Hot takes—The Moral Limits of Markets

Last time, I summarized Michael Sandel’s What Money Can’t Buy: The Moral Limits of Markets (Sandel 2012). Now, I’ll say my own things instead of regurgitating Sandel (as delicious as premasticated Sandel may be).

Throughout, I’ll try to resist temptation and keep the discussion to the moral failings of markets. There’s a whole vast literature on how and when markets fail on their own terms (i.e. don’t achieve social efficiency) that I’d like to avoid.

Also, I’ve tried to order things for comprehensibility, but there isn’t a single, coherent thesis here. Most of the sections are standalone.

Markets defined

I think it behooves us to start with a discussion of precisely what markets are. This should clarify and it should help us understand which features of markets are necessary and which contingent.

Without thinking too deeply about it, I’ll say a market is a legal and sociocultural system via which unaffiliated parties may exchange rights—paradigmatically, one party gives up the rights for exclusive use (i.e. property rights) of some tangible good and receives in exchange the rights for exclusive use of some quantity of money. I choose this annoyingly abstract definition to highlight the flexibility and generality of markets which is important when talking about atypical markets.

Markets vs. property

This definition quickly suggests the importance of distinguishing between markets (the mechanism of exchange) and property (what’s exchanged on the market). Property (or some other bundle of rights) is a precondition to markets. Unfortunately, I think the book rather wholly elides this distinction1.

Many of the ills attributed to atypical markets are more accurately pinned on property. In fact, I can’t think of any examples where ‘propertizing’ (i.e. formalizing and legislating the rights to some formerly fuzzy thing) is okay and market exchange is squicky2. If the market in slaves had been abolished and ownership of slaves could be transferred only by inheritance, chattel slavery would have been no less appalling.

This isn’t pure, idle pedantry. By omitting markets from the story, we highlight that core to the corruption concern is people relinquishing capacities we’d rather they keep. From this perspective, the problem with women agreeing to be sterilized for cash is that they’re relinquishing their reproductive rights while we think they ought to be inalienable; it invites outsiders in to our bodies. “Bank One blast” rankles because our choice of words ought to be our own; to do otherwise is to invite outsiders in to our minds.

We’re then left with the question: Is it best to deny people the capacity to relinquish certain capacities? Morally? Politically?

Inequality vs. markets

Another distinction which gets less attention than I’d like is between markets themselves and markets under conditions of inequality.

The glib (and yet obligatory) response here is to point to the second fundamental theorem of welfare economics: “out of all possible Pareto optimal outcomes, one can achieve any particular one by enacting a lump-sum wealth redistribution and then letting the market take over.” In other words, this just confirms that markets would achieve fairer outcomes under fairer circumstances.

But I don’t have a wand I can wave to eliminate inequality and I don’t expect to come across one any time soon. So I’ll try to engage with the argument more seriously.

Here’s my best counterargument to markets and inequality then. I think we can tell a story (by which I mean this is very speculative) where the growing reach of markets is a consequence rather than a cause of inequality. In this story, powerful actors encourage the marketization of all things3 because they expect to be able to better leverage their power on the market. When there’s a market in organs, Mr. Burns can buy all the spare organs he needs, no muss, no fuss. Without a market, he’d have to pursue a less savory route. If we believe this story, the retrenchment of markets might only lead the powerful to find some other mechanism to exercise their power.

All that said, I do more or less grant this argument. We live in a world of radical inequality and, in many circumstances, markets magnify that inequality.

Crowding out and expressive actions

On multiple occasions, Sandel talks about market norms crowding out other norms. If we examine why this happens, I think we’ll find something useful.

Once we leave the most naive versions of rational choice, we can suggest that humans sometimes act for expressive reasons. That is, we intend to or happen to communicate with our actions. When I show up late to pick up my child, I express that I don’t value the time of the day-care workers. Conversely, punctuality expresses that I do. When I agree to accept nuclear waste in my town, I am communicating that I value my fellow citizens and that I am sensitive to claims of civic need.

On this view, market norms can crowd out other norms because they make it harder to express what people hope to express. Prompt pick up might express respect or it might express unwillingness to pay. Agreeing to house nuclear waste might express civic responsibility or it might just be a cash grab. If people are going to misinterpret an action, it’s a much less appealing expression.

