What Money Can't (Shouldn't) Buy: The Commercialization Effect
Many economists now recognize that markets change the character of the goods and social practices they govern. In recent years, one of the first to emphasize the corrosive effect of markets on nonmarket norms was Fred Hirsch, a British economist who served as a senior adviser to IMF. In a book published in 1976 (the same year that Gary Becker's influential An Economic Approach to Human Behavior appeared and three years before Thatcher was elected prime minister), Hirsch challenged the assumption that the value of good is the same whether provided through the market or in some other way.
Hirsch argues that mainstream economics has overlooked what he calls the "commercialization effect." By this he means "the effect on the characteristics of a product or activity of supplying it exclusively or predominantly on commercial terms rather than on some other basis -- such as informal exchange, mutual obligation, altruism or love, or feelings of service or obligation." The "common assumption, almost always hidden, is that the commercialization process does not affect the product." Hirsch observes that this mistaken assumption loomed large in the rising economic imperialism of the time, including attempts, by Becker and others, to extend economic analysis into neighboring realms of social and political life.
Hirsch died just two years later at the age of forty-seven, and so did not have the chance to elaborate his critique of mainstream economics. In the ensuing decades, his book become a minor classic among those who rejected the growing commodification of social life and the economic reasoning that propelled it. The three empirical cases we've just considered support Hirsch's insight -- that the introduction of market incentives and mechanisms can change people's attitudes and crowd out nonmarket values.
Recently, other empirically minded economists have been finding further evidence of the commercialization effect. Dan Ariely, a behavioral economists, did a series of experiments demonstrating that paying people to do something may elicit less effort from them than asking them to do it for free, especially if it's a good deed. The American Association of Retired Persons asked a group of lawyers if they would be willing to provide legal services to needy retirees at a discounted rate of $30 an hour. The lawyers refused. Then the AARP asked if they would provide legal advice to the needy retirees for free. The lawyers agreed. Once it was clear they were being asked to engage in a charitable activity rather than a market transaction. the lawyers responded charitably.
A growing body of work in social psychology offers a possible explanation for this commercialization effect. These studies highlight the difference between intrinsic motivations (such as moral conviction or interest in the task at hand ) and external ones (such as money or other tangible rewards). When people are engaged in an activity they consider intrinsically worthwhile, offering them money may weaken their motivation by depreciating or "crowding out" their intrinsic interest or commitment. Standard economic theory construes all motivations, whatever their character or source, as preferences and assumes they are additive. But this misses the corrosive effect of money.
The crowding-out phenomenon has big implications for economics. It calls into question the use of market mechanisms and market reasoning in many aspects of social life, including financial incentives to motivate performance in education, health care, the work place, voluntary associations, civic life, and other settings in which intrinsic motivation or moral commitments matter. Bruno Frey (an author of the Swiss nuclear waste siting study) and the economist Reto Jegen summarize the implications as follows:
"Arguably, the crowding-out effect is one of the most important anomalies in economics, as it suggests the opposite of the most fundamental economic law, that raising monetary incentives increases supply. If the crowding-out effect holds, raising monetary incentives reduces, rather than increases, supply.
Blood for Sale
Perhaps the best-known illustration of markets crowding out non-market norms is a classic study of blood donation by the British sociologist Richard Titmuss. In his 1970 book The Gift Relationship, Titmuss compared the system of blood collection used in U.K., where all blood for transfusion is given by unpaid, voluntary donors, and the system in the U.S., where some blood is donated and some bought by commercial blood banks from people, typically the poor, who are willing to sell their blood as a way of making money. Titmuss argued in favor of the U.K. system and against treating human blood as a commodity to be bought and sold on the market.
Titmuss presented a wealth of data showing that, in economic and practical terms alone, the British blood collection system works better than the American one. Despite the supposed efficiency of markets, he argued, the American system leads to chronic shortages, wasted blood, higher costs, and greater risk of contaminated blood. But Titmuss also leveled an ethical argument against the buying and selling the blood.
