Alternative approaches [Long]

So I'm aware of the fact that my approach to this isn't the one people leap to when they think of the best way to go about embarking on a project like this. My approach, as I've  outlined before, is to offer ways of thinking about the subject, rather than the attempts I've come across which try to offer reams of knowledge about the subject.

One of the approaches I wrestle with as an alternative is exploring those arguments that keep coming up once every generation or so. One in particular that's caught my interest recently is the issue of markets. People need stuff, how do we get it to them? Does the rising tide lift all boats, or do markets inevitably tend toward monopoly and become the plaything of plutocrats? I read a lot of pro market literature, more than is probably healthy for me. But I also have plenty of conversations where people conflate the market and what has recently been called 'crony capitalism'.

What Money Can't Buy

One book in particular has got me thinking about this, Michael J Sandel's What Money Can't Buy: The Moral Limits of Markets. You can pick up a free sample from Amazon's kindle store, or he's done an interview or two about it on The Colbert Report and BBC Radio 4, whose catch up services are US- and UK-only respectively.

I'd like to explore the substance of the book, because I'm hoping that this post might well form something on which to build. It might not, but again, this blog is about the whole journey, dead ends and all.

Though you might normally roll your eyes or sigh with despair whenever you hear anything about markets, this debate touches everything you do. Because as a human being, you need stuff. Food, water, shelter, education, healthcare and much else besides. However, there is a limited amount of all of this stuff. So how do we get it to everyone?

The fact you're reading this blog post and I'm typing it out in the first place stands as a monument to the market system. It has provided you with at least enough to afford the use of a device connected to the internet. But, as Sandel asks in his book, are there some things that money can't buy? You might not be surprised to find out that he thinks there are.

If I'm going to ask you to take your time to read this post, I should be more precise in telling you exactly what it is Sandel is doing in this book. Thankfully, that won't take long. Ignoring the introduction, it is in the title that we get the jist. He's looking for the moral limits of markets. Rather than what money can't buy, we are looking for things that money shouldn't buy. Sandel promises a framework for debating whether we should or shouldn't sell this or that, which you'd expect might involve some serious moral introspection about what the conditions that make it morally good or acceptable to sell an object or service.

Thankfully, Sandel avoids this, though Deidre McCloskey criticises him for not treating his readers as grown ups. I think it comes down to who this book best serves and for that, we should ask to whom the book is addressed and speculate why it's been written because it's not apparent in the introduction.

This book is written to stem a tide and it is certainly apparent that Sandel wants to push back against something he sees as seeping in where it doesn't belong. But what is it that Sandel is defending against? Getting down to it, he's defending against the naive application of markets to the problems of the world. He does concede that the marketisation of our lives has brought unimagined prosperity to millions. But he thinks that the success the market has had has ushered in an era of "market triumphalism", where pro-market activists have decided that the market will solve all of our social problems.

So who exactly is it that is advocating the positions he's worried about? Well, Jodi Beggs of Economists Do It With Models goes to some great lengths to show that despite frequent references to "economists", Sandel isn't really attacking them. So allow me to speculate a bit about who he might be taking aim at.

Sandel is a Harvard Professor, so you might think this book is meant for his fellow political philosophers and economists to discuss in their lectures. Perhaps it is written with one eye on politicians, whom he takes aim at with a section entitled "Our Rancorous Politics". (pp 11-15) Perhaps, knowing that his students will one day be masters of the universe, it is also designed to be some light bed time reading for those who miss out on his famous Justice: What's the Right Thing to Do? course. But I think this book is actually more of an intervention in popular, not academic, debate.

Frequent references to Steven D Levitt and Stephen J Dubner, of Freakonomics fame suggest that the real itch that needs scratching is pop economics and economists with book sales in mind. Also, anyone who's only ever taken what the Americans call ECON101. So there are going to be a lot of students, especially in Sandel's own Harvard, that do just take the one class, where introductory materials are likely to be light on the detail and heavy on the easy-going types of materials like Freakonomics.

Equally, I think, he's taking aim at students of business. Perhaps people like Katie Hopkins, of the UK Apprentice, who take the lesson on how taxation discourages consumption and run off with it, straight into a wall. Diedre McCloskey, in a really good article objects to taking aim at these people, because it's like shooting fish in a barrel. But this is mistaken. I believe that many of these views, such as those from Hopkins, do seep into social attitudes. After all, they're present in the media. Sandel is right to not just argue with his fellow professors but with commonly held views too.

