Limits to markets and morality

I just read Michael Sandel's What Money Can't Buy: The Moral Limits of Markets. Sandel is a Harvard professor who teaches a famous course in ethics (much of the content of which is in his book Justice: What's the Right Thing to Do?, which I'd strongly recommend.)

Sandel does not question markets as such, so much as applying markets where they don't belong. Reliance on markets can displace or corrupt social norms and meanings, he says.

We need to ask whether there are some things money should not buy. The reach of markets, and market-oriented thinking, into aspects of life traditionally governed by nonmarket norms is one of the most significant developments of our time.

This is not just a matter of whether we should sell kidneys, or faster passage through security lines, or the norms implied by carbon trading. Overapplying markets also helps empty public life of deeper moral content or substance.

The problem with our politics is not too much moral argument but too little. Our politics is overheated because it is mostly vacant, empty of moral and spiritual content. It fails to engage with big questions that people care about. The moral vacancy of contemporary politics has a number of sources. One is the attempt to banish notions of the good life from public discourse. In hopes of avoiding sectarian strife, we often insist that citizens leave their moral and spiritual convictions behind when they enter the public square. But despite its good intention, the reluctance to admit arguments about the good life into politics prepared the way for market triumphalism and for the continuing hold of market reasoning.

This is very important. I keep coming back to the need for some conception of the good life, which tends to be connected with some sense of purpose. We lack any public conception of what makes for human flourishing, and so it is no wonder we increasingly settle for lowest-common-denominator solutions.

Public life is increasingly seen as a matter of coexistence, not flourishing. in large part because this is the root motivation of enlightenment liberalism. We are still haunted by the wars of religion in the seventeenth century, which motivated thinkers to turn to reason and neutrality. Reason is by its very nature universalist. And in the nineteenth and early twentieth centuries, there was far too much emphasis on aspirational aims, whether the nation, the Volk, real existing socialism or local ethnic power.

But coexistence is a very minimal aspiration. It tends to erode the legitimacy of politics itself, as coexistence is not really enough to motivate loyalty or common feeling. In fact, it suggests the absence of common feeling.

 

Economics and Morality

Economics as a discipline contributed to this problem, Sandel says.

Most economists prefer not to deal with moral questions, at least not in their role as economists. They say their job is to explain people’s behavior, not judge it. Telling us what norms should govern this or that activity or how we should value this or that good is not, they insist, what they do. The price system allocates goods according to people’s preferences; it doesn’t assess those preferences as worthy or admirable or appropriate to the circumstance. But despite their protestations, economists increasingly find themselves entangled in moral questions.

The reason for this is economists have got increasingly focused on incentives:

Today, economics has wandered quite a distance from its traditional subject matter. Consider this definition of an economy offered by Greg Mankiw in a recent edition of his own influential economics textbook: “There is no mystery to what an ‘economy’ is. An economy is just a group of people interacting with one another as they go about their lives.” In this account, economics is about not only the production, distribution, and consumption of material goods but also about human interaction in general and the principles by which individuals make decisions. One of the most important of these principles, Mankiw observes, is that “people respond to incentives.”Talk of incentives has become so pervasive in contemporary economics that it has come to define the discipline.

But this is quite a recent change.

It is easy to miss the novelty of this definition. The language of incentives is a recent development in economic thought. The word “incentive” does not appear in the writings of Adam Smith or other classical economists. In fact, it didn’t enter economic discourse until the twentieth century and didn’t become prominent until the 1980s and 1990s.

And it is now present with a vengeance. Sandel cites the authors of Freakonomics :

“Economists love incentives,” write Levitt and Dubner. “They love to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme.

Yet this naturally takes economics into the realm of ethics, even if they do admit it.

