06/14:What Money Can't Buy: The Moral Limits of Markets

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Book review: "What Money Can't Buy," by Michael Sandel

Harvard's Sandel takes aim at death bonds and the price we pay when market mentality permeates all of society

By James Pressley, Bloomberg

May 14, 2012

In September 2009, Steven Strongin ofGoldman Sachs Group Inc.went before a U.S. congressional subcommittee to discuss a delicate subject: death bonds.

The hearing captured a dilemma coursing through Michael Sandel's cogent new book, "What Money Can't Buy."

The official topic that day was "Recent Innovations in Securitization." The real issue was life insurance policies bundled into bonds for investors, who receive income as the original policyholders die.

Ghoulish to some, efficient to others, these securities highlight what Sandel calls the "moral limits of markets." Even at a time when market mechanisms have spread high and low in the U.S., home of the college football skybox and land of the for-profit prison, death bonds engender moral disquietude, as the hearing showed.

"The idea of institutional investors profiting from a person's death seems, to say the least, unsettling and immoral," said the panel's chairman, Rep. Paul Kanjorski, a Pennsylvania Democrat.

Strongin, testifying as a Goldman Sachs managing director, stated three times that the bank had never done this kind of securitization. Why, I wonder, did he repeat that? Was he concerned that Goldman might be seen as a sinister bookie taking bets on the lives of strangers?

Death bonds illustrate how far market values have seeped into society in recent decades, says Sandel, the Harvard University government professor whose book "Justice" spawned television series in the U.S. and U.K.

"We live at a time when almost everything can be bought and sold," Sandel writes. He flicks through examples.

Want to shoot an endangered black rhino? You can do so legally for $150,000 in South Africa. Looking for a clever way to advertise your online casino? Pay a single mother $10,000 to have your website tattooed across her forehead.

Sandel isn't questioning the success of the market as a mechanism for producing and distributing goods and spreading prosperity. He is, rather, seeking to provoke a debate about the proper place of markets in society: "We need to ask whether there are some things money should not buy."

This is especially true when it comes to placing a value on things that raise moral or political questions, such as civic duties. The debate is needed, he says, partly because market reasoning, being nonjudgmental, "empties public life of moral argument." When price is the only issue, we stop discriminating between what is admirable and what is base.

As in "Justice" and his online course in political philosophy, Sandel digs below the surface of things we take for granted. Consider the transformation of baseball into "moneyball," as Michael Lewis called it.

It's true that general manager Billy Beane used market thinking to turn the Oakland Athletics into a winning team. Drawing on statistical analysis, he identified underpriced players and inefficient practices.

Once Beane determined that a hitter's batting average mattered less to winning than his on-base percentage, the A's began hiring players who drew walks. Discovering that base stealing reduced the chance of scoring, he discouraged the practice.

Before long, teams with deeper pockets adopted the same strategies. Baseball became more economically efficient. It also grew less exciting, Sandel says.

"A game littered with long at bats and lots of walks is usually a tedious affair," he writes, challenging the sway of what he terms "the moneyball faith."

Market incentives can prove counterproductive. In one Swiss mountain village, Sandel says, economists asked residents if they would vote to accept a nuclear waste dump in their community. A narrow majority of 51 percent said yes.

What if they were compensated with annual cash payments? In that case, only 25 percent would vote in favor. Why? Though the residents were willing to bear the risk for the good of the nation, the monetary offer felt like a bribe.

When it comes to blood collection, Sandel writes, a system that relies entirely on voluntary donors has been found to work better than one in which some supplies are purchased, typically from the poor. The latter results in "chronic shortages, wasted blood, higher costs and a greater risk of contaminated blood," he says.

Sandel doesn't offer definitive answers. He instead supplies "a philosophical framework" for weighing promised economic benefits against potential societal costs.

Life insurance, for instance, was long restricted to those who had an "insurable interest" in the person insured. Gambling on the lives of strangers was banned.

That taboo has been breached, as death bonds show. Though trading on mortality has been justified in the name of free markets, there's a moral price to pay, Sandel notes.

"When markets in death become familiar and routine, the moral opprobrium is not easy to retain."

Or even to recall.

