The Market Stops Here

Michael J. Sandel What Money Can't Buy The Moral Limits of MarketsISBN: 978-0-241-95448-5. “What Money Can’t Buy – The Moral Limits to Markets” by Michael J. Sandel was published by Penguin Books in 2013 (from an original by Allen Lane in Great Britain in 2012). If the accolades that litter the covers (and first few pages) are to be believed, Sandel is quite the rock star of contemporary philosophy. Don’t doubt it: this is a book about philosophy. Yet it is not an anti-market tirade from a leftist angle. Sandel discusses how placing a market price upon a commodity changes it in ways that the market cannot account for. These are the intangible impacts – the reasons why we as humans find some forms of ‘commodification’ and ‘commercialisation’ so objectionable. It is a very modern battlefield that concerns just how do we define ‘what is right’. On one side of the fence there are those economists who believe that all aspects of life can be defined in market economic terms, on the other those who object to commodification of daily life simply on principle. Although a worthy exercise, is this pumping out more heat than light?

Up front we have to say this is a book about economics but it is not an economics book. Let us explain the distinction. Professor Steven Keen’s “Debunking Economics” concerns the many flaws in neoliberal economics doctrine and uses economic theory to demonstrate this. Sandel, on the other hand, uses many real world examples to explain how people react to neoliberal market extensions. He does not, for example, introduce concepts of market pricing of public goods as an extension of Government Taxation in the way that James Meek did in “Private Island“. Sandel is not concerned with issues that may be deemed as ‘political’ in that fashion. He is far more concerned with how the market pricing of traditionally “free goods” can crowd out the important non-market attributes of societal norms. Yet he does not attempt to price these non-market attributes in terms of utility as an economist would. His work is far more about how our civilisation understands the role of prices in a world where some things simply are priceless.

When we say ‘civilisation’ we speak from a Western point of view. Many of Sandel’s examples are culled from the USA, UK, Europe and Israel. We should be concerned that the bar he sets is not universal. These are only illustrations and each remains unique. Each will be perceived differently by different people both within a community and across national borders. There are no real precedents – only suggestions of how public reaction may fall.

The book remains studiously apolitical and his central thesis – that markets crowd out moral norms – is one that could be grasped to justify Right-wing opinion as it could Left. [Just swap “market” for “State”. Voila!] Sandel terms this aspect as “corruption”; the corrosive effects markets have upon how goods and services are perceived by society. We have an attitude to an exchange that changes if the swap involves money.

“Sometimes, market values crowd out nonmarket values worth caring about.”

When in 2010 the British Government changed from a Labour administration to a mainly Conservative one it brought with it a “big idea”. It was called “Big Society” and was based upon a principle that society should handle more social services on a voluntary basis. Communities would be able to run their own meeting halls, parents could run their own schools, voluntary groups could supply care for the elderly, etc. It was an attempt to push back the boundaries of the state and re-deploy the non-state sector. It could be viewed as an attempt to “un-crowd” the third sector and re-introduce society as a service provider. Cynically it could be viewed as just another way to save money so that a cash-strapped Treasury could keep on cutting taxes for the very wealthy (no doubt with the intention that the very wealthy would start to dig into their own pockets to start to fund this Big Society privately out of altruism).

How successful this was depends upon your political persuasion. Whether it works in terms of what Sandel is writing about depends upon what you judge to be a social norm. Conservatives may argue that they wish to reset those ‘norms’ back to where they were somewhere in the 1930s. In essence to undo some perceived “socialist-rot” that was the post-war consensus on the role of Government in society. What matters really is whether you view such a ‘turning back of the clock’ as viable. Can it be done? Can you reengineer what is ‘normal’? Certainly the landscape has changed enormously since 1979 and some things may well never be the same again. But is there a firm bed-rock of universal norms beyond which we are unwilling to push?

Putting aside moral concerns many of us have more immediate problems with the spread of markets and the monetary pricing of free goods. The first objection concerns inequality. In a society where more and more can be purchased for a price then the lifestyles of the rich and poor diverge. Firstly there becomes less and less the poor have right of access to for free. In essence it belittles their lives in favour of those who can afford all the extras. Now the rich can jump to the head of the queue because they now have preferential access with their greater purchasing power. They can buy the things they used to have to wait in line for with people of other incomes. Income now matters more and more. This enhances inequality and leads to feelings of injustice.

