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.