imperfection as equivalent to owning shares in an oil company or working for one. I'm not quite sure why it is that I feel they are different. Maybe if the oil companies were only supplying the product without manipulating the belief in the problem then I'd feel different. I don't know.

[jacob]

Actually, to be more accurate ... P/S is usually about 1-2 .. so for every dollar invested in equity, you control $1-2 of revenue or consumerism.

The fair comparison would, therefore, be savings times 2 compared to spending. Most people's consumer-impact is still dominant but anyone with savings >1x annual expenses have more of an impact by where they invest their money.

[jennypenny]

@jacob--Forgive me for being slow -- are you saying investment dollars have a bigger impact?

Of course, that only takes into account the financial impact. Visibly consuming a product is a tacit endorsement that others might then emulate. In other words, consumer dollars can also double as advertising dollars. No one know what my 401K is invested in, but they can all see my consumption patterns. I'm not sure which has a bigger aggregate effect.

[jacob]

Ok fine ... if you're gonna be complex and sociological about it

Personally, I punt. I don't make transactions with counterparts whom I find "evil". It's as simple as that.

IOW, what happens at the second order is beyond my control, so I disavow what happens then.

[JL13]

I don't know if this is necessarily correct. Think of the three ways you can interact with an "evil" corporation.

1.) Customer - gives money directly to corporation
2.) Employee - takes money directly from corporation, generally supports day-to-day operations
3.) investor - gives money to unrelated third party, takes money directly from corporation (dividends)

I would consider #3 the most moral.

[Riggerjack]

.they all seem to point to a misconception on their part as to who is actually responsible for contributing to the profits of the industry and the problem generally.

This is my problem with leftists, but again that's my problem.

You mentioned returns matching market indexes. This, to me sounds like index funds, or investing for the lazy. To my mind, you are comparing index investment with one of the specialty mutual funds for "ethical investment products".

We all have a limited amount of resources, time, and money. Some will sink alot of time into investment research and some (myself) will just buy index and mutual funds. If I buy a morality fund, it comes with higher fees. In exchange for the righteousness of not investing in tobacco, I can support financial services. I can't justify that.

When in doubt, I default to efficiency. Index funds are reasonably financially efficient and certainly efficient with my time. Trading miniscule effect on lending costs to a corporation for directly funneling money to the financial services industry seems to be an easy choice.

Now if you are talking about buying individual shares of competing investments, that is a different kettle of fish.

[Runer]

Actually, to be more accurate ... P/S is usually about 1-2 .. so for every dollar invested in equity, you control $1-2 of revenue or consumerism.

What is P/S?

[George the original one]

I don't know if this is necessarily correct. Think of the three ways you can interact with an "evil" corporation.

1.) Customer - gives money directly to corporation
2.) Employee - takes money directly from corporation, generally supports day-to-day operations
3.) investor - gives money to unrelated third party, takes money directly from corporation (dividends)

I would consider #3 the most moral.

What about if you're a customer of the customer of the evil corporation? Or the landlord of an employee who earns money from the evil corporation in order to pay you rent? Or your bank of choice is the prime lender for the evil corporation?

[Dragline]

Yes, it all does begin to sound like a debate about how many angels can dance on the head of a pin now, doesn't it?

I think the fundamental idea that your morality is defined by your consumptive or investment habits is pretty lacking in substance to begin with. It has, however, become a powerful tool in advertising. Eddie Bernays would be proud of how serious people take this now and what they are willing to buy or invest in to be considered part of the "ethical" in-crowd.

[7Wannabe5]

What if you consume roasted gorilla hands and invest in human trafficking?

[Dragline]

Well, that the kind of outlandish exception that proves the rule. Those activities involve both violence and are per se illegal by long-standing societal norms and consensus, so you have actual rules of morality such as "don't commit crimes" and "don't be involved in per se violent activities". You would have to be committing crimes to participate in those activities.

What we've been talking about here is akin to buying knives from the company that also sells them to other people that cut the hands of gorillas or sandwiches from a company that employs a pedophile spokesperson. Would you brand someone as unethical if they bought those things or invested in those companies?

Here's another relevant example: Is it unethical to buy a sandwich from Jimmy Johns given what their CEO does in his spare time? And would you refuse to associate with someone who ate Jimmy Johns sandwiches to show everyone how ethical you were?

[JL13]

What about if you're a customer of the customer of the evil corporation? Or the landlord of an employee who earns money from the evil corporation in order to pay you rent? Or your bank of choice is the prime lender for the evil corporation?

Haha. You want me to rank those also?

True, any economic activity quickly dissipates throughout society and gets conflated with everything else. My simplistic model is just my first gut reaction to the anti-corporate crowd. The idea that shareholders bear 100% responsibility and consumers/employee bear 0% really bothers me.

I should probably not be so idealistic though. The holidays just rile me up politically