"What Money Can't Buy: The Moral Limits of Markets"

Michael Sandel

Farrar, Straus and Giroux

244 pages

$27

http://www.chicagotribune.com/business/ct-biz-0514-book-review-sandel-20120514,0,3091663.story

What Money Can't Buy by Michael Sandel – review

Michael Sandel challenges the idea that markets are morally neutral

Walmart … able to benefit from 'janitors insurance' policies. Photograph: Robert E Klein/AP Photo

"Dead peasants insurance" is a term that sounds as if it comes straight out of Monty Python. If only that were true. Here's an example of what it means: in 1999, Michael Rice, a 48-year-old employee of the supermarket firm Walmart, collapsed while helping a customer carry a television to her car. He died a week later, and an insurance company paid out $300,000 for the loss of his life.

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So far, a sad but not unusual story; the twist was in the identity of the people who benefited from the insurance. It wasn't Rice's family, who didn't get a penny, but Walmart. In a subsequent lawsuit, it turned out that Walmart had hundreds of thousands of such policies on employees, so every time one of them died, the huge corporation enjoyed a tiny windfall. And that's dead peasants insurance, or, as it is also known, "janitors insurance". They are forms of what the insurance industry calls Stoli, or "stranger originated life insurance" – in other words, an insurance policy taken out on your life by someone else, not on your behalf but on theirs.

Michael Sandel is a professor of politics at Harvard, and is one of the best known public intellectuals in America. He enjoyed a worldwide hit with his last book, Justice, the subject of a famous lecture course at Harvard, and gave the 2009 Reith lectures. His new book, What Money Can't Buy, is a study of "the moral limits of markets". For him, the story of dead peasants insurance is an example of how the encroachment of market values can change the character of an industry. Sandel shows how life insurance, which had its origins in the idea that we can mitigate the economic impact of death on survivors and dependents – an idea which was always controversial, and indeed was illegal across much of Europe – was gradually corrupted into a form of betting against other people's lives.

Another example of this process was the development of "viaticals". These were insurance policies that had been taken out earlier in their lives by people who were dying of Aids. The life insurance policies of these dying patients were valuable – so a market developed in which these policies were bought by investors, who would give the Aids sufferer a lump sum and would pay for their care during the terminal illness. Then, when the patient died, the policy would pay out: kerching! The catch for investors was that the longer the patient lived, the less money they would make. "There have been some phenomenal returns," said the president of one company that specialised in viaticals, "but there have also been some horror stories where people live longer."

This trajectory, for Sandel, is paradigmatic. We can all instinctively understand the idea of life insurance; most of us will feel an instinctive repugnance at the thought of the viatical industry or dead peasants insurance. As market thinking penetrated the life insurance industry, a moral line was crossed, and the application of market ideas was taken too far.

That shows what has happened with the increasing ubiquity of market ideas. "Over the past three decades," Sandel writes, "markets – and market values – have come to govern out lives as never before." Sandel is no socialist and isn't against markets per se. He is forthright about the positive impact markets can have in their correct sphere. "No other mechanism for organising the production and distribution of goods had proved as successful for generating affluence and prosperity." His focus, perhaps unexpectedly, isn't on the 2008 crash and the great recession that followed. Instead, Sandel is interested in what he sees as a deeper and more consequential loss of our collective moral compass. "The most fateful change that unfolded in the last three decades was not an increase in greed. It was the expansion of markets, and of market values, into spheres of life where they don't belong."

This might make it sound as if What Money Can't Buy is mainly a work of polemic. It's not: Sandel isn't that kind of philosopher. He is clear about what he thinks, and the direction of his argument is clear too, but he progresses patiently, through the accumulation of examples from a number of fields. Too patiently, perhaps, for some readers. Anyone who is already in agreement with the ideas Sandel is advancing – a fairly numerous group of his readers, I'd have thought – may well want a more sweeping, angrier book, one that is more heated about the morally debased landscape brought to us by the ubiquity of market thinking.

I had moments when I wanted What Money Can't Buy to be more charged, to use more of the language of right and wrong and less of the bloodless vocabulary of "norms". But Sandel, I came to realise, is doing something very specific in this book. It's a work of political philosophy more than it is a polemic: he wants to make it unambiguously clear that markets have a moral impact on the goods that are traded in them.