Sandel discusses the services of a concierge doctor in the United States where, for a handsome fee, you can buy access to a doctor without the need to wait. This is morally neutral from the perspective of free-marketeer but it is not from Sandel’s point of view. The problem is that in a market of limited resources the queue jumping pushes those who cannot afford it further back in the queue. It can only be justified if it increases the supply of resources to the market so that everyone therefore has enhanced access. As this is not an economics book this is not an aspect that Sandel explores. We are left with some of the statistical evidence used by James Meek to judge the economic efficiency of free markets in healthcare. Centralised State-driven healthcare has better outcomes. Still, few would argue with people wishing to take private health insurance and see a private Doctor in the UK – just as long as it does not disadvantage someone in the NHS system.

Sandel introduces another good example of how markets can fail to distribute resources in a manner that our society would judge to be just. He quotes the story of the free tickets given out for Shakespearian performances in New York. Since this was highly valued people would stand in line only to sell their tickets on. Sandel is unconvinced that this maximises social utility in the same way that a queue might. The problem is that market prices reflect willingness to pay, not who values it most highly. In fact those who can afford to pay the ticket-tout prices may not be the people who will benefit the most from the performance. Fans of certain sports team may well have greater passion for the game than someone who has deeper pockets. As such the free market cannot always maximise utility.

The author goes onto talk about monetary incentives and specifically the question as to whether you can pay a student to learn better. Some evidence suggest that you can but the matter is complicated. The price signal does not quite work the way the free market might suggest. Paying a small sum may enhance learning but paying double does not double performance. Indeed it may have no effect at all. Why? Simply because the money has, what Sandel describes as, an “expressive effect”. Under the right circumstance it can make learning “cool” and lead to higher enrolment and performance in classes for which no money incentive was offered. The money had a positive effect by changing attitudes to learning. Its impact was cultural.

As part of the incentives discussion Sandel introduces the idea of Carbon-trading markets and offsets. It is something we have been on record before as saying that they are justifiable from a narrow economic perspective although they may fail in execution. What does Sandel say? His argument is that the excessive pollution caused by CO2 should be discouraged and stigmatised even if it is, itself, not intrinsically wrong. Hence tradable quotas used by the rich to buy emission rights from the poor “damages” the norms because..

“ entrenches an instrumental attitude towards nature, and it undermines the spirit of shared sacrifice that may be necessary to create a global environmental ethic.”

These are essentially the arguments of many Greens; that trading Carbon has an ethical element that is wrong, even if it gets results. I don’t have a great sympathy for this view as I am more utilitarian. If it works we should do it. We cannot rely upon everyone’s shared sense of ethics to fix the problem. However, in this case I am perfectly willing to believe that the market doesn’t work simply because of cheating and manipulation by Governments and traders. Sandel is saying that “norms matter”. It isn’t enough just to attempt to trade our way out of this mess. Other essential changes have to happen. Adopting a market-fixes-all attitude forestalls the time when people will have to make more genuine and effective changes. Once again, this is the argument of the Green movement, more so the deep Greens and less so amongst ‘new environmentalists’.

With the example of offsets Sandel suggest that having a 4×4 SUV should be seen by society as

“..a sign of wasteful self-indulgence, a kind of gluttony. [..] But carbon offsets could undermine these norms by seeming to confer a moral licence to pollute.”

Since we need to change attitudes the introduction of market pricing, no matter how economically rational, fails to endorse the sort of societal changes we need.

Sandel comes up with an intriguing example of how markets crowd-out morals when writing about a proposed nuclear storage facility in Switzerland. Policy makers found that if it was simply a matter of civic duty then a community might, by a narrow majority, allow such a dump near their homes. However if the Government tried to pay the community then support went down. Why? Because a sense of moral duty was the driving factor behind the acceptance. If you pay people then the sense of duty evaporates. Now you are forcing people not to weigh up the value of moral obligation versus nuclear dump but the dump versus some monetary value. This changed the equation radically. No amount of money could substitute for the loss of moral duty. In this example the price effect doesn’t work. The community saw the money as a bribe.

We can draw conclusions about this today in Britain where communities are being asked to accept fracking or wind farms near to them. Researchers find that some form of payment may well be acceptable but only if it is for public goods like parks, libraries and other improvements to local amenities. Sandel does not discuss how shares in the equity of such a local development also overcomes this problem. If the community feels that the new wind farm somehow ‘belongs’ to them, it is itself a local amenity of sort, then that also overcomes the failure of a one-off ‘bribe’. In that sense, the market can offer an incentive but it must be imaginative when dealing with social norms, else the market can be too blunt an instrument.

“..the introduction of market norms displaced, or at least dampened [..] moral and civic commitment.”

..a conclusion born out by experiences of paying volunteers to collect money for charity. Paying a small amount undervalued the task so that volunteers felt undermotivated. Best to pay nothing at all so that the sense of duty kicks in as motivation. Another example Sandel used often was the story of the day care centre which had a persistent problem with parents arriving late to pick up their children. This forced the staff to stay at work after hours unpaid. So they put in place a system of fines to penalised the tardy parents. The result? Tardiness got worse not better. Why? Because the fines overcame the parents’ sense of duty to the school staff. They saw the fines as a means of paying the staff to look after their children after hours. They saw it as a fee they could afford.