Titmuss' ethical argument against the commodification of blood offers a good illustration of the two objections to markets identified earlier -- fairness and corruption. Part of his argument is that a market in blood exploits the poor (the fariness objection). He observed that for-profit blood banks in the U.S. recruit much of their supply from Skid Row residents desperate for quick cash. The commercialization of blood leads to more blood "being supplied by the poor, the unskilled, the unemployed, Negroes and other low income groups. A new class is emerging of an exploited human population of high blood yielders The redistribution of blood from the poor to the rich appears to be one of the dominant effects of the American blood banking systems.
But Titmuss had a further objection: turning blood into a market commodity erodes people's sense of obligation to donate blood, diminishes the spirit of altruism, and undermines the "gift relationship" as an active feature of social life (the corruption objection). Looking at U.S., he lamented the decline in recent years in the voluntary giving of blood, and attributed this to the rise of commercial blood banks. Commercialization and profit in blood has been driving out the voluntary donor. Once people begin to view blood as a commodity that is routinely bought and sold, they are less likely to feel a moral responsibility to donate it. Here he was pointing to the crowding-out effect of market relations on nonmarket norms, though he didn't use this phrase.
Titmuss was concerned not only with the declining willingness to give blood but also with the broader moral implications. Beyond its harmful effect on the quantity and quality of blood, the declining spirit of giving made for an impoverished moral and social life. It is likely that a decline in the spirit of altruism in one sphere of human activities will be accompanies by similar changes in attitudes, motives and relationships in other spheres.
While a market-based system does not prevent anyone from donating blood if she or she wants to, the market values that suffuse the system exert a corrosive effect on the norm of giving. The ways in which society organizes and structures its social institutions -- and particularly its health and welfare systems -- can encourage or discourage the altruistic in man; such systems can foster integration or alienation; they can allow the 'theme of the gift' -- of generosity towards strangers -- to spread among and between social groups and generations. At some point, Titmuss worried, market-driven societies might become so inhospitable to altruism that they could be said to impair the freedom of persons to give. The commercialization of blood and donor relationships represses the expression of altruism, and erodes the sense of community.
Titmuss' book prompted much debate. Among his critics was Kenneth Arrow, one of the most distinguished American economists. Arrow was no Milton Friedman-like proponent of unfettered markets. His earlier work had analyzed imperfections in markets for health-care. But he took strong exception to Titmuss; critique of economics and market thinking. In doing so, Arrow in voked two key tenets of the market faith -- two assumptions about human nature and moral life that economists often assert but rarely defend.
Two Tenets of Market Faith
The first is that commercializing an activity doesn't change it. On this assumption, money never corrupts, and market relations never crowd out nonmarket norms. If this is true, then the case for extending markets into every aspect of life is hard to resist. If previously untraded good is made tradable, no harm i sdone. Those who wish to buy and sell it can do so, thereby increasing their utility, while those who regard the good as priceless are free to desist from trafficking in it. According to this logic, allowing market transactions makes some people better off without making anyone else worse off -- even if the good being bought and sold is human blood.
As Arrow explains: "economists typically take for granted that since the creation of a market increases the individual's area of choice it therefore leads to higher benefits. Thus, if to a voluntary blood donor system we add the possibility of selling blood, we have only expanded the individual's range of alternatives. If he derives satisfaction from giving, it is argued, he can still give, and nothing had been done to impair that right.
This line of reasoning leans heavily on the notion that creating a market in blood does not change its value or meaning. Blood is blood, and it will serve its life-sustaining purpose whether gifted or sold. Of course, the good at stake here is not only blood but also the act of donating blood out of altruism. Titmuss attaches independent moral value to the generosity that motivates the gift. But Arrow doubts that even this practice could be damaged by the introduction of a market: Why should it be that the creation of a market for blood would decrease the altruism embodied in giving blood?
