What Money Can't (Shouldn't) Buy: Crowding Out NonMarket Norms
By Michael J. Sandel\
Two Objections to Markets
These two kinds of arguments reverberate through debates about what money should and should not buy. The fairness objection asks about the inequality that market choices may reflect; the corruption objection asks about the attitudes and norms tha tmarket relations may damage or dissolve.
It's worth taking a moment to clarify these two arguments for the moral limits of markets. The fairness objection points to the injustice that can arise when people buy and sell things under conditions of inequality or dire economic necessity. According to this objection, market exchanges are not always as voluntary as market enthusiasts suggest. A peasant may agree to sell his kidney to feed his starving family, but his agreement may not really be voluntary. He may be unfairly coerced, in effect, by the necessities of his situation.
The corruption objection is different. It points to the degrading effect of market valuation and exchange on certain goods and practices. According to this objection, certain moral and civic goods are diminished or corrupted if bought and sold. The argument from corruption cannot be met by establishing fair bargaining conditions. It applies under conditions of equality and inequality alike.
The long-standing debate about prostitution illustrates the difference. Some people oppose prostitution on the grounds that it is rarely, if ever, truly voluntary. They argue that those who sell their bodies for sex are typically coerced, whether by poverty, drug addiction, or the threat of violence.This is a version of the fairness objection. But, others object to prostitution on the grounds that it is degrading to women, whether or not they are forced into it. According to this argument, prostitution is a form of corruption that demeans women and promotes bad attitudes toward sex. The degradation objection doesn't depend on tainted consent; it would condemn prostitution even in a society without poverty, even in cases of upscale prostitutes, who liked the work and freely chose it.
Each objection draws on a different moral ideal. The fairness argument draws on the ideal of consent or, more precisely, the ideal of consent carried out under fair background conditions. One of the main arguments for using markets to allocate goods is that markets respect freedom of choice. They allow people to choose for themselves whether to sell this or that good at a given price.
But the fairness objection points out that some such choices are not truly voluntary. Market choices are not free choices if some people are desperately poor or lack the ability to bargain on fair terms. So in order to know whether a market choice is a free choice, we have to ask what inequalities in the background conditions of society undermine meaningful consent. At what point do inequalities of bargaining power coerce the disadvantaged and undermine the fairness of the deals they make?
The corruption argument points to a different set of moral ideals. It appeals not to consent but to the moral importance of the goods at stake, the ones said to be degraded by market valuation and exchange. So to decide whether college admission should be bought and sold, we have to debate the moral and civic goods that colleges should pursue, and ask whether selling admission would damage those goods. To decide whether to establish a market in babies up for adoption, we need to ask what norms should govern the parent-child relationship, and ask whether buying and selling children would undermine those norms.
The fairness and corruption objections differ in their implications for markets: The fairness argument does not object to marketizing certain goods on the grounds that they are precious or sacred or priceless; it objects to buying and selling goods against a background of inequality sever enough to create unfair bargaining conditions. It offers no basis for objecting to the commodification of goods (whether sex or kidneys or college admission) in a society whose background conditions are fair.
The corruption argument, by contrast, focuses on the character of the goods themselves and the norms that should govern them. So it cannot be met simply by establishing fair bargaining conditions. Eve in a society without unjust differences of power and wealth, there would still be things that money should not buy. This is because markets are not mere mechanisms; they embody certain values. And sometimes, market values crowd out nonmarket norms worth caring about.
Crowding Out Nonmarket Norms
How exactly does this crowding out take place? How do market values corrupt, dissolve, or displace nonmarket norms? Standard economic reasoning assumes that commodifying a good -- putting it up for sale -- does not alter its character. Market exchanges increase economic efficiency without changing the goods themselves. That is why economists are generally sympathetic to using financial incentives to elicit desirable behavior; scalping tickets for highly prized concerts, sporting events, even papal masses; employing tradable quotas to allocate pollution, refugees, and procreation; giving cash gifts rather than presents; using markets to ease the gap between supply and demand for all manner of goods, even kidneys. Market exchanges make both parties better off without making anyone else worse off -- if you assume that market relations and the attitudes they foster don't diminish the value of the goods being exchanged. But this assumption is open to doubt. We've already considered a raft of examples that call it into question. As markets reach into spheres of life traditionally governed by nonmarket norms, the notion that markets don't touch or taint the goods they exchange becomes increasingly implausible. A growing body of research confirms what common sense suggests: financial incentives and other market mechanisms can backfire by crowding out nonmarket norms. Sometimes, offering payment for a certain behavior gets you less of it, not more.
