On Immoral Markets

Harvard Professor Michael Sandel presents the Reith lectures – the topic, “A New Citizenship” -- this month on the BBC.  (HT: Al Roth via Tim Harford).  You can listen to a podcast of the lectures (a series of four, of which two have been delivered so far) here.  Sandel, as most readers already know, is a well-known political philosopher, and his theories on the moral limits of markets make up a large part of this four-lecture series.  As Sandel clarifies in response to an audience question in the first lecture in the series (and has emphasized in prior lectures and publications), his concerns with the moral limits of markets extend to the degrading effect of market exchange on certain goods and services – what are often referred to as “commodification” concerns.  Establishing fair and equal bargaining conditions or general equality in the underlying distribution of wealth cannot address this objection – in other words, it is different from “coercion” concerns.

Perhaps not surprisingly, from a person who attempted to sell her tenure in her very first blog post, I’m generally unpersuaded by attempts to define the sphere of acceptable market transactions through this particular moral objection. Repugnance and disgust deeply affect both legal systems and markets, and thus are real constraints on the ways in which people conduct their lives. As I argue in Show Me The Money: Making Markets in Forbidden Exchange, which introduces a forthcoming symposium volume on the same topic, nearly all cultures reserve certain items, activities, and entitlements as inalienable for profit. But the individual mental accounting, social norms, and laws regarding the proper scope of commercial activity are not universal, preordained, or inflexible. In fact, researchers across disciplines have demonstrated both the malleability and context-dependency of individual mental accounting, and the socially constructed nature of relational boundaries, which vary across time and cultures. Moreover, attempts to limit the incursion of market forces into other arenas do not always operate uniformly. Some restrictions on market exchange may disproportionately harm those already disadvantaged in the marketplace, facilitate anticompetitive behavior, or exacerbate bargaining inequality.

For example, despite the frequent insistence that some values, relationships, or activities are sacred, priceless, or incommensurable, in reality scarce resources force each of us to at least implicitly attach dollar amounts to and trade off such values with some frequency.  These transactions frequently cause cognitive discomfort, and individuals adopt a variety of coping strategies to reconcile their behavior with their value beliefs. 

Moreover, market and non-market transactions and relationships often resemble one another so closely that the participants go to great lengths to distinguish them, including by adherence to social norms that dictate the appropriate exchange rules for each transaction. Although one’s relations with a wife, a date, a girlfriend, a mistress, and a sex worker may have similarities, the participants can and do define and distinguish the boundaries of the relationship, in part, through the type of exchange principles that operate in each. What is the appropriate thank you for an enjoyable evening?  Flowers, jewelry, cash, or doing the dishes? The choice of payment terms signals much about the nature of the relationship itself.

Finally, social norms and legal rules regarding relational boundaries and the proper means of exchange within them are permeable and changing.   The rules vary over time and across societies, and may be ambiguous or contentious at the margins. Sometimes, a trade or market once considered commonplace and legitimate becomes forbidden. By contrast, some markets once forbidden, or at least contested, eventually become commonplace or less contested.  Moreover, technological innovation, social or political change, or other developments may create previously unknown circumstances for which no existing rules of acceptable exchange exist, causing social, legal, and political strain.  From blood and organs to eggs, sperm, and parenthood, money is closely intertwined with numerous items, activities, and relationships that many contend should be impervious to, or even sacredly immune from, market forces. As resource scarcity and scientific, medical, and technological advancement continue to expand, this trend is likely to continue. 

Update:  As Matt notes in the comments, there's also a discussion on the Sandel lectures over at Crooked Timber.

Comments

[Matt]

for those who, like me, find the idea of listening to pod-cast lectures almost unbearable, the "other links" section of the bbc page includes a link to the transcript of each lecture. I've read only the first, introductory lecture, and while I have a bit of sympathy I didn't find it that persuasive. There's some discussion of the first lecture here:

http://crookedtimber.org/2009/06/09/michael-sandels-reith-lectures/

I wonder, though, if it isn't a mistake to talk about the sorts of "exchanges" that go on in a healthy intimate relationship as "payments", as is done here. When I do something for my wife (the dishes, say), it certainly doesn't usually have any of the phemomenological feel of a "payment" or a market exchange, and I think it would show something seriously wrong with our relationship if it did. (Sometimes there are such exchanges- I'll do some extra shopping if she does my ironing, say, but that's unusual and feels like such.) Now, maybe you can say that we can formally treat these the same, regardless of how they seem to us, or that we're just deceiving ourselves, but I suspect that the first approach will obscure more than enlightens and the second isn't very plausible.

[Kim Krawiec]

Thanks so much for these links, and for your very thoughtful comments, Matt. I'm surprised that I missed the discussion over at Crooked Timber, which is one of my favorite blogs. In any event, I'm adding a link to the discussion there in the text of the post now. Your point on "payment" versus "exchange" is well taken, and I actually did not intend to imply that the various relationships or the forms of exchange that are typical within them are equivalent. Merely that when relationships or transactions that we consider substantively different have similarities, one of the (many) means by which we endeavor to distinguish them is through the form of "exchange" that operates in each (a "thank you" or kiss for mom for cooking dinner, but not to your co-worker -- presumably reciprocity is more appropriate -- or the restaurant owner, who obviously expects cash). A Fiske & Tetlock or Viviana Zelizer type of point, if you will. The choice of wording does reveal my priors, though, I suspect -- to me, "payment" is a normatively empty term and I realize it is not to many others. Perhaps simply "exchange terms" or "mode of exchange" would be clearer. In fact, I may edit that phrase in my paper, which is still in draft form. In which case, I owe you a double "thanks."

[Miriam A. Cherry]

Okay, started writing a comment (which got erased), but the essence of it was that this was a very interesting post and I'm not sure how I missed it the first time around (but thank you for linking to it again).
I'm particularly intrigued with the notion of information as commodified or free, specifically as it concerns prediction markets & the information that financial markets generate. I'm also interested in the categorization of gambling as "immoral" and investing as "moral" - the cultural factors you note (a la Fligstein).
I'll read your article with interst and look forward to seeing the volume when it comes out; it is possible to request a copy? I'm a prof at McGeorge but will be visiting at UGA in the fall.
Merci beaucoup, Miriam

[Kim Krawiec]

Hi Miriam -- you and I have a lot of interests in common then. The entire symposium volume, when it comes out, will be free online, so no need to request a hard copy, unless you just prefer hard copies to digital pdfs. I'm sending separately to your McGeorge account my syllabus for my "Taboo Trades & Forbidden Markets" course. We only spend a week on prediction markets, so I'm sure that there's nothing in that reading that you haven't seen before (Wolfers). But you might be interested to see how, for me at least, prediction markets fit within the spectrum of taboo trades. I'm also sending my syllabus for financial derivatives. A few readings at the beginning of the course deal with the struggle to fit futures markets into either the investment/moral box or the speculation/gambling/immoral box. The investment/moral characterization eventually won, but the fit continues to be an uneasy one sometimes. I'm looking forward to seeing your work on this in the future. Keep me in the loop! Kim