The answer is that commercializing blood changes the meaning of donating it. For consider: In a world where blood is routinely bought and sold, is donating a pint of blood at your local Red Cross still an act of generosity? Or is it an unfair labor practice that deprives needy persons of gainful employment selling their blood? If you want to contribute a blood drive, would it better to donate blood yourself, or to donate $50 that can be used to buy an extra pint of blood from a homeless person who needs the income? A would-be altruist could be forgiven for being confused.
The second tenet of market faith that figures in Arrow's critique is that ethical behavior is a commodity that needs to be economized. The idea is we should not rely too heavily on altruism, generosity, solidarity, or civic duty, because these moral sentiments are scarce resources that are depleted with use. Markets, which rely on self-interest, spare us from using up the limited supply of virtue. So, for example, if we rely on the generosity of the public for the supply of blood, there will be less generosity left over for other social or charitable purposes. If, however, we use the price system to generate the blood, supply, people's altruistic impulses will be available, undiminished, when we really need them. Arrow writes, "Like many economists, I do not want to rely too heavily on substituting ethics for self-interest. I think it best on the whole that the requirement of ethical behavior be confined to those circumstances where the price system breaks down ... We do not wish to use up recklessly the scarce resources of altruistic motivation.
It is easy to see how this economistic conception of virtue, if true, provides yet further grounds for extending markets into every sphere of life, including those traditionally governed by nonmarket values. If the supply of altruism, generosity, and civic virtue is fixed, as if by nature, like the supply of fossil fuels, then we should try to conserve it. The more we use, the less we have. On this assumption, relying more on markets and less on morals is a way of preserving a scarce resources.
Economizing Love
Sir Dennis H. Robertson, a Cambridge economist and former student of John Maynard Keynes, gave lecture titled "What does the economist economize?" He sought to show that despite catering to the aggressive and acquisitive instincts of human beings, economists nonetheless serve a moral mission.
Robertson began by conceding that economics, concerned as it is with the desire for gain, does not deal with the noblest human motives. It is for the preacher, lay or clerical, to inculcate the higher virtues -- altruism, benevolence, generosity, solidarity, and civic duty. It is the humbler, and often the invidious, role of the economist to help, so far as he can, in reducing the preacher's task to manageable dimensions.
How does the economist help? By promoting policies that rely, whenever possible, on self-interest rather than altruism on moral considerations, the economist saves society from squandering its scarce supply of virtue. "If we economists do our business well," Robertson concludes, "we can, I believe, contribute mightily to the economizing ... of that scarce resource Love, the most precious thing in the world."
To those not steeped in economics, this way of thinking about the generous virtues is strange, even far-fetched. It ignores the possibility that our capacity for love and benevolence is not depleted with use but enlarged with practice. Think of a loving couple. If, over a lifetime, they asked little of one another, in hopes of hoarding their love, how well would they fare? Wouldn't their love deepen rather than diminish the more they called upon it? Would they do better to treat one another in more calculating fashion, to conserve their love for the times they really needed it?
Similar questions can be asked about social solidarity and civic virtue. Should we try to conserve civic virtue by telling citizens to go shopping until their country needs to call upon them to sacrifice for the common good? Or do civic virtue and public spirit atrophy with disuse? Many moralists have taken the second view. Aristotle taught that virtue is something we cultivate with practice: "we become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts."
Rousseau held a similar view. The more country asks of its citizens, the greater their devotion to it. "In a well-ordered city every man flies to the assemblies." Under a bad government, no one participates in public life "because no one is interested in what happens there" and "domestic cares are all-absorbing." Civic virtue is built up, not spent down, by strenuous citizenship. Use it or lose it, Rousseau says, in effect. "As soon as public service ceases to be the chief business of the citizens, and they would rather serve with their money than with their persons, the state is not far from its fall".