Nuclear Waste Sites
For years, Switzerland had been trying to find a place to store radioactive nuclear waste. Although the country relies heavily on nuclear energy, few communities wanted nuclear waste to reside in their midst. One location designated as a potential nuclear waste site was the small mountain village of Wolfenschiessen in central Switzerland. In 1993, shortly before a referendum on the issue, some economists surveyed the residents of the village, asking whether they would vote to accept a nuclear waste repository in their community, if the Swiss parliament decided to build it there. Although the facility was widely viewed as an undesirable addition to the neighborhood, a slim majority (51%) of residents said they would accept it. Apparently their sense of civic duty outweighed their concern about the risks. Then the economists added a sweetener: suppose parliament proposed building the nuclear waste facility in your community and offered to compensate each resident with an annual monetary payment. Then would you favor it? The result: support went down, not up. Adding the financial inducement cut the rate of acceptance in half, from 51% to 25%. The offer of money actually reduced people's willingness to host the nuclear waste site. What's more, upping the ante didn't help. When the economists increased the monetary offer, the result was unchanged. The residents stood firm even when offered yearly cash payments as high as $8700 per person, well in excess of the median monthly income. Similar if less dramatic reactions to monetary offers have been found in other places where local communities have resisted radio-active waste repositories.
Why would more people in the Swiss village accept nuclear waste for free than for pay?
Standard economic analysis suggests that offering people money to accept a burden would increase, not decrease their willingness to do so. But Bruno S. Frey and Felix Oberholzer-Gee, the economists who led the study, point out that the price effect is sometimes confounded by moral considerations, including a commitment to the common good. For many villagers, willingness to accept the nuclear waste site reflected public spirit -- a recognition that the country as a whole depended on nuclear energy and that the nuclear waste had to be stored somewhere. If their community was found to be the safest storage site, they were willing to bear the burden. Against the background of this civic commitment, the offer of cash to residents of the village felt like a bribe, an effort to buy their vote. In fact, 83% of those who rejected the monetary proposal explained their opposition by saying they could not be bribed.
You might think that adding a financial incentive would simply reinforce whatever public-spirited sentiment already exists, thus increasing support for the nuclear waste site. After all, aren't two incentives -- one financial, the other civic -- more powerful than one? Not necessarilly. It is a mistake to assume that incentives are additive. To the contrary, for the good citizens of Switzerland, the prospect of a private payoff transformed a civic question into a pecuniary one. The intrusion of market norms crowded out their sense of civic duty.
"Where public spirit prevails", the authors of the study conclude, "using price incentives to muster support for the construction of a socially desirable, but locally unwanted, facility comes at a higher price than suggested by standard economic theory because these incentives tend to crowd out civic duty.
This does not mean that government agencies should simply impose siting decision on local communities. High-handed regulation can be even more corrosive of public spirit than monetary incentives. Enabling local residents to assess the risks for themselves, allowing citizens to participate in deciding what sites best serve the public interest, giving host communities the right to close dangerous facilities if necessary -- these are surer ways of generating public support than simply trying to buy it.
Although cash payoffs are generally resented, compensation in kind is often welcomed. Communities often accept compensation for the siting of undesirable public projects -- an airport, a landfill site, a recycling station -- in their own backyards. But studies have found that people are more likely to accept such compensation if it takes the form of public goods rather than cash. Public parks, libraries, school improvements, community centers, even jogging and bicycle trails are more readily accepted as compensation than are monetary payments.
Fro the standpoint of economic efficiency, this is puzzling, even irrational. Cash is always better, supposedly, than in kind public goods, for reasons we explored in connection with gift giving. Money is fungible, the universal gift card: if residents are compensated in cash, they can always decide to pool their windfall to pay for public parks, libraries, and playgrounds, if that is what will maximize their utility. Or they can choose to spend the money on private consumption.
But this logic misses the meaning of civic sacrifice. Public goods are more fitting than private cash as compensation for public harms and inconveniences, because such goods acknowledge the civic burdens and shared sacrifice that siting decisions impose. A monetary payment to residents for accepting a new runway or landfill in their town can be seen as a bribe to acquiesce in the degradation of the community. But a new library, playground, or school repays the civic sacrifice in the same coin, so to speak, by strengthening the community and honoring its public spirit.