What was even more intriguing, in this latter example, is that when the fines were dropped the parental tardiness didn’t improve. The payments had distorted the norm to the point that the sense of duty had been permanently eroded. This leads is back to our earlier question about British “Big Society” measures. Can we turn the clock back? It may well be that we cannot. We are stuck with the system we have because it has a created a new norm that is hard to erode. It is so very hard to re-invoke the old sense of responsibility once it had been broken by a monetary payment system.

This leads Sandel to quote Rousseau and Aristotle concerning the role of civic virtue. Can it be permanently broken? Can it be repaired? How do you preserve such virtues in society? It is argued the such duty is enhanced through continuous exercise. It cannot be ‘used up’. However that is the view of philosophers. Economists treat love and generosity as if they are finite resources that can be depleted. They believe altruism needs to preserved, something that Sandel (as a philosopher) disagrees with.

“One of the defects of a market-driven-society is that it lets these virtues languish. To renew our public life we need to exercise them more strenuously.”

Sandel finally turns to the topic of paid advertising to fund state-schools. When adverts are put into schools are they simply a good way of raising extra revenue or is there a more sinister problem? Sandel reckons this is at odds with the purpose of schools. Advertising is there to ‘recruit consumers’, education is there to ‘cultivate citizens’. These two purposes are at odds. Yet schools are driven into the hands of the advertisers for want of the resources to cultivate the young citizens. By extension this is an argument for fully-funded state-schools and for a taxation system that pays for it out of the public purse. This is what it means yet this is not what Sandel chooses to be explicit about. If we choose HIS definition of what schools are for then we also choose the consequences.

Sandel then asks the big question: what is the “meaning” behind the goods and services we can now procure in the free market? More than that

“…we also need to ask a bigger question, about the kind of society in which we wish to live.”

One of Sandel’s conclusions is highly philosopher-centric, ie, the debate about free-markets versus fairness doesn’t explain the real problem. That, as he sees it, can only be described through a “moral vocabulary of corruption and degradation“. Yes, free markets are only ‘free’ on a level playing field but Sandel reckons that this is not what troubles us. It is, in essence, a problem of us being able to work towards a conception of the “good life” Something we are increasingly starting to see trend through the literature such as this. (Take, as an example, the Skidilesky‘s concept of ‘enoughness’.)

This is also a debate about our democracy. If people voted for Party Political policies they would indeed vote for a kinder, fairer, more sharing society where schools are cherished in the way the author suggests. Yet we repeatedly return Governments that do not yield to this public pressure. This is a failing that falls upon all of us. If we want a better world then we will need to seize it by the throat. This is hard to do when our choices are so carefully edited by a political class that serves the needs of a minority who can afford to jump ahead in the queue.

When the people who can afford the best schools find it to their detriment to under-fund the state-school sector then this reality might change. What we lack is the appropriate feedback mechanism in the market system. The state is now shielding the very wealthy from the results of the funding choices. Many of us thought it was the job of the state to protect our most vulnerable people. When markets maraud through our moral landscape, when everything is for sale, there are no adverse consequences of the anti-social choices of a wealthy elite. This, in the final analysis, is the ultimate market failure (or failure of the state, depending upon your political world-view). Until we genuinely are “in it all together” then we will never identify with each other as fellow travellers. This is as true of the topics addressed in this book as they are of the battle against climate change and the struggle for sustainable economics. Sandel concludes

“Democracy does not require perfect equality, but it does require that citizens share a common life. What matters is that people of different backgrounds and social positions encounter one another, [..] in the course of everyday life.”

There can be no society working for a common good if we have nothing in common. That is what inequality destroys. In a world where everything has its price then we can buy an opt-out from society. This deliberate choosing of inequality by a minority, a choice endorsed and protected by the state, will destroy everything we hold dear.

About post-carbon-man

A passionate advocate of a peaceful transition to a sustainable political-economy, Mark hails from a working class farming background. Today he is a Company Director and Chairman of the Low Carbon Chilterns Co-operative. Whilst at University (Engineering Masters) he was active in Conservative Student politics but has had no affiliation since. He has travelled widely on business covering the USA, Europe, Middle East and Central Asian Republics. In 2007 Mark founded Post-Carbon-Living and a year later co-founded Transition Town High Wycombe. He lives with is wife & daughter in a home they retrofitted to be carbon-neutral. Today he blogs about surviving politics on a shrinking planet and is passionate in his rejection of Nationalism.

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