Robertson offers his observation in a lighthearted, speculative spirit. But the notion that love and generosity are scarce resources that are depleted with use continues to exert a powerful hold on the moral imagination of economists, even if they don't argue for it explicitly. It is not an official textbook principle, like the law of supply and demand. No one has proved it empirically. It is more like an adage, a piece of folk wisdom, to which many economists still subscribe.
Almost half a century after Robertson's lecture, the economist Lawrence Summers, then the president of Harvard University, was invited to offer the morning prayer in Harvard's Memorial Church. He chose as his theme what "economics can contribute to thinking about moral questions." Economics, he stated, "is too rarely appreciated for its moral as well as practical significance."
Summers observed that economists place "great emphasis on respect for individuals -- and the needs, tastes, choices and judgment they make for themselves." He then offered a standard utilitarian account of the common good as the sum of people's subjective preferences: "It is the basis of much economic analysis that the good is an aggregation of many individuals' assessments of their own well-being, and not something that can be assessed" apart from these preferences on the basis of an independent moral theory.
He illustrated this approach by challenging students who had advocated a boycott of goods produced by sweatshop labor: "We all deplore the conditions in which so many on this planet work and the paltry compensation they receive. And yet there is surely some moral force to the concern that as long as the workers are voluntarily employed, they have chosen to work because they are working to their best alternative. Is narrowing an individual's set of choices an act of respect, of charity, even of concern?"
He concluded with a reply to those who criticize markets for relying on selfishness and greed: "We all have only so much altruism in us. Economists like me think of altruism as a valuable and rare good that needs conserving. Far better to conserve it by designing a system in which poeple's wants will be satisfied by individuals being selfish, and saving that altruism for our families, our friends, and the many social problems in this world that markets cannot solve."
Here was Robertson's adage reasserted. notice that Summers' version of it is even starker than Arrow's: Reckless expenditures of altruism in social and economic life not only deplete the supply available for other public purposes. They even reduce the amount we have left for our families and friends.
This economistic view of virtue fuels the faith in markets and propels their reach into places they don't belong. But the metaphor is misleading. Altruism, generosity, solidarity, and civic spirit are not like commodities that are depleted with use. They are more like muscles that develop and grow stronger with exercise. One of the defects of a market-driven society is that it lets these virtues languish. To renew our public life we need to exercise them more strenuously.
Hirsch argues that mainstream economics has overlooked what he calls the "commercialization effect." By this he means "the effect on the characteristics of a product or activity of supplying it exclusively or predominantly on commercial terms rather than on some other basis -- such as informal exchange, mutual obligation, altruism or love, or feelings of service or obligation." The "common assumption, almost always hidden, is that the commercialization process does not affect the product." Hirsch observes that this mistaken assumption loomed large in the rising economic imperialism of the time, including attempts, by Becker and others, to extend economic analysis into neighboring realms of social and political life.
Hirsch died just two years later at the age of forty-seven, and so did not have the chance to elaborate his critique of mainstream economics. In the ensuing decades, his book become a minor classic among those who rejected the growing commodification of social life and the economic reasoning that propelled it. The three empirical cases we've just considered support Hirsch's insight -- that the introduction of market incentives and mechanisms can change people's attitudes and crowd out nonmarket values.
Recently, other empirically minded economists have been finding further evidence of the commercialization effect. Dan Ariely, a behavioral economists, did a series of experiments demonstrating that paying people to do something may elicit less effort from them than asking them to do it for free, especially if it's a good deed. The American Association of Retired Persons asked a group of lawyers if they would be willing to provide legal services to needy retirees at a discounted rate of $30 an hour. The lawyers refused. Then the AARP asked if they would provide legal advice to the needy retirees for free. The lawyers agreed. Once it was clear they were being asked to engage in a charitable activity rather than a market transaction. the lawyers responded charitably.