Despite their new incentivizing bent, most economists continue to insist on the distinction between economics and ethics, between market reasoning and moral reasoning. Economics “simply doesn’t traffic in morality,” Levitt and Dubner explain. “Morality represents the way we would like the world to work, and economics represents how it actually does work.” The notion that economics is a value-free science independent of moral and political philosophy has always been questionable. But the vaunting ambition of economics today makes this claim especially difficult to defend. The more markets extend their reach into noneconomic spheres of life, the more entangled they become with moral questions.

The trouble is this is unsustainable.

... once we see that markets and commerce change the character of the goods they touch, we have to ask where markets belong—and where they don’t. And we can’t answer this question without deliberating about the meaning and purpose of goods, and the values that should govern them. Such deliberations touch, unavoidably, on competing conceptions of the good life. This is terrain on which we sometimes fear to tread. For fear of disagreement, we hesitate to bring our moral and spiritual convictions into the public square. But shrinking from these questions does not leave then undecided. It simply means that markets will decide them for us. This is the lesson of the last three decades. The era of market triumphalism has coincided with a time when public discourse has been largely empty of moral and spiritual substance. Our only hope of keeping markets in their place is to deliberate openly and publicly about the meaning of the goods and social practices we prize.

So on this view, incentives are a way to talk about behavior in a neutral, ethics-free way. (This may be why economic historian Deirdre McCloskey bitterly attacks Douglass North on this score, as we saw). The word incentive has become value-laden. It carries a neutralist set of associations. In practice, manipulating incentives has often proved a failure. CEO pay packages have often not aligned them in reality with shareholder interests, for example. Investment banks have done a disastrous job of rewarding the right behavior in many cases. The issue of how to influence behavior for the better remains.

Universalism and Coexistence

I agree with what Sandel says about bringing substance back into the public square, of course. But some of the fears and taboos and ingrained reactions about coexistence are a serious obstacle. Take the sensitvities about separation of church and state in the US, for example.

How can different races and ethnicities and classes and religions get along together? All many people can imagine is a minamalist separation. Multiculturalism often develops at the same time as a loss of confidence in the predominant culture. In Canada, it came at the same time as Quebec separatism and fraying of older Commonwealth links. In the US, the old melting pot ideal faded, especially on the left, as people became disillusioned with Vietnam, the Cold War, and consumer society.

There are many reasons why minimal neutrality is not the only way to prevent hostility or conflict, however, and in fact some reasons why it may enflame suspicion.

At some levels differences are intractable. Either transubstantiation is a valid doctrine , or it is not. Either God is one entity, or many. Ideology is difficult to compromise. But people agree much more on what you look for in daily life - the traits you want in a spouse, or a colleague, or wanting to get their kids into good schools.

The problem, in fact, is one of universalism, universal hedgehog world views competing with each other. If you are content to be more situated, more reliant on a particular context, the clash of eternal ideologies is not such an intractable problem. The universalists came to believe the only answer was a minimal universalism, a rules-of the road for universal juggernauts thundering forward and hoping not to crash into each other (too much).

If you don't have universal rules, meant to apply mechanically in every possible circumstance, you don't need fearful minimal coexistence in the same way because there is less at stake. Differences can be a matter of context, not fearful exclusion from the public square.

How can we get along with less emphasis on universal rules? Is this utopian? Not at all. This, after all, is the difference between the common law view of the world, a matter of evolution and adaptation and generating principles from particulars, versus the codified law view, of the Code Napoleon and treating particulars in accordance with the general. The common law view has a thousand years of history behind it. Every rule has its exceptions or needs to be adapted in the light of new circumstances.

People can get the conception of the good life very wrong. So why did conceptions of flourishing go so wrong before, leading to extreme nationalism or class struggle? First, because they got contaminated with ideology, rather than seeing things as a matter of balance (the golden mean). And because flourishing got too connected with martial values and pride. The desire for respect and recognition can easily be distorted into resentment and rage.

We do need to bring conceptions of the good life back into the public square, or all we will have as a society is lowest-common-denominator residues. The way to do that is not to talk about universal rules, but promoting character and good situational judgement, and the virtues. We have to realize every rule or approach has its own scope.