Donation Day and Late Pickups
Financial incentives have also been found to crowd out public spirit in settings less fateful than those involving nuclear waste. Each year, on a designated donation day, Israeli high school students go to door-to-door to solicit donations for worthy causes -- cancer research, aid to disabled children, and so on. Two economists did an experiment to determine the effect of financial incentives on the students' motivations. They divided students into three groups. One group was given a brief motivational speech about the importance of the cause and sent on its way. The second and third groups were given the same speech but also offered a monetary reward based on the amount they collected -- 1% and 10%, respectively. The rewards would not be deducted from the charitable donations; they would come from a separate source.
The unpaid group raised the most money, collected 55% more in donations that those who were offered a 1% commission. Those who were offered 10% did considerably better than the 1% group, but less well than the students who were not paid at all. (The unpaid volunteers collected 9% more than those on the high commission).
The moral of the story, if you're going to use financial incentives to motivate people, you should either "pay enough or don't pay at all". while it may be true that paying enough will get you what you want, that's not all this story tells us. There is also a lesson here about how money crowds out norms.
The three cases: nuclear waste siting, charitable fund-raising, late day-care pickups, illustrate the way introducing money into a nonmarket setting can change people's attitudes and crowd out moral and civic commitments. The corrosive effect of market relations is sometimes strong enough to override the price effect: offering a financial incentive to accept a hazardous facility, or go door-to-door collecting charity, ro show up on time reduced rather than increased people's willingness to do so.
Why worry about the tendency of markets to crowd out nonmarket norms? Two reasons: one fiscal, the other ethical. From an economic point of view, social norms such as civic virtue and public spiritedness are great bargains. They motivate socially useful behavior that would otherwise cost a lot to buy. If you had to rely on financial incentives to get communities to accept nuclear waste, you'd have to pay a lot more than if you could rely instead on the resident's sense of civic obligation. But to view moral and civic norms simply as cost-effective ways of motivating people ignores the intrinsic value of the norms. It's like treating the stigma cash gifts as a social fact that stands in the way of economic efficiency but that can't be assessed in moral terms. Relying solely on cash payments to induce residents to accept a nuclear waste facility is not only expensive; it is also corrupting. It bypasses persuasion and the kind of consent that arises from deliberating about the risks the facility poses and the larger community's need for it.
Two Objections to Markets
These two kinds of arguments reverberate through debates about what money should and should not buy. The fairness objection asks about the inequality that market choices may reflect; the corruption objection asks about the attitudes and norms tha tmarket relations may damage or dissolve.
It's worth taking a moment to clarify these two arguments for the moral limits of markets. The fairness objection points to the injustice that can arise when people buy and sell things under conditions of inequality or dire economic necessity. According to this objection, market exchanges are not always as voluntary as market enthusiasts suggest. A peasant may agree to sell his kidney to feed his starving family, but his agreement may not really be voluntary. He may be unfairly coerced, in effect, by the necessities of his situation.
The corruption objection is different. It points to the degrading effect of market valuation and exchange on certain goods and practices. According to this objection, certain moral and civic goods are diminished or corrupted if bought and sold. The argument from corruption cannot be met by establishing fair bargaining conditions. It applies under conditions of equality and inequality alike.
The long-standing debate about prostitution illustrates the difference. Some people oppose prostitution on the grounds that it is rarely, if ever, truly voluntary. They argue that those who sell their bodies for sex are typically coerced, whether by poverty, drug addiction, or the threat of violence.This is a version of the fairness objection. But, others object to prostitution on the grounds that it is degrading to women, whether or not they are forced into it. According to this argument, prostitution is a form of corruption that demeans women and promotes bad attitudes toward sex. The degradation objection doesn't depend on tainted consent; it would condemn prostitution even in a society without poverty, even in cases of upscale prostitutes, who liked the work and freely chose it.
Each objection draws on a different moral ideal. The fairness argument draws on the ideal of consent or, more precisely, the ideal of consent carried out under fair background conditions. One of the main arguments for using markets to allocate goods is that markets respect freedom of choice. They allow people to choose for themselves whether to sell this or that good at a given price.
But the fairness objection points out that some such choices are not truly voluntary. Market choices are not free choices if some people are desperately poor or lack the ability to bargain on fair terms. So in order to know whether a market choice is a free choice, we have to ask what inequalities in the background conditions of society undermine meaningful consent. At what point do inequalities of bargaining power coerce the disadvantaged and undermine the fairness of the deals they make?
