Consumer Confidence as a Matter of Information and Regulation - Can it Enhance Social Welfare?

Abstract

Confidence seems to replace certain knowledge and the necessity for specific information. It simplifies economical processes and procedures, it motivates investing, and obviously, it enhances welfare — if it was missing, innumerable dealings would not be made. Consequently, if confidence among consumers was enhanced, welfare would be enhanced as well. But how may this implemented, and to which conditions is an approach successful? This paper observes the nature of consumer confidence from a law and economics perspective, and discovers its impact on markets. In two case studies, it analyses the importance of a confidence-enhancing, market-oriented regulation, regarding firstly organic farming within the European Union, and secondly Germany’s measures within the financial crisis in 2008.