The Danger of Using Markets Too Much—or Too Little

Michael Sandel offers compelling examples of the corrosive effects of commodification. There is, however, another side to the story.

In "What Money Can't Buy," Professor Michael Sandel argues that the United States has always had a market economy, but that more recently it has started to become a market society, where market values seep into many new areas of life, often with negative consequences. Discussing his thesis Saturday at the Aspen Ideas Festival*, he raised the example of education experiments that pay disadvantaged students for every book that they read, or compensate them with money every time they receive an A or a B on their report cards.

Is this a good idea or a bad one?

He put that question to the audience.

One woman who responded described herself as an alpha-mom and a WASP. She complained that despite her cajoling, her young son kept refusing to practice Mandarin for the one hour per day she proscribed. Nothing worked until she pulled out her pocketbook. "For a dollar a day he takes his Mandarin quite happily," she said, defending such payments as an indisputably effective tool. On the other hand, she added as an aside, he now requests payment for everything. Say that she wants to take her son's photograph. It's an indulgence he once granted her for free.

Now he requests cash.

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There are 90,000 Americans waiting for a kidney transplant. Thousands die each year due to a shortage of donated organs. Many of those people would live if the sale of kidneys was permitted. But it remains illegal, even though you can live a perfectly healthy life with just one kidney.

*  *  *

Professor Sandel's talk was filled with fantastic examples of times when the use of markets seemed to backfire. His focus is a logical reaction to the aforementioned trend he perceives, wherein markets become increasingly pervasive to ill effect. What his lecture lacked was acknowledgement of ruinous outcomes when market mechanisms are underused, though there are plenty of them besides the dearth of kidneys. Read up on free parking or congestion pricing, for example. It is plausible - urban planning experts say it is probable - that we'd save time and money and live much happier lives if we weren't irrationally attracted to "free" parking and roads.

Under-using markets can be as imprudent as their over-use.

*  *  *

Happily, Professor Sandel's ultimate counsel to the audience was sound. Think carefully, he said, before introducing markets into new arenas of American society and human life. There is good reason to heed his admonition; what would make it even better is if he added a warning about failing to use the market when it offers a plausible solution to an otherwise intractable problem.

That isn't to say that such experiments aren't sometimes fraught.

Says John Lanchester:

There's one example in particular that comes close to summing up the entire argument of What Money Can't Buy.
Notes from the Aspen Ideas Festival -- See full coverage
It concerns an Israeli daycare centre, which responded to a problem with parents turning up late to collect their children by introducing fines. The result? Late pick-ups increased. Parents turned up late, paid the fine, and thought no more of it; the fine had turned into a fee.

The fear of disapproval and of doing the wrong thing was based on non-monetary values, and was a stronger force than mere cash. The daycare centre went back to the old system, but parents kept turning up late, because the introduction of market values had killed the old ideas of collective responsibility. Once the old "norm" of turning up on time had been marketised, it was impossible to change back.
But dead kidney patients are impossible to "change back" too. Let us think through the consequences of using markets more explicitly and rigorously - but as we engage in the democratic debates on these matters that Sandel wisely counsels,  let us carefully weigh the costs of not using markets too.