Michael Sandel is quite right that some things are best left outside the market system, says M S Sriram, reviewing this profoundly moral book on modern capitalism
Sandel is a well-known professor of Harvard University and the author of the iconic book Justice. He is also known for making his course of the same name available freely, both online and on television. His latest book continues his argument that the world has become more marketised and financialised but maybe, at some point, we should stop arguing that the markets know best.
In the process of examining the moral fabric of society and trying to poke holes in the rationality of the economic world, he takes on his colleague N Gregory Mankiw as well as Stephen J Dubner and Steven D Levitt, authors of Freakonomics. Although he does not discuss the work of Abhijit Banerjee and Esther Duflo of Poor Economics fame — in which they argue for testing human behaviour based on market-based incentives through randomised control trials — he does give us enough thought to view their work from a moral lens.
Sandel’s basic argument is that there should be some things that money should not buy. Or, at least, money alone should not buy. When we introduce the concept of markets everywhere, we lose on moral suasion and guilt. In order to have a just society it is important to have some feeling of guilt. Let me start with a more nuanced example that Sandel gives from an experiment carried out in an Israeli day-care centre (Freakonomics discusses something similar). When the centre introduced a fine on parents for collecting their children after closing time, the number of parents who did so and paid actually went up. Since they were paying for the extra time, they no longer felt guilty or responsible for those who would be kept waiting. Dubner and Levitt look at the issue from the economic lens of incentives, but Sandel seems to question whether this is indeed the right and moral approach.
Most of Sandel’s examples are located in a grey area, and can have powerful arguments for or against on either side — market-based rational behaviour argument is equally persuasive. It is only in the chapters “Markets in Life and Death” and “Naming Rights” that the differences become stark. How good is it to have a futures market in terrorism, how appropriate is it to bet on death or how wrong is it to tattoo a brand on a person’s fore-head for life?
If we were to extend Sandel’s arguments to the Indian context we could consider the following examples. How appropriate is it to sell the darshan of the deity in Tirupati through a paid, VIP route that jumps the queue? Are god and his blessings for sale? What about healthcare or primary education as entitlements? What is the concept of a capitation fee? And what exactly do we mean by cross-subsidy? Where are we crossing the line when we ask the rich to pay for a superior benefit, so that the poor can get it at an affordable price?
There are several examples in his book that indicate that the markets seem to have taken over. Trading in carbon in order to buy the right to pollute is one and organised and controlled poaching in order to save endangered species is another. In each of these cases the pro-market argument raises issues of demand and supply, the overall positive effects of reducing information asymmetry and the benefits of measurability. At the same time, there is some element of injustice in the entire manner in which these solutions are structured.
Of course, there are many more things that should not be in the market, they are and we seem to have accepted them as part of life. Buying and selling drinking water is one of them. Jacking up prices for movie tickets over the week-ends and on the release date has removed the thrill of standing in a first-day first-show queue and getting an entitlement. Toll roads without alternative access, legalising floor space indices, and having corporate groups spruce up police stations are clear examples where we have crossed the line. Paid news and news-like advertisements have probably given legitimacy to an existing practice that was considered corrupt.
Let us take a somewhat peculiar posit for Sandel. Standing in the queue for movie tickets for hours and getting them was a common childhood experience for many of us. This was clearly a function of demand and supply. Those who did not get tickets but had the money simply bought tickets in black. This is how the asymmetry in the market worked. Those who sold and bought tickets in black possibly suffered from a temporary pang of guilt. However, with economic rationality taking over, we now have dual pricing – and the rent that was sought by the black marketeer is now transferred directly to the cinema hall. The guilt is washed away and there is a price discovery. However, it has also taken away the livelihood of the black marketeer who would have been a poorer intermediary between the multiplex owner and the consumer. Is that something we need to consider from a moral point of view?
Sandel is a delight to read and this book should be made mandatory for all graduates of business school intending to specialise in the financial markets with complex derivative products. They must understand that there should be at least some products and derivatives they should not be dealing with, however innovative and lucrative. Drug abuse is bad for society and that is a moral position. We cannot buy that position with money. That is Sandel’s message and it should not be lost in the financialised world.
The reviewer is visiting faculty at the Indian Institute of Management, Bangalore
WHAT MONEY CAN’T BUY THE MORAL LIMITS OF MARKETS
Author: Michael Sandel
Price: Rs 550