A growing body of work in social psychology offers a possible explanation for this commercialization effect. These studies highlight the difference between intrinsic motivations (such as moral conviction or interest in the task at hand ) and external ones (such as money or other tangible rewards). When people are engaged in an activity they consider intrinsically worthwhile, offering them money may weaken their motivation by depreciating or "crowding out" their intrinsic interest or commitment. Standard economic theory construes all motivations, whatever their character or source, as preferences and assumes they are additive. But this misses the corrosive effect of money.
The crowding-out phenomenon has big implications for economics. It calls into question the use of market mechanisms and market reasoning in many aspects of social life, including financial incentives to motivate performance in education, health care, the work place, voluntary associations, civic life, and other settings in which intrinsic motivation or moral commitments matter. Bruno Frey (an author of the Swiss nuclear waste siting study) and the economist Reto Jegen summarize the implications as follows:
"Arguably, the crowding-out effect is one of the most important anomalies in economics, as it suggests the opposite of the most fundamental economic law, that raising monetary incentives increases supply. If the crowding-out effect holds, raising monetary incentives reduces, rather than increases, supply.
Blood for Sale
Perhaps the best-known illustration of markets crowding out non-market norms is a classic study of blood donation by the British sociologist Richard Titmuss. In his 1970 book The Gift Relationship, Titmuss compared the system of blood collection used in U.K., where all blood for transfusion is given by unpaid, voluntary donors, and the system in the U.S., where some blood is donated and some bought by commercial blood banks from people, typically the poor, who are willing to sell their blood as a way of making money. Titmuss argued in favor of the U.K. system and against treating human blood as a commodity to be bought and sold on the market.
Titmuss presented a wealth of data showing that, in economic and practical terms alone, the British blood collection system works better than the American one. Despite the supposed efficiency of markets, he argued, the American system leads to chronic shortages, wasted blood, higher costs, and greater risk of contaminated blood. But Titmuss also leveled an ethical argument against the buying and selling the blood.
Titmuss' ethical argument against the commodification of blood offers a good illustration of the two objections to markets identified earlier -- fairness and corruption. Part of his argument is that a market in blood exploits the poor (the fariness objection). He observed that for-profit blood banks in the U.S. recruit much of their supply from Skid Row residents desperate for quick cash. The commercialization of blood leads to more blood "being supplied by the poor, the unskilled, the unemployed, Negroes and other low income groups. A new class is emerging of an exploited human population of high blood yielders The redistribution of blood from the poor to the rich appears to be one of the dominant effects of the American blood banking systems.
But Titmuss had a further objection: turning blood into a market commodity erodes people's sense of obligation to donate blood, diminishes the spirit of altruism, and undermines the "gift relationship" as an active feature of social life (the corruption objection). Looking at U.S., he lamented the decline in recent years in the voluntary giving of blood, and attributed this to the rise of commercial blood banks. Commercialization and profit in blood has been driving out the voluntary donor. Once people begin to view blood as a commodity that is routinely bought and sold, they are less likely to feel a moral responsibility to donate it. Here he was pointing to the crowding-out effect of market relations on nonmarket norms, though he didn't use this phrase.
Titmuss was concerned not only with the declining willingness to give blood but also with the broader moral implications. Beyond its harmful effect on the quantity and quality of blood, the declining spirit of giving made for an impoverished moral and social life. It is likely that a decline in the spirit of altruism in one sphere of human activities will be accompanies by similar changes in attitudes, motives and relationships in other spheres.
While a market-based system does not prevent anyone from donating blood if she or she wants to, the market values that suffuse the system exert a corrosive effect on the norm of giving. The ways in which society organizes and structures its social institutions -- and particularly its health and welfare systems -- can encourage or discourage the altruistic in man; such systems can foster integration or alienation; they can allow the 'theme of the gift' -- of generosity towards strangers -- to spread among and between social groups and generations. At some point, Titmuss worried, market-driven societies might become so inhospitable to altruism that they could be said to impair the freedom of persons to give. The commercialization of blood and donor relationships represses the expression of altruism, and erodes the sense of community.
