The Moral Limits of Markets

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From paying people to queue for you to selling permits to allow factories to pollute, Michael Sandel (Professor of Philosophy at Harvard University) is uncomfortable with the creeping marketisation of our society. Is attaching a price to something a morally neutral act that might help us to achieve our aims more efficiently or can the act of paying for something devalue and degrade the very thing we hope to obtain? Sandel certainly thinks so.

 

In his book, “What Money Can’t Buy, The Moral Limits of Markets”, Sandel uses many examples to state his case that, while there are some things that money cannot buy, more importantly, there are many things that money should not buy. Each year hundreds of children in the UK and many more in the US are born with drug addictions because their mothers continued to abuse narcotics and prescription medication whilst pregnant. These children require huge amounts of medical care, often suffer long term damage to their health and development and are disproportionally likely to end up in social care. There have been apparently successful trials offering cash incentives to such would-be mothers to be sterilised or use long term methods of contraception to prevent them from becoming pregnant. The impact on trial groups has been to dramatically reduce the number of children born to drug addicted mothers. Is this a highly effective way of reducing harm to children and costs to society of caring for them or is this, as Sandel sees it, a bribe? Does it more efficiently allocate resources and lead to a happier, healthier society or does it demean society and amount to the buying and selling of children?

 

This is not, as far as Sandel is concerned, simply a rarefied example of market extremists but rather the logical extension of selling visas, environmental taxes, emissions training schemes and other practices that have become common place over the last few decades.

Economists traditionally view markets as much more efficient at dealing with many problems. If there are not enough cars to go around we could simply hold a raffle to decide who gets them, but that might end up allocating cars to people who don’t want a car or can’t drive. We could simply get people to queue up and allocate the cars on a first-come-first-served basis, but this might mean that some people who only have a vague interest in owning a car getting one just because they happened to be free to queue. The alternative is that we sell cars to the highest bidder. The fewer cars there are, the higher the price will be. Presumably the consumers who most want them will be prepared to pay the highest price[1]. In addition, the higher price gives firms the incentive to make more. The end result is more cars are available and they go to those who want them most. It is what Adam Smith referred to as the “invisible hand” and what economists today call the PRICE MECHANISM. Many economists have proposed that such a system could help distribute resources not only for basic goods and services but also in more complex cases of resource misallocation such as pollution, healthcare and even the justice system.

Selling visas, licences to procreate, permits to pollute, organs for transplant, paying children to read books, health insurance companies paying people to stay thin, all these are in in Sandel’s sights as proposed but inappropriate uses of the PRICE MECHANISM. Many will share Sandel’s concern as to whether some of the more outlandish uses of prices may be effective or whether they risk unintended consequences or perverse incentives. Charging for rubbish that goes to landfill, for example, may seem like a good way to encourage people to throw away less rubbish but the risk is that it encourages more fly tipping. While this would clearly be even more damaging, this sort of market failure is not Sandel’s primary concern. There are two issues at the core of his argument that he feels makes such systems morally unacceptable rather than simply questionably effective.

  1. Paying for certain goods in some way diminishes or destroys the very thing we hope to gain.
  2. That using money as an incentive may in some cases be seen a bribery

First, Sandel feels that paying for certain goods and services in some way diminishes the very thing we hope to gain. He takes the example of awards. It is not possible to buy an Oscar or a Nobel prize. It might be possible to buy the statue or medal, but this does not confer the acting ability or academic prowess required and so buying it would destroy what it means. He equates these ‘honourific goods’, which money literally cannot buy, to purchasing a best man’s speech or paying someone to apologise on your behalf; two things that are indeed for sale from various companies. Would you, he asks, be equally satisfied with a bought apology delivered by a third party or a speech you know your best friend had not written? If not, he suggests, this is because the value has been diminished by the very fact that it was purchased.

This however conflates two things, the statue and the award. The real issue is not that money destroys the value, but that, like an Oscar, the good or service being bought is not the speech. The real value in a best man speech is the relationship and, understanding and care it shows. The real value in an apology is that it conveys an understanding that the person has wronged you and has been humble enough to apologise. The words of the speech or the word ‘sorry’ are not the point of the exercise and since only the words can be bought, it is not the case that the exchange of money devalues the good, but that the real point of the transaction cannot be purchased. These are not really saleable commodities.

This argument cannot be applied to markets for organs, pollution or even the right to have children. The purpose of these things is not symbolic. The purpose is a functioning kidney, the reduction of CO2 production or to have a daughter or son. All of these ends can be achieved even if money changes hands. If I receive a kidney, it does not work less well because I was allowed to pay for it, nor is the real value in the transaction the intangible relationships and emotions it creates and so the charge that payment would diminish the value does not seem to fit.

Second, Sandel views paying for some of these goods and services as bribery. For example, paying children to read books. His concern is that the monetary inducement replaces an intrinsic motivation – the joy of reading, with an extrinsic one – earning money. This, he argues, replaces a higher motivation with a lower one. This is not, however, what most people understand by bribery. For most people, the term bribery includes elements of coercion and immorality. One can hardly argue that there is any coercion on the part of the school, children are free not to accept the money.  They are not persuading children to do anything morally objectionable - few would argue that reading is anything but positive.  They are not asking pupils to act against their own interests - their education and understanding will benefit.  It is hard to see therefore, how this might be considered bribery.

Even the case of paying drug addicts not to have children, something that instinctively makes many uncomfortable, can hardly be considered bribery. It is clearly in the interests of the mother not to add pregnancy and child-care to the challenges of a long-standing addiction, and it is hard to argue that reducing births of disabled and drug addicted children is immoral. There are legitimate questions about whether drug addicts are in a position to make rational decisions, but this is a separate question. It is also far from clear that the motivation is the key issue in most situations. If children learn to read better and to love books in the end, does it matter that the initial motivation was to earn money? Again, the question is whether there will be a long-term impact on the literacy levels of children, not a moral question about methods.

If these moral objections do not stand up to scrutiny[2], then rather than asking whether we must defend the moral fabric of our society by limiting the scope of market incentives, we are really left asking whether such incentives will work on a case by case basis. Let me propose two alternative questions when we consider whether markets might help:

  1.  Is it possible to buy what I want or am I only “buying the statue”?
  2. Will allowing people to pay get the right amount of the good or service into the hands of the right people?

Neither of these are fundamentally moral questions, they are questions of efficacy.

 


[1] Sandel is quite correct to identify problems with this mechanism. INEQUALITY (different people having different incomes and savings) is a huge problem for economists and constitutes possibly the most serious MARKET FAILURE (when prices do not lead to efficient allocation of resources). Each pound spent can be seen as an economic vote. The economy makes most of the things that most people vote for but unfortunately, some people have more votes than others. This means they can signal what they want to the market more easily. Instead of the people who want the car most, we may end up with the people who have the most votes getting it instead. Despite this being a real concern for economists, it is still likely in many cases that the PRICE MECHANISM will allocate resources more efficiently than lotteries or first come, first served, even if it does not do so perfectly. There will be times when there are better alternatives to using prices, but this is a case of efficacy in each case, not a general moral principle

[2] None of this is to deny that there are many immoral ways that money can be spent, simply that it is not the exchange of money that makes them immoral. To use another of Sandel’s examples, the slave trade is certainly immoral. The gift of a slave however, would be equally immoral. It is not the pecuniary motive that creates the immorality.

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