To understand the importance of his purpose, you first have to grasp the full extent of the triumph achieved by market thinking in economics, and the extent to which that thinking has spread to other domains. This school sees economics as a discipline that has nothing to do with morality, and is instead the study of incentives, considered in an ethical vacuum. Sandel's book is, in its calm way, an all-out assault on that idea, and on the influential doctrine that the economic approach to "utility maximisation" explains all human behaviour.

Sandel is methodical about assembling evidence to refute the idea that markets are amoral and have no moral impact. Paying people to queue, for example: Sandel studies this practice in areas such as US congressional hearings and free outdoor theatre performances. In both cases, companies have come into being to allow the well-off to hire a homeless person to go and hold a place in the queue until the rich person turns up just in time for the main event. This is an example of something which is supposed to be a communal good being marketised and turned into cash. This has two consequences that often recur and are stressed by Sandel: one is that the process is unfair, and the other is that it is corrupting or degrading to the thing being marketised.

He sees this dual phenomenon, of unfairness and the degradation of values, at work in many areas: from the market in sports memorabilia to carbon trading to on-call doctor services to Chinese population control policy to the growth of executive boxes at sports grounds – "skyboxification", as he calls it. That leads to one of his most direct statements of political engagement: "Democracy does not require perfect equality, but it does require that citizens share a common life. What matters is that people of different backgrounds and social positions encounter one another, and bump up against one another, in the course of ordinary life."

There's one example in particular that comes close to summing up the entire argument of What Money Can't Buy. 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.

This is such a vivid illustration of Sandel's thinking that it is almost a parable. Let's hope that What Money Can't Buy, by being so patient and so accumulative in its argument and its examples, marks a permanent shift in these debates. Markets are not morally neutral. Let's all be clear about that. As Sandel concludes: "The question of markets is really a question about how we want to live together. Do we want a society where everything is up for sale? Or are there certain moral and civic goods that markets do not honour and money cannot buy?"

• John Lanchester's Capital is published by Faber.

http://www.guardian.co.uk/books/2012/may/17/what-money-cant-buy-michael-sandel-review

Civil Society

A Market (Rather Than Civil) Society

In his new book, Harvard political philosopher Michael Sandel asks what, if any, are the moral limits of the marketplace.

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Reviewed By Rob Reich | 3

What Money Can't Buy: The Moral Limits of Markets

Michael J. Sandel

256 pages, Farrar, Straus & Giroux, 2012

Buy the book »

Harvard political philosopher Michael Sandel is one of our nation’s preeminent public intellectuals. Author of many notable books, he is a masterful teacher of a legendary class, called “Justice,” also offered online and on television, and seen by millions. In 2010, China Newsweek named him “the most influential foreign figure of the year.”

Sandel’s mode of operation is straightforward: he tackles large and important questions in clear, engaging prose, examining a feature of contemporary life in which ethical boundaries have been transgressed or where an important ethical concern has been leached from debate. In previous work, Sandel has expressed anxiety about a diminishing capacity to talk about moral issues in American politics and civil society, and has sounded an alarm about the quest for perfection in biomedical research and genetic engineering.

Sandel’s new book takes up the large and undeniably important question: What, if any, are the moral limits of the marketplace? What shouldn’t money buy? True to form, he worries that things have gone too far, that we have “drifted from having a market economy to being a market society.” His aim is to show the moral cost of what happens when everything is for sale, when any good can be commodified.

Far from an academic treatise, the book consists mainly of short case studies of surprising new commodities and labor forms. The first chapter is about the line jumping market— people who are paid to stand in line at airports, Congressional hearings, or amusement parks, as well as those who work as ticket scalpers and so-called concierge doctors. The second chapter is about encouraging or limiting various behaviors through market incentives, such as tradable pollution permits, cash for good grades, payments for human organs, or a marketplace in accepting refugees. The third chapter examines how markets can crowd out desirable moral norms, such as hiring friends, purchasing wedding toasts, auctioning college admissions, and buying rather than donating blood. The fourth chapter takes up markets in life and death, covering Internet death pools, a terrorism futures market, and death bonds. The final chapter questions the proliferation of naming rights, such as the Falik Men’s Room at Harvard, endowed by and named after alumnus William Falik. Truth is indeed stranger than fiction!