Titmuss' book prompted much debate. Among his critics was Kenneth Arrow, one of the most distinguished American economists. Arrow was no Milton Friedman-like proponent of unfettered markets. His earlier work had analyzed imperfections in markets for health-care. But he took strong exception to Titmuss; critique of economics and market thinking. In doing so, Arrow in voked two key tenets of the market faith -- two assumptions about human nature and moral life that economists often assert but rarely defend.
Two Tenets of Market Faith
The first is that commercializing an activity doesn't change it. On this assumption, money never corrupts, and market relations never crowd out nonmarket norms. If this is true, then the case for extending markets into every aspect of life is hard to resist. If previously untraded good is made tradable, no harm i sdone. Those who wish to buy and sell it can do so, thereby increasing their utility, while those who regard the good as priceless are free to desist from trafficking in it. According to this logic, allowing market transactions makes some people better off without making anyone else worse off -- even if the good being bought and sold is human blood.
As Arrow explains: "economists typically take for granted that since the creation of a market increases the individual's area of choice it therefore leads to higher benefits. Thus, if to a voluntary blood donor system we add the possibility of selling blood, we have only expanded the individual's range of alternatives. If he derives satisfaction from giving, it is argued, he can still give, and nothing had been done to impair that right.
This line of reasoning leans heavily on the notion that creating a market in blood does not change its value or meaning. Blood is blood, and it will serve its life-sustaining purpose whether gifted or sold. Of course, the good at stake here is not only blood but also the act of donating blood out of altruism. Titmuss attaches independent moral value to the generosity that motivates the gift. But Arrow doubts that even this practice could be damaged by the introduction of a market: Why should it be that the creation of a market for blood would decrease the altruism embodied in giving blood?
The answer is that commercializing blood changes the meaning of donating it. For consider: In a world where blood is routinely bought and sold, is donating a pint of blood at your local Red Cross still an act of generosity? Or is it an unfair labor practice that deprives needy persons of gainful employment selling their blood? If you want to contribute a blood drive, would it better to donate blood yourself, or to donate $50 that can be used to buy an extra pint of blood from a homeless person who needs the income? A would-be altruist could be forgiven for being confused.
The second tenet of market faith that figures in Arrow's critique is that ethical behavior is a commodity that needs to be economized. The idea is we should not rely too heavily on altruism, generosity, solidarity, or civic duty, because these moral sentiments are scarce resources that are depleted with use. Markets, which rely on self-interest, spare us from using up the limited supply of virtue. So, for example, if we rely on the generosity of the public for the supply of blood, there will be less generosity left over for other social or charitable purposes. If, however, we use the price system to generate the blood, supply, people's altruistic impulses will be available, undiminished, when we really need them. Arrow writes, "Like many economists, I do not want to rely too heavily on substituting ethics for self-interest. I think it best on the whole that the requirement of ethical behavior be confined to those circumstances where the price system breaks down ... We do not wish to use up recklessly the scarce resources of altruistic motivation.
It is easy to see how this economistic conception of virtue, if true, provides yet further grounds for extending markets into every sphere of life, including those traditionally governed by nonmarket values. If the supply of altruism, generosity, and civic virtue is fixed, as if by nature, like the supply of fossil fuels, then we should try to conserve it. The more we use, the less we have. On this assumption, relying more on markets and less on morals is a way of preserving a scarce resources.
Economizing Love
Sir Dennis H. Robertson, a Cambridge economist and former student of John Maynard Keynes, gave lecture titled "What does the economist economize?" He sought to show that despite catering to the aggressive and acquisitive instincts of human beings, economists nonetheless serve a moral mission.
Robertson began by conceding that economics, concerned as it is with the desire for gain, does not deal with the noblest human motives. It is for the preacher, lay or clerical, to inculcate the higher virtues -- altruism, benevolence, generosity, solidarity, and civic duty. It is the humbler, and often the invidious, role of the economist to help, so far as he can, in reducing the preacher's task to manageable dimensions.
