Summary—The Moral Limits of Markets

Markets continue to expand into areas that were once governed by other mechanisms. But markets can be unfair and they can corrupt the goods allocated by them. Because markets have a moral dimension, their continued expansion means that economic reasoning must explicitly embrace moral reasoning.

I recently read Michael Sandel’s What Money Can’t Buy: The Moral Limits of Markets (Sandel 2012). Now, I’ll summarize it1. Next time, I’ll critique it.

Scope of markets

There is no alternative. Markets are inescapable. But markets now extend beyond the mere exchange of commercial products into “spheres of life once governed by nonmarket norms”.

The book offers many, many (many) examples of this including:

  • [I]n 2001, [a] British novelist […] wrote a book commissioned by Bulgari […]. [The author] agreed to mention Bulgari jewelry in the novel at least a dozen times. The book, aptly titled The Bulgari Connection […] more than exceeded the required number of product references, mentioning Bulgari thirty-four times. [One critic] pointed to the clunkiness of the product-laden prose as in sentences such as this: “‘A Bulgari necklace in the hand is worth two in the bush,’ said Doris.”
  • [T]he Campbell Soup Company sent out a free science kit that purported to teach the scientific method. With the use of a slotted spoon (included in the kit), students were shown how to prove that Campbell’s Prego spaghetti sauce was thicker than Ragú, the rival brand. General Mills sent teachers a science curriculum on volcanoes called “Gushers: Wonders of the Earth.” The kit included free samples of its Fruit Gushers candy, with soft centers that “gushed” when bitten. The teacher’s guide suggested that students bite into the Gushers and compare the effect to a geothermal eruption.
  • When a bank bought the right to name the Arizona Diamondbacks’ stadium Bank One Ballpark, the deal also required that the team’s broadcasters call each Arizona home run a “Bank One blast.” […] Even sliding into home is now a corporate-sponsored event. [… F]or example, when the umpire calls a runner safe at home plate, a corporate logo appears on the television screen, and the play-by-play announcer must say, “Safe at home. Safe and secure. New York Life.”
  • [The] North Carolina-based charity called Project Prevention, has a market-based solution: offer drug-addicted women $300 cash if they will undergo sterilization or long-term birth control. More than three thousand women have taken [up] the offer since […] 1997.
  • Becker even proposed charging admission to refugees fleeing persecution. The free market, he claimed, would make it easy to decide which refugees to accept—those sufficiently motivated to pay the price: “For obvious reasons, political refugees and those persecuted in their own countries would be willing to pay a sizeable fee to gain admission to a free nation. So a fee system would automatically avoid time-consuming hearings about whether they are really in physical danger if they were forced to return home.”
  • [There was another] use of life insurance that arose in the 1980s and 1990s, prompted by the AIDS epidemic. It was called the viatical industry. It consisted of a market in the life insurance policies of people with AIDS and others who had been diagnosed with a terminal illness. Here is how it worked: Suppose someone with a $100,000 life insurance policy is told by his doctor that he has only a year to live. And suppose he needs money now for medical care, or perhaps simply to live well in the short time he has remaining. An investor offers to buy the policy from the ailing person at a discount, say, $50,000, and takes over payment of the annual premiums. When the original policyholder dies, the investor collects the $100,000.

The morality of markets

This expansion of markets isn’t morally neutral.

For markets

In favor of markets, Sandel lists two moral arguments.

The first is the libertarian, deontological argument about autonomy and liberty. This line of argument suggests that choice and freedom are the default and any abrogation of them must be thoroughly justified (or, for hardliners, is unjustifiable). The argument concludes by suggesting that markets are the natural result of these freedoms. If a market is merely what arises when individuals buy and sell their property, we should expect markets in anything and everything that individuals wish to buy or sell. To stop consenting adults from making such mutually beneficial transactions would be to unjustifiably tyrannize them.

The second argument is the utilitarian one. It emphasizes the ‘mutually beneficial’ part of the transaction. Markets allow trades and, in theory, trades only occur when both parties benefit. If we forbid these trades, we are, in effect, forbidding people from increasing their welfare. If we generalize this from a trade between two people to society as a whole, we get the first welfare theorem of economics: Under certain technical conditions, a market equilibrium means that no one can be made better off without making someone worse off. That is, markets allocate goods to those most willing to pay for them.

Against markets

On the ‘against’ side, Sandel again has two arguments.

The first is that markets are not fair. “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 or cornea 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.” Sandel goes on to highlight that markets don’t necessarily determine who values any given good most; they only determine who is most willing to pay. Willingness to pay is, in turn, the product of both interest and, crucially, ability to pay.

The second is about corruption. According to this objection, “Certain goods have value in ways that go beyond the utility they give individual buyers and sellers. How a good is allocated may be part of what makes it the kind of good it is.” To allocate a good via markets may, in some cases, degrade it by tainting it with a more profane set of norms.

“Tell me more about this corruption”, you, dear reader, conveniently say. “Okay”, I gamely reply.

One way in which markets can be corrupting is that they function like bribes. Sandel gives the example of health insurance discounts for healthy living. They “bypass persuasion and substitute an external reason for an intrinsic one”. I think he then very obliquely suggests that this has first-order ethical consequences because it discourages the cultivation of virtue. Sandel raises similar concerns about the disfiguring of civic and public virtues. It “dishonors their public spirit”.

Another crucial piece of the corruption story is that market incentives are not merely additive2. Offering money in exchange for some good or task can crowd out and diminish other incentives. As evidence of this, he describes the famous (in certain circles) Israeli day-care study where parents picked up their children later after the introduction of a fine for late pickups (Gneezy and Rustichini 2000). He also describes a Swiss village where inhabitants were less willing to house nuclear waste if offered annual cash compensation than if done purely out of a sense of civic duty (Frey and Oberholzer-Gee 1997).

Trade-offs

We’ll close this section by noting that Sandel does acknowledge that corruption and unfairness aren’t definitive arguments against markets; they’re defeasible. “I do not claim that promoting virtuous attitudes toward the environment, or parenting, or education must always trump competing considerations. Bribery sometimes works. And it may, on occasion, be the right thing to do. […] But it is important to remember that it is bribery we are engaged in, a morally compromised practice that substitutes a lower norm […] for a higher one […].”

Economists: What do they know? Do they know things?? Let’s find out!

I’ll claim that a second major thread of the book is a sort of ethnography of economists.

Parallel to the expansion of markets is the growth of economists’ ambitions. Nowadays, economics is “not merely a set of insights about the production and consumption of material goods but also a science of human behavior.” (See (Fourcade