Examples abound in Sandel’s book, which makes for a good, even rollicking read. And as the examples accumulate, one begins to appreciate just how deeply markets and market behavior have rooted themselves in virtually all aspects of our lives. The claim that we are a market society, as opposed to having a market economy, seems not far-fetched.

Yet Sandel is not arguing against markets per se. Rather, he proposes that markets should have limits. He identifies two moral concerns. First, when markets exist everywhere, he argues, we need to worry more about inequality. If money can buy more and more, including political influence and better health care and education, then having money matters more and more. Second, making certain goods into commodities can corrupt the very value of these goods; market norms can crowd out valuable non-market behavior.

Sandel’s first point is really an argument about fairness, and it is a familiar concern. If money is the necessary means to obtaining certain goods, or a certain quality of goods, then the poor will be systematically disadvantaged in the marketplace. Should obtaining a life-saving organ transplant depend on the ability to pay a market price for the organ? Should admission to a selective university ride on the wealth of a student’s parents? When goods such as these are commodified, we rightly worry about unfairness.

The second argument about market norms displacing valuable non-market behavior, however, is Sandel’s main preoccupation. For Sandel, markets not only allocate goods, they “express and promote certain attitudes toward the goods being exchanged.” Paying cash for good grades may corrode an intrinsic desire to learn. Auctioning off college admissions can corrupt the integrity of higher education.

A famous example of this general phenomenon, twice discussed by Sandel, is a study of childcare providers in Israel. The day care centers were having a problem with parents arriving past closing time to pick up their children. Several providers opted to introduce a fine for late pick-ups. The result was an increase in late pick-ups, where parents treated the fine as a fee they were willing to pay rather than construing on-time pick-up as a norm they were expected to uphold. For Sandel, this demonstrates how attaching a price to certain moral or civic goods can diminish or corrupt those very goods.

Like the worry about unfairness, corruption is a reasonable concern. But Sandel never delivers an argument about exactly how to determine whether or when market norms will displace non-market behavior. Or more importantly—since markets can promote efficiency and liberty and agency—Sandel offers no resource to referee whether the benefit from commodifying certain goods is worth the cost to non-market norms.

Sandel’s talent is for identifying and asking important questions about the place of markets. But the book fails—indeed, does not really try—to answer these questions. Even in the many examples Sandel describes, the reader is left unsure whether he believes that some moral limit has actually been transgressed. So while Sandel is expert at assembling worrisome examples and challenging readers to puzzle through their own intuitions and views about markets, he could have accomplished more.

First, Sandel could have conveyed a more sophisticated view about markets. Not all markets and marketplace exchanges are alike, or have the potential to corrupt valuable non-market norms. Take for instance the simple distinction, familiar to any reader of SSIR, between goods offered for sale by for-profit versus nonprofit organizations. Commodification looks different if the marketplace is populated by nonprofit organizations, but this distinction is lost in Sandel’s undifferentiated treatment of markets.

Second, Sandel could have offered a more sophisticated framework for thinking about the limits of markets, a framework capable of delivering more guidance about where the limits are. It would not have been difficult to do so; a growing literature on this topic is inexcusably ignored by Sandel. Books by philosophers Elizabeth Anderson and Debra Satz or by economists Kenneth Arrow and Amartya Sen, among others, all provide a more sophisticated account of the limits of markets.

Sandel, however, is operating in public intellectual and provocateur mode: to raise important questions for public debate. What Money Can’t Buy is neither original nor deep, but if it stimulates a wider public discussion about the emergence of a market society, it will have succeeded on its own terms.

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Rob Reich is associate professor of political science at Stanford University and faculty co-director of the Center on Philanthropy and Civil Society.

http://www.ssireview.org/book_reviews/entry/a_market_rather_than_civil_society

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seek to address: Are there some things that money can't buy? My answer: sadly, fewer and fewer. Today, markets and market-like practices are extending their ...

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