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Do markets respond by naturally boycotting unethical companies? For example, if an American company makes its products using Uyghur labor, can we trust their customers and would-be customers to respond in an elastic way so that there is an incentive to produce and operate ethically?

All I'm interested in is whether stock price and sales deviate from what would otherwise be predicted in a quantitative model as a response to news about supply chains, or other issues (e.g. mishandling of consumer data or data breaches).

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  • $\begingroup$ Welcome to Economics:SE. Thank you for your question; please consider revising it to be more in line with our community expectations. Like many other stacks, we expect questions to provide evidence of prior research. That helps us to understand the question, and avoids our repeating work you've already done. Our help center, and other stacks provide additional resources to assist with revisions $\endgroup$ – 1muflon1 Mar 16 at 10:06
  • $\begingroup$ In addition, this question needs more details and clarity (see points in Giskard’s answer) $\endgroup$ – 1muflon1 Mar 16 at 10:06
  • $\begingroup$ Ethics are notoriously difficult to quantify. I don't believe we need to quantify them to answer this question. Who's waiting for a quantified system of ethics to enact policy that assumes an answer to this question? $\endgroup$ – PineappleThursday Mar 16 at 22:43
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    $\begingroup$ if you can’t define what is ethical and what is not this question is unanswerable. How can you begin to measure elasticity of something you are not able to define? This is problem with the question as it is $\endgroup$ – 1muflon1 Mar 16 at 22:46
  • $\begingroup$ You're confusing not being able to mathematize ethics with not having a system of ethics at all. I don't doubt that the question could be better phrased. I wasn't expecting a simple answer. I'm wondering how to better phrase the question myself. I just wanted to bounce ideas off of this community. If I were able to have a quantified system of ethics, I'd pick either R or Python and determine the answer myself. We're economists, not calculators. $\endgroup$ – PineappleThursday Mar 16 at 22:48
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Elastic boycotting would imply that the number of consumers boycotting would increase by more than 1% when unethicalness increases by 1%. A proper answer is nigh-on-impossible, as it is difficult to measure these things quantitatively.

  1. How do you measure unethicalness? Also, unethical according to whom? I think most will aggree that slave labor is unethical, but what else is? Is underpaid labor unethical? Is factory farming unethical? How much more unethical is one than the other?

  2. The number of consumers boycotting can perhaps be measured, but this would still require more precision. If governments prohibit imports, is that their consumers' boycott? If the consumers do not boycott, but only because they do not know about the unethical practices, is that inelasticity or just lack of information?

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  • $\begingroup$ +1 because these are important points for the OP, although this is more of an comment on problems with the Q rather than an answer $\endgroup$ – 1muflon1 Mar 16 at 10:07
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    $\begingroup$ @1muflon1 At most this is an impossibilty proof :) but I also think of it as a long comment rather than an answer. $\endgroup$ – Giskard Mar 16 at 18:43
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    $\begingroup$ @Giskard I didn't want to compete against such a good answer, so I am adding a comment. In the 90s, Barrons ran an article on "ethical portfolios." Prudential had a person whose sole job was to construct ethical portfolios for high net wealth patrons. The range of requests as to what was ethical was astounding. One patron wanted to avoid stocks that developed drugs to treat or cure HIV. The owner felt that AIDS was a curse by god and that anything that killed gay people was good. So, they built such a portfolio. There were other eye popping requests too. $\endgroup$ – Dave Harris Mar 17 at 0:13
  • $\begingroup$ One thing that could be done to narrow this question is to perform event studies, but the criteria would have to be very strongly bounded. It is a question that can be studied if it can be better defined. I looked, there is a body of research, but it isn't amenable to the form of the question. $\endgroup$ – Dave Harris Mar 17 at 0:18
  • $\begingroup$ @DaveHarris these comments are really helpful. What search terms did you use? $\endgroup$ – PineappleThursday Mar 17 at 4:21

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