Alright, so we know who is the problem, but what is the problem? Specifically, that is. Because it's no good just complaining about the marketisation of everything bluntly. We are promised a discussion as to the moral limits of markets, so we need to explore just that: where the moral argument that justifies markets breaks down.

But before we explore Sandel's objection to market triumphalism, we need to lay out the moral case for markets. This isn't really given a lot of attention in What Money Can't Buy, so I'd like to articulate the case for markets.

The Moral Case for Markets

So the case for markets goes like this: markets maximise the welfare of the participants and require little, if any, regulation. Just by people acting in their own self-interest we've achieved an efficient outcome that allocates goods to the people who have the most use for them. Many, if not all, social problems can be characterised by the misallocation of goods: either people don't get enough of a good, or some people get too much of a good.

The price mechanism resolves this by effecting efficient trades. So, to stop carbon emissions, some countries have proposed marketing the right to pollute. This puts an explicit cost on an activity in the present that only previously had an implied cost for the future. By allocating permits equally across industries, you give carbon-light industries a surplus while giving carbon-heavy industries too little. So industries either have to innovate and invest in greener technologies to reduce their need for permits, or they have to buy the permits from greener firms to pay them to emit less.

To make things more effective, you gradually reduce the number of available permits, thus raising the price and forcing more and more firms to switch to lowering emissions rather than simply paying for permits.

Finding the Limits

So the thesis is simple. The ideal outcome of the free market is not always the moral outcome, against the contention of – among others – Levitt & Dubner, against the lessons we're taught in those introductory economics classes. There are two reasons why this might be the case.

One of the reasons is easily grasped: unfairness. Sometimes, people get priced out of a market of necessary goods. So, the home heating market in the UK puts people into fuel poverty and, before the introduction of a Winter Fuel Allowance, meant that there were routine winter crises as the cold affected the elderly. The second reason is harder: markets corrupt goods. They aren't the neutral catalyst that  economists presume them to be – the introduction of the market changes the nature of the good and its valuation.

It's not really in these two principles that Sandel is very convincing. He is trite when it comes to fairness, frankly. Economists are fully aware that markets sometimes fail to bring about welfare – whether by pollution or because they simply price out poorer members of society. We should remind people that this happens but it is arguable this is not a moral limit of markets, rather evidence the market needs to be restructured.

While it is true that goods such as apologies and degrees are corrupted by selling them, this is not exactly a knock down blow – we resist such markets anyway. It is no good to write a book challenging the spread of markets to where they don't belong if, bluntly, they don't inhabit anyway. The market for human kidneys is another example – Sandel suggests we might object because we wish to keep sacred the sanctity of the human body. But this is an example where we might benefit from the existence of a market

However, Sandel is more convincing when he gives his examples whereby it is not the good that is corrupted but the participants. While economists are aware that participation in a market brings certain values with it, they are not particularly vocal about the 'crowding out' of non-market norms that can occur when a good is priced. In particular, Sandel worries about "The Skyboxification of Human Life". (p. 201)

This is an argument about the externalities of markets themselves, which is interesting and the single most compelling point in this book for me. Markets are presumed to be able to correct externalities – but if their introduction can result in them, then there is an opportunity cost of markets themselves. And, for a book written to encourage a degree of caution when introducing markets, this is the reason to agree.

But hang on. What's skyboxification when it's at home? Put simply, it's the drifting apart of society who are now discriminated against based on their income. Markets encourage tiered service – on trains, planes, in theme parks – and naturally, those with the greatest income to dispose of on these services choose the luxury packages. In isolation, there is no need to worry. Cumulatively, however, as markets exist for everything, it is possible for the rich and the poor to live their lives without ever interacting. They don't queue together, (chapter 1) aren't going to visit the same doctors, (again, chapter 1), aren't educated together (see UK admissions statistics), aren't shopping together (Waitrose's vs Lidl's clientele): in short, never even brushing past each other.

The point isn't that tickets to sporting events are entitlements for citizens. The point is that these goods constitute what it means to be a citizen, i.e., give meaning to the phrase 'national life'.

So I'll leave it there.