The Moral Limits of Markets

Dec 31, 2012 Michael J. Sandel

Almost without realizing it, we have drifted from having market economies to becoming market societies. A market economy is a tool for organizing productive activity, while a market society is a place where almost everything – from our bodies to our politics – is up for sale.

TOKYO – Today, there are very few things that money can’t buy.

If you are sentenced to a jail term in Santa Barbara, California, and don’t like the standard accommodations, you can buy a prison-cell upgrade for about $90 per night.

If you want to help to prevent the tragic fact that, each year, thousands of babies are born to drug-addicted mothers, you can contribute to a charity that uses a market mechanism to ameliorate the problem: a $300 cash grant to any drug-addicted woman willing to be sterilized.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Already have an account? Log in

Support High-Quality Commentary

For more than 25 years, Project Syndicate has been guided by a simple credo: All people deserve access to a broad range of views by the world's foremost leaders and thinkers on the issues, events, and forces shaping their lives. At a time of unprecedented uncertainty, that mission is more important than ever – and we remain committed to fulfilling it.

But there is no doubt that we, like so many other media organizations nowadays, are under growing strain. If you are in a position to support us, please subscribe now.

As a subscriber, you will enjoy unlimited access to our On Point suite of long reads, book reviews, and insider interviews; Big Picture topical collections; Say More contributor interviews; Opinion Has It podcast features; The Year Ahead magazine, the full PS archive, and much more. You will also directly support our mission of delivering the highest-quality commentary on the world's most pressing issues to as wide an audience as possible.

By helping us to build a truly open world of ideas, every PS subscriber makes a real difference. Thank you.

Subscribe Now

new comment has been posted. new comments have been posted.

0 Comments on this paragraph, 10 Comments on this article

Ravi Mantha Jul 31, 2013

One could actually argue the opposite, that there is actually not enough market-based pricing in society. For example, peak hour road usage is a finite resource. We can pay for it through countless hours of collective congestion, or ameliorate it by road pricing (as Singapore does effectively). In the US, urban peak traffic is a daily nightmare that can be resolved by pricing the road use appropriately, yet no one has done this because roads are supposedly a free resource that anyone can and should use. The other one is carbon pricing. We think air is free, so there is massive pollution by various industries. Market pricing of the right to pollute will lower pollution, and yet no one does it. Even allowing people who pay to jump the queue in nationalized healthcare systems like the UK, will result in the money that is collected being used to improve healthcare access for all. Instead of arguing about the perils of inequality, we could all spend more time on figuring out how to provide more services to the wealthy and relieve them (voluntarily) of more of the money that can then be used to improve services for those with limited means. Regarding Santa Barbara, As long as the rich can’t pay someone to go to jail for them, I am not worried if they are charged money for a nicer room in jail. After all, it costs society tens of thousands to keep people in jail, so why not give them a nicer room and charge them hotel rates. The point of jail is supposed to be incarceration, not punitive discomfort.
- Stamatis Kavvadias Jan 12, 2014
  
  Surely you don't make any sense out of the concept of inequality. You cannot see that traffic-based pricing of road access and health-care means that the needs of the rich are "more important" than the same needs of the poor. It does not make sense to you that easier jail time for the rich means the poor are "more guilty" for the same offenses.
  
  As far as pollution is concerned, of course we should price it at a rate that creates incentive for clean energy investment. But extreme neglect of inequality of the human right to clean air and the right to a future free of the results of global warming, makes politicians (especially in the US) care more for their campaign donations than for the rights of their electorate. To see clearly that this is the case, remember that we do restrict smoking in public areas, a situation that does not affect political campaign donations.
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
Evan Nesterak Jul 31, 2013

Barry Schwartz wrote a great book on this topic in the 90s, prior to his best seller Paradox of Choice, called The Costs of Living: How Market Freedom erodes the best things in life. Karl Polanyi's "Great Transforamtion" in the 1940s also predicted this. To paraphrase, he writes that the biggest issue with a supposed free-market is that no longer are economic interactions a part of the overall social interactions, but social interactions, and all interactions for that matter, become subject to economic interactions.
A new reply to this comment has been posted.
Stamatis Kavvadias Jul 25, 2013

Well, nice, but the author makes the same mistake he identifies: he does not engage in the discussion of the moral issues, and, as a result, he does not identify the kind of things that should not be marketable. "The moral limits" are yet unidentified. The article "the" should be excluded from the title, and, still, there are not any specific arguments, even for the obvious moral hazard creating marketable social goods.