The corruption argument points to a different set of moral ideals. It appeals not to consent but to the moral importance of the goods at stake, the ones said to be degraded by market valuation and exchange. So to decide whether college admission should be bought and sold, we have to debate the moral and civic goods that colleges should pursue, and ask whether selling admission would damage those goods. To decide whether to establish a market in babies up for adoption, we need to ask what norms should govern the parent-child relationship, and ask whether buying and selling children would undermine those norms.
The fairness and corruption objections differ in their implications for markets: The fairness argument does not object to marketizing certain goods on the grounds that they are precious or sacred or priceless; it objects to buying and selling goods against a background of inequality sever enough to create unfair bargaining conditions. It offers no basis for objecting to the commodification of goods (whether sex or kidneys or college admission) in a society whose background conditions are fair.
The corruption argument, by contrast, focuses on the character of the goods themselves and the norms that should govern them. So it cannot be met simply by establishing fair bargaining conditions. Eve in a society without unjust differences of power and wealth, there would still be things that money should not buy. This is because markets are not mere mechanisms; they embody certain values. And sometimes, market values crowd out nonmarket norms worth caring about.
Crowding Out Nonmarket Norms
How exactly does this crowding out take place? How do market values corrupt, dissolve, or displace nonmarket norms? Standard economic reasoning assumes that commodifying a good -- putting it up for sale -- does not alter its character. Market exchanges increase economic efficiency without changing the goods themselves. That is why economists are generally sympathetic to using financial incentives to elicit desirable behavior; scalping tickets for highly prized concerts, sporting events, even papal masses; employing tradable quotas to allocate pollution, refugees, and procreation; giving cash gifts rather than presents; using markets to ease the gap between supply and demand for all manner of goods, even kidneys. Market exchanges make both parties better off without making anyone else worse off -- if you assume that market relations and the attitudes they foster don't diminish the value of the goods being exchanged. But this assumption is open to doubt. We've already considered a raft of examples that call it into question. As markets reach into spheres of life traditionally governed by nonmarket norms, the notion that markets don't touch or taint the goods they exchange becomes increasingly implausible. A growing body of research confirms what common sense suggests: financial incentives and other market mechanisms can backfire by crowding out nonmarket norms. Sometimes, offering payment for a certain behavior gets you less of it, not more.
Nuclear Waste Sites
For years, Switzerland had been trying to find a place to store radioactive nuclear waste. Although the country relies heavily on nuclear energy, few communities wanted nuclear waste to reside in their midst. One location designated as a potential nuclear waste site was the small mountain village of Wolfenschiessen in central Switzerland. In 1993, shortly before a referendum on the issue, some economists surveyed the residents of the village, asking whether they would vote to accept a nuclear waste repository in their community, if the Swiss parliament decided to build it there. Although the facility was widely viewed as an undesirable addition to the neighborhood, a slim majority (51%) of residents said they would accept it. Apparently their sense of civic duty outweighed their concern about the risks. Then the economists added a sweetener: suppose parliament proposed building the nuclear waste facility in your community and offered to compensate each resident with an annual monetary payment. Then would you favor it? The result: support went down, not up. Adding the financial inducement cut the rate of acceptance in half, from 51% to 25%. The offer of money actually reduced people's willingness to host the nuclear waste site. What's more, upping the ante didn't help. When the economists increased the monetary offer, the result was unchanged. The residents stood firm even when offered yearly cash payments as high as $8700 per person, well in excess of the median monthly income. Similar if less dramatic reactions to monetary offers have been found in other places where local communities have resisted radio-active waste repositories.
Why would more people in the Swiss village accept nuclear waste for free than for pay?
Standard economic analysis suggests that offering people money to accept a burden would increase, not decrease their willingness to do so. But Bruno S. Frey and Felix Oberholzer-Gee, the economists who led the study, point out that the price effect is sometimes confounded by moral considerations, including a commitment to the common good. For many villagers, willingness to accept the nuclear waste site reflected public spirit -- a recognition that the country as a whole depended on nuclear energy and that the nuclear waste had to be stored somewhere. If their community was found to be the safest storage site, they were willing to bear the burden. Against the background of this civic commitment, the offer of cash to residents of the village felt like a bribe, an effort to buy their vote. In fact, 83% of those who rejected the monetary proposal explained their opposition by saying they could not be bribed.