How does the economist help? By promoting policies that rely, whenever possible, on self-interest rather than altruism on moral considerations, the economist saves society from squandering its scarce supply of virtue. "If we economists do our business well," Robertson concludes, "we can, I believe, contribute mightily to the economizing ... of that scarce resource Love, the most precious thing in the world."
To those not steeped in economics, this way of thinking about the generous virtues is strange, even far-fetched. It ignores the possibility that our capacity for love and benevolence is not depleted with use but enlarged with practice. Think of a loving couple. If, over a lifetime, they asked little of one another, in hopes of hoarding their love, how well would they fare? Wouldn't their love deepen rather than diminish the more they called upon it? Would they do better to treat one another in more calculating fashion, to conserve their love for the times they really needed it?
Similar questions can be asked about social solidarity and civic virtue. Should we try to conserve civic virtue by telling citizens to go shopping until their country needs to call upon them to sacrifice for the common good? Or do civic virtue and public spirit atrophy with disuse? Many moralists have taken the second view. Aristotle taught that virtue is something we cultivate with practice: "we become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts."
Rousseau held a similar view. The more country asks of its citizens, the greater their devotion to it. "In a well-ordered city every man flies to the assemblies." Under a bad government, no one participates in public life "because no one is interested in what happens there" and "domestic cares are all-absorbing." Civic virtue is built up, not spent down, by strenuous citizenship. Use it or lose it, Rousseau says, in effect. "As soon as public service ceases to be the chief business of the citizens, and they would rather serve with their money than with their persons, the state is not far from its fall".
Robertson offers his observation in a lighthearted, speculative spirit. But the notion that love and generosity are scarce resources that are depleted with use continues to exert a powerful hold on the moral imagination of economists, even if they don't argue for it explicitly. It is not an official textbook principle, like the law of supply and demand. No one has proved it empirically. It is more like an adage, a piece of folk wisdom, to which many economists still subscribe.
Almost half a century after Robertson's lecture, the economist Lawrence Summers, then the president of Harvard University, was invited to offer the morning prayer in Harvard's Memorial Church. He chose as his theme what "economics can contribute to thinking about moral questions." Economics, he stated, "is too rarely appreciated for its moral as well as practical significance."
Summers observed that economists place "great emphasis on respect for individuals -- and the needs, tastes, choices and judgment they make for themselves." He then offered a standard utilitarian account of the common good as the sum of people's subjective preferences: "It is the basis of much economic analysis that the good is an aggregation of many individuals' assessments of their own well-being, and not something that can be assessed" apart from these preferences on the basis of an independent moral theory.
He illustrated this approach by challenging students who had advocated a boycott of goods produced by sweatshop labor: "We all deplore the conditions in which so many on this planet work and the paltry compensation they receive. And yet there is surely some moral force to the concern that as long as the workers are voluntarily employed, they have chosen to work because they are working to their best alternative. Is narrowing an individual's set of choices an act of respect, of charity, even of concern?"
He concluded with a reply to those who criticize markets for relying on selfishness and greed: "We all have only so much altruism in us. Economists like me think of altruism as a valuable and rare good that needs conserving. Far better to conserve it by designing a system in which poeple's wants will be satisfied by individuals being selfish, and saving that altruism for our families, our friends, and the many social problems in this world that markets cannot solve."
Here was Robertson's adage reasserted. notice that Summers' version of it is even starker than Arrow's: Reckless expenditures of altruism in social and economic life not only deplete the supply available for other public purposes. They even reduce the amount we have left for our families and friends.
This economistic view of virtue fuels the faith in markets and propels their reach into places they don't belong. But the metaphor is misleading. Altruism, generosity, solidarity, and civic spirit are not like commodities that are depleted with use. They are more like muscles that develop and grow stronger with exercise. One of the defects of a market-driven society is that it lets these virtues languish. To renew our public life we need to exercise them more strenuously.
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