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Markets and Morality

Michael Sandel's new book, What Money Can't Buy: The Moral Limits of Markets, has been getting a lot of attention lately, with excerpts appearing in both the Atlantic and the Boston Review. In his book, Sandel makes the convincing case that, as he puts it, "We live in a time when almost anything can be bought and sold." Wedding speeches, kidneys, a prison-cell upgrade: all can be had for a price. Sandel examines the damage that our transition from "having a market economy to being a market society" has wrought, arguing that this shift has impoverished everything from our understanding of what constitutes a "public good" to our sense of altruism. Here is Sandel on the place of gifts within a market society:

If gift giving is a massively wasteful and inefficient activity, why do we persist in it? ... [Harvard economist] Gregory Mankiw's explanation is that gift giving is a mode of 'signaling,' an economist's term for using markets to overcome 'information asymmetries.' So, for example, a firm with a good product buys expensive advertising not only to persuade customers directly but also to 'signal' to them that it is confident enough in the quality of its product to undertake a costly advertising campaign. In a similar way, Mankiw suggests, gift giving serves a signaling function. A man contemplating a gift for his girlfriend 'has private information that the girlfriend would like to know: does he really love her? Choosing a good gift for her is a signal of his love.' Since it takes time and effort to look for a gift, choosing an apt one is a way for him to 'convey the private information of his love for her.'This is a strangely wooden way to think about lovers and gifts. 'Signaling' love is not the same as expressing it. To speak of signaling wrongly assumes that love is a piece of private information that one party reports to the other. If this were the case, then cash would work well--the higher the payment, the stronger the signal, and the greater (presumably) the love. But love is not only, or mainly, a matter of private information. It is a way of being with and responding to another person. Giving, especially attentive giving, can be an expression of it. On the expressive account, a good gift not only aims to please, in the sense of satisfying the consumer preferences of the recipient. It also engages and connects with the recipient in a way that reflects a certain intimacy.

In the Boston Review, you can read responses from other philosophers, economists, and political scientists to some of Sandel's arguments. It's well worth a read.


Commenting Guidelines

What a romantic this Mankiw guy is. I wonder what his wife/girlfiend now thinks of his "gifts."

It would appear that there are some things that should not have "exchange values" and should not be part of the market. The question is, is the market itself responsible for the erosion of values (by substituting prices for values in the Catholic sense) or are we just looking at some depraved individuals? I think it's the former and that the "Market" is actually a competing moral order to Catholicism; not something that is simply neutral nor something that is simply expressive of people's individuality.

u --When you say the Market is a competing moral order, what do you have in mind? The Protestant work ethic or what?

In Capital, Marx makes a not very Marxian technical distinction between "use values" and "exchange values". Objects have uses and on rare occasions one will produce objects for one's personal use, but capitalism is the history of the movement towards producing objects for exchange, for money. When something is produced for exchange rather than for use (from the point of view of the producer) it becomes a commodity. The big step that societies takes towards capitalism is when labor itself becomes a commodity and people work for wages.A thing has an exchange value when bartered for another thing. And it has an exchange value when it is traded for money and that money is traded for another thing. But the so-called "commodification" of society occurs when exchange values are seen as true value of a thing; when people believe that all things have exchange values; and when people come to believe that they can accumulate values independently of the use values of things.The market becomes a moral order when exchange values start to be seen as use values. As the article under discussion seems to point out, things enter the market that really shouldn't enter any market at all. This opposes the economics behind Catholic social teaching, because Catholic social teaching is primarily concerned with "use values" and the appropriate use of things. The appropriate use of things in Catholic social teaching is tied up with beliefs about the intrinsic value of human beings separate from both use values and exchange values. The Church is rather blind to the market being a moral order because it recognizes that things need to be exchanged (and that they can therefore have exchange values), which hides from it the qualitative transformation of the market that occurs when exchange values come to be seen as intrinsic values. The Church, it seems to me, considers exchange values a quantitative rather than a qualitative problem. We are told not to consume or accumulate too much, as though market relations are simply a matter of prudence.When most everything becomes commoditized and exchange values come to be seen as intrinsic (or natural) to things, things become equivalent to money and they lose their moral identities. So, for example, sex enters the marketplace and sex work becomes a matter of adequate compensation. The social boundaries that used to be put on the use of things begins to erode. People begin to sell things (or impute exchange values to things) as far as they personally feel like going. The old moral order that held things like community and family as values (without exchange value) begins to break down and the determination of a use value becomes more and more a purely individual choice. In fact, the redefinition of use values becomes and expression of a person's individuality and having an advertisement tattooed on one's forehead becomes a sign of personal liberty.The Church, through its claims that Natural Law means that things have intrinsic values separate from their exchange values or an individual's subjective ability to assign a use value to something, comes to look like it is opposed to personal liberty. Since the Church cannot account for the qualitative change that exchange values have wrought on the moral order, it cannot adequately address the problem. It chases behind the capitalist system, falling further and further behind, as it admonishes people to be fair and to not forget the poor.

u. --Thanks for the interesting reply. It amazes me how Marx could be so astute in some ways and so wrong about his overview. But he's so often interesting.I don't understand your explanation about Church teaching about intrinsic and exchange values. Could you give an example or two? Yes, people often confuse intrinsic value and exchange value (which is why some people think that the more a thing costs the more intrinsic value it has), but I don't think Church teaching agrees. I don't understand what you mean when you say that ' The Church is rather blind to the market being a moral order because it recognizes that things need to be exchanged (and that they can therefore have exchange values), which hides from it the qualitative transformation of the market that occurs when exchange values come to be seen as intrinsic values."And when you say that "the market is a moral order", what makes it a moral order? Because things do have real values and sometimes wrong uses?

Catholic morality understands what use values are and the Church seems to speak a great deal about what constitutes the appropriate and inappropriate use of things (not to mention what is and is not appropriate to be treated as a thing.) And the Church understands that things can be exchanged and that there are equivalent values for things and that such exchanges should be "fair".What the Church seems to have a blind spot for is the capitalist moral category of Value (with a capital V); the idea that something called Values exist, that they can be produced, and most importantly, accumulated without regard to any other sort of utility."Value" is the "good" in a the capitalist moral order as is its pursuit and accumulation. It's hard for us to see it for what it is, because Values seem to simply arise from exchange values expressed by the market in the form of money. But we can see how Value (as opposed to value) operates in the so-called free market around real estate during the recent housing bubble.In the classic concept of a market, real estate prices would rise and fall according to supply and demand. The exchange value of a house that sold for $400K in 2007 is now $200K and that is that. But our whole capitalist political economy is set up to maintain Value. So people are living in $200K houses that are held as living assets of $400K on the books of banks. The holders of this Value will see millions of people turned out of work and live on the edge of poverty in the most abundant society that has ever existed than to see these Values turned into values that are liquidated by the free market.The poor wretch who sold her forehead as advertising space believes that her forehead has a Value and that Value is equivalent to $10K. This idea that everything, including one's own body has a Value is normal moral behavior in capitalism. It's not so much that everything is for sale; it's that everything has a Value that can be expressed in cash.

If exchange value comes from the production of use values, then it would be perfectly reasonable to believe that the production and accumulation of Value means the production of more use values and means that a society is more abundant for all the people living in it. Perfectly reasonable to think this, but not true. And this is the Achilles Heal of the Right. They think that Value = value and that things like Bain Capital are more valuable to society than the manufacturing companies it loots and destroys, because more dollars seem to be generated at the other end.