You might think that adding a financial incentive would simply reinforce whatever public-spirited sentiment already exists, thus increasing support for the nuclear waste site. After all, aren't two incentives -- one financial, the other civic -- more powerful than one? Not necessarilly. It is a mistake to assume that incentives are additive. To the contrary, for the good citizens of Switzerland, the prospect of a private payoff transformed a civic question into a pecuniary one. The intrusion of market norms crowded out their sense of civic duty.
"Where public spirit prevails", the authors of the study conclude, "using price incentives to muster support for the construction of a socially desirable, but locally unwanted, facility comes at a higher price than suggested by standard economic theory because these incentives tend to crowd out civic duty.
This does not mean that government agencies should simply impose siting decision on local communities. High-handed regulation can be even more corrosive of public spirit than monetary incentives. Enabling local residents to assess the risks for themselves, allowing citizens to participate in deciding what sites best serve the public interest, giving host communities the right to close dangerous facilities if necessary -- these are surer ways of generating public support than simply trying to buy it.
Although cash payoffs are generally resented, compensation in kind is often welcomed. Communities often accept compensation for the siting of undesirable public projects -- an airport, a landfill site, a recycling station -- in their own backyards. But studies have found that people are more likely to accept such compensation if it takes the form of public goods rather than cash. Public parks, libraries, school improvements, community centers, even jogging and bicycle trails are more readily accepted as compensation than are monetary payments.
Fro the standpoint of economic efficiency, this is puzzling, even irrational. Cash is always better, supposedly, than in kind public goods, for reasons we explored in connection with gift giving. Money is fungible, the universal gift card: if residents are compensated in cash, they can always decide to pool their windfall to pay for public parks, libraries, and playgrounds, if that is what will maximize their utility. Or they can choose to spend the money on private consumption.
But this logic misses the meaning of civic sacrifice. Public goods are more fitting than private cash as compensation for public harms and inconveniences, because such goods acknowledge the civic burdens and shared sacrifice that siting decisions impose. A monetary payment to residents for accepting a new runway or landfill in their town can be seen as a bribe to acquiesce in the degradation of the community. But a new library, playground, or school repays the civic sacrifice in the same coin, so to speak, by strengthening the community and honoring its public spirit.
Donation Day and Late Pickups
Financial incentives have also been found to crowd out public spirit in settings less fateful than those involving nuclear waste. Each year, on a designated donation day, Israeli high school students go to door-to-door to solicit donations for worthy causes -- cancer research, aid to disabled children, and so on. Two economists did an experiment to determine the effect of financial incentives on the students' motivations. They divided students into three groups. One group was given a brief motivational speech about the importance of the cause and sent on its way. The second and third groups were given the same speech but also offered a monetary reward based on the amount they collected -- 1% and 10%, respectively. The rewards would not be deducted from the charitable donations; they would come from a separate source.
The unpaid group raised the most money, collected 55% more in donations that those who were offered a 1% commission. Those who were offered 10% did considerably better than the 1% group, but less well than the students who were not paid at all. (The unpaid volunteers collected 9% more than those on the high commission).
The moral of the story, if you're going to use financial incentives to motivate people, you should either "pay enough or don't pay at all". while it may be true that paying enough will get you what you want, that's not all this story tells us. There is also a lesson here about how money crowds out norms.
The three cases: nuclear waste siting, charitable fund-raising, late day-care pickups, illustrate the way introducing money into a nonmarket setting can change people's attitudes and crowd out moral and civic commitments. The corrosive effect of market relations is sometimes strong enough to override the price effect: offering a financial incentive to accept a hazardous facility, or go door-to-door collecting charity, ro show up on time reduced rather than increased people's willingness to do so.
Why worry about the tendency of markets to crowd out nonmarket norms? Two reasons: one fiscal, the other ethical. From an economic point of view, social norms such as civic virtue and public spiritedness are great bargains. They motivate socially useful behavior that would otherwise cost a lot to buy. If you had to rely on financial incentives to get communities to accept nuclear waste, you'd have to pay a lot more than if you could rely instead on the resident's sense of civic obligation. But to view moral and civic norms simply as cost-effective ways of motivating people ignores the intrinsic value of the norms. It's like treating the stigma cash gifts as a social fact that stands in the way of economic efficiency but that can't be assessed in moral terms. Relying solely on cash payments to induce residents to accept a nuclear waste facility is not only expensive; it is also corrupting. It bypasses persuasion and the kind of consent that arises from deliberating about the risks the facility poses and the larger community's need for it.
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