If we accept this story, crowding out isn’t unique to the introduction of market incentives. Any additional incentives muddy the expressive waters. Because observers only see the action and not the intention, they’re left to guess which predominated.

Preferences are malleable

Markets as ‘corrupting’ is largely contingent. It depends on the meaning we assign to markets which is socioculturally determined. We can imagine some Randian paradise in which markets are held in the highest esteem. Here, allocating a thing via the market elevates rather than degrades.

Even short of some mass reeducation program that shifts the whole culture, I think this is relevant. I and many economists object to the use of markets much less than average, it seems. This suggests that at least some individuals can independently make peace with atypical markets. If the meaning assigned to markets changed enough for enough people, markets might be both more efficient and non-corrupting.

However, because markets are fundamentally an impersonal mechanism for the allocation of goods, that meaning is unavoidable. Actions intended to be personal and particularistic ought not to be conducted via the market.


Sandel acknowledges that we may sometimes make moral comprises—we may accept the corruption of some good in exchange for the efficiency markets provide. However, Sandel never provides any detailed criteria or even examples for how we should make this trade-off. I think this is because is doing so would require describing and committing to some concrete, normative theory. His reluctance to do so is both understandable (it would take him on quite a tangent) and a bit ironic given his criticism of amoral economists. I think Sandel’s reluctance to defend any particular trade-off reveals just how tricky the thing he’s advocating for (bringing moral discussion into economic decisions) is.

Straw man

The critique about economists being ignorant of the commercialization effect and otherwise believing in Homo economicus uncritically rings false to me. This is what behavioral economics is all about and many of the works Sandel cites in support of his claims (e.g. the study of crowding out effects with placement of nuclear waste) were produced by economists!

Altruism as a limited resource

Sandel also critiques economists for claiming that we should favor markets to conserve the limited supply of altruism. But moral licensing fairly directly suggests this. But I guess you could justly regard this with some skepticism because it’s social psychology and, you know, the replication crisis

Morality and modernity

Even if prosocial sentiment isn’t a depletable resource, I think it’s very plausible that the prosocial impulses of humans aren’t well-adapted to the modern world.

In the ancestral environment, anyone you interacted with was likely someone you knew fairly well. You were almost assured of interacting with them again. We could go on, but suffice it to say that modern mass society is nothing like this.

If our moral impulses are to give due consideration to those we know or those with whom we’ll interact again4, they suffice for the ancestral environment and are woefully inadequate now. I feel a fondness for my family that militates against profit maximizing when letting them borrow my car but have no such compunction when renting my car out to the man who lives on the other side of city. In our impersonal era, we need social technology to fill the gaps.

Ultimately, this is an empirical question. I think it’s clear that people do give special moral consideration to those that are close to them. The question that’s left is if the lesser moral consideration allotted to strangers is sufficient to enable modern society without social technologies like markets. If not, do we sacrifice modernity (mass society) in the name of morality?

Acemoglu, Daron, Simon Johnson, and James A Robinson. 2005. “Institutions as a Fundamental Cause of Long-Run Growth.” Handbook of Economic Growth 1. Elsevier: 385–472.

Sandel, Michael J. 2012. What Money Can’t Buy: The Moral Limits of Markets. Macmillan.

  1. Are these things actually distinct? If property rights are always and everywhere tied to markets, then this would be an idle distinction. But they are not. We have many other mechanisms for the transfer of property rights like marriage (private property (often) becomes jointly held by the couple) and inheritance (the inheritor receives the property rights).

  2. By ‘squicky’, I mean ‘incenses my moral intution’ or ‘is likely to incense the moral intuition of others’.

  3. It sounds more conniving and conspiratorial here in shorthand than I mean it to. My claim is intended to be read a la Robinson and Acemoglu (Acemoglu, Johnson, and Robinson 2005):
    Economic institutions determine the incentives of and the constraints on economic actors, and shape economic outcomes. As such, they are social decisions, chosen for their consequences. Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favor of groups with greater political power.
  4. I’m not claiming this is what’s moral. Just that it might be how our biology predisposes us to act.