The tone of the article shows that, people talking about morals, believe they have lost the battle against people talking about market values. That is the first reason it is true.
A new reply to this comment has been posted.
sande cohen Feb 13, 2013

As a recently retired college prof. (arts and humanities), the raising of tuition far above inflation and lowering of the quality of the faculty (a truth few wish to acknowledge) is the educational version/form of fraud and corruption--yet it is impossible to convince people of this. Why? Because we are dealing with fetish-items--the name of an institution grafted to the work-career of a student. The narrowing of life into a sub-set of career requires distance and withdrawal, but who can do this in a total business environment?
A new reply to this comment has been posted.
Paul Condon Jan 22, 2013

'The best argument against a market in votes is that the vote is ... "
Not in my opinion. The best arguement depends on the attitudes and biases of the reader. The argument given is not even the best economic argument. For example, an economic argument that I prefer is that the buying and selling of votes has enormous negative externalities, in that it transforms society in a way that makes entirely other from what it was before a market in votes was allowed. Think for a moment about how it would be implement. How could the buyer be assured that the purchased was properly delivered, etc., etc.
A new reply to this comment has been posted.
Dallas Weaver, Ph.D. Jan 9, 2013

I fail to see the significance of having money be a factor at a time when political power is being concentrated at higher and higher levels. Real wealth is control over the disposition of assets and decision making, not who "owns" the asset (that only determines who pay the taxes).

The rising inequality of power, especially power over other people, may be a larger problem than money that is all exchanged as a voluntary mutually beneficial relationship. It is in the interest of the power elite to divert attention towards someone else such as those who have made a lot of money.
A new reply to this comment has been posted.
David Crichton Jan 9, 2013

Interesting article on the challenges of having a market for all goods and complementary with the release of the movie Atlas Shrugged. Pricing generally breaks down for a public or higher good due to the inability to measure and capture hidden social costs. Your article takes it a step further with the question of whether higher goods should be marketed at all. I suppose Ms Rand would say yes. Some public goods, such as electricity and water, are provided only via regulated markets. Other public goods, such as universal mail service, military defense and fire protection, are provided by government and taxation. Finally, there are a category of “higher” goods or activities that personal in nature and yet have an impact on others in society (and yourself). An individual clearly should not be permitted to purchase from the government the right to break the law that harms another or similarly not have the right to purchase a verdict of “Not Guilty” from a jury/judge. I would argue that markets should not be available to enable the sale of higher goods, so that the debate becomes where the activity falls on the continuum of a market good, public good or higher good.
A new reply to this comment has been posted.
Vincent Thanarajah Chandran Jan 9, 2013

I am afraid that I beg to differ with the statement- that “Business environment should be foggy and deregulated for economy to prosper was considered”.
The law must be certain and this is certainly not so in the USA:-
• When you influence a politician to vote in a certain way it is called corruption making lobbyists criminals. This new business has no place in the institution of democracy-it takes away the one man one vote!
o Bad enough the courts have resurrected a company to be a human being and can participate in elections!!!
• When lawyers prepare documents which allow bankers to commit a fraud, both lawyer and bankers should be jailed for fraud or fraudulent negligence. The mortgage crisis is an example where no one went jail-in fact bankers who bet on both sides made more money. Banks should be closed down or at least the bankers arrested.
• Pharmaceutical and big corporation who put out products that kill the man on the street pay fines and get away with it. One large company paid $1 billion in fines after making $8 billion in of profits after selling drugs that resulted in countless deaths of Americans. If you drove a car and killed someone you will go to jail for negligence. So you can pay to stay away from jail.
These are only a few examples
These are some of the examples where laws must be made to control businesses behavior-sadly, thieves are getting away with murder in the USA.
A new reply to this comment has been posted.
Joshua Ioji Konov Jan 9, 2013

The Rule of Law in Business

From generations the rule of common law does not apply to business in its force and clarity because it is considered counterproductive in providing most adequate conditions for businesses to grow up. Business environment should be foggy and deregulated for economy to prosper was considered. Unless in the Common Law where clarity was main priority in Business Law the opportunism was its main priority.

The ideas about the role of “the rule of law” differ:

“Not surprising, people disagree a great deal about how many laws (and what sort of laws) are just right. For example, liberals tend to think we need lots of laws to control corporations, to protect minorities, to protect the environment and to provide social goods. As another example, while American conservatives claim they are for “small government”, they tend to want more laws limiting things such as sex, drugs, and various personal liberties they disagree with. This nicely matches the fact that the guiding “principle” of most people is “people should do what I want and not do what I do not want them to do.” So, people tend to favor many laws against what they dislike and many laws for what they like. They tend to be against laws that are for what they are against and against what they are for.”

For businesses an environment of “do not see do not say” with limited business laws is considered the best. policies of “easy business” are widespread:

“Jun 1, 2010
Cameron announces his initiative for change. Picture: Andrew Yates/Getty
In his first speech as Prime Minister, David Cameron promised to aid companies by cutting red tape, improving the speed of business start-ups and kick starting bank lending.”

Cameron’s speech reflected the plans for businesses laid out in a new document, which was released last week in partnership with the Liberal Democrats.
In the document, the coalition government promised to introduce a one-in-one-out rule, whereby no piece of new regulation would be introduced without the exit of another. It also stated it would find a practical method of making small business rate relief automatic and would aim to level the playing field between small and large retailers, by enabling local councils to take into account competition laws whilst drawing up plans to shape new retail development.
The government added it would make the UK one of the fastest countries in the world to set up a new business and would end the ‘gold-plating’ of EU rules, so that British companies would no longer be at a disadvantage against their EU competitors.”

Any experienced business attorney could confirm countless stories of corporate management getting away with fraud by not paying on contracts. Number of schemas of how to trick the system and avoid legal actions is developed in details. Corporate limited liability laws are craftily exploited and are examples of this philosophy; e.g., countless fake offers on the Internet, through Junk mail or even on TV are coming from happy “honest” executives and advertisers with offers for easy money and immanent success if we buy their product, follow their advice or give them some money in advance. There are some laws that try to curb on such activities of fake advertising and canning promotions, but these laws are so difficult to win in court unless multiple fraud is not resulted in serious financial harm. However, preventive actions against possible fraud are very rarely taken. Moreover, the biggest harm for the economy does not come from pyramids and financial fraud but from the general “insecurity” resulted of such lawlessness. When in the past “easy business” could have been positive to boost pro-supply economies, which have already changed into pro-demand economies of a global marketplace. Hence, financing has been changing too: the narrowing profit margins of the US businesses have Large Capital well gone oversees particularly to China and now India even in case SMB have rarely been financed by large investors anyway, the ones left were the Small and Medium Investors who were the heaviest hit by the last recession.

“What Does Venture Capital Mean?
Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

Investopedia explains Venture Capital
Venture capital can also include managerial and technical expertise. Most venture capital comes from a group of wealthy investors, investment banks and other financial institutions that pool such investments or partnerships. This form of raising capital is popular among new companies or ventures with limited operating history, which cannot raise funds by issuing debt. The downside for entrepreneurs is that venture capitalists usually get a say in company decisions, in addition to a portion of the equity.”

In a pro-supply economy experiencing growth in a local marketplace (before the globalization took over) the system of deregulation and clueless business laws might have worked well. However, the situation in the world has changed greatly to a pro-demand open globalized marketplace, whereas the relative insecurity of small and medium businesses because of lacking clarity of business laws started having a negative market effect of: Insecure contracting, bonding and limited personal liability of corporate structures consequences of underwriting financing difficulties.

Usual for SMB are
- Limited access to public financing;
- Limited access to foreign markets experiencing economic growth;
- Limited ability to outsource production or move some production to somewhere more advantageous

Therefore, the necessity of stable borrow-ability in volatile economic environment or in direct competition to foreign companies, subsidized by their governments, is paramount. For SMB to be competitive would be only if better access to financing is available.

The overall condition of small and medium businesses and their profitability directly reflects the overall conditions of ones economy because SMB provide the highest percentage employment of all, thus if SMB struggle to survive as it happened through the 2007 Great Recession so the middle class and the poor in the US economy overall.

In an environment of globalization with open borders for business and ever-rising productivity, the large global corporations are not anymore interested in maintaining industrial production on US territory. Neither are they interested in investing into long term projects on US territory, because of the less expensive labor and well ongoing economic growth of China, India, Vietnam and etc.
It is with the large investors who really are not coming back on the US market; because of the lower ROI, therefore it is up to the small and medium businesses to create employment. The clarity of business laws bringing out higher security to SMB and SMI is from great importance to revive US economy and to funnel so needed wealth distribution and redistribution for balancing demand-to-supply ratios.

Small and medium businesses are much more flexible then large global corporations; SMB could develop in very diverse areas of business and reflect governments’ environmental policies much faster.

When the Market Economics is implemented the small and medium business borrow-ability is going be based on enhanced market “security”. On the market not on artificially general subsidizing by governments in a lack of business laws marketplace practiced until now, because by using genuine market forces lower market volatility and redundancy, and consequently prevent from economic turmoil.
Posted by Joshua Konov at 3:21 AM
Labels: development, economics, economy, globalization, market economics, philosophy, quantum economics
© Joshua Konov, 2009
A new reply to this comment has been posted.

https://prosyn.org/2rYWrh0

PS OnPoint

The Moral Limits of Markets

To continue reading, subscribe now.

Support High-Quality Commentary

New Comment

Email this piece to a friend

Contact us

What the Energy Transition Needs

Inflation in the Shadow of Debt

India's Green Growth Imperative

A Just Transition Needs a Job Guarantee

Log in/Register

PS OnPoint

The Moral Limits of Markets

To continue reading, subscribe now.

Support High-Quality Commentary

Edit Newsletter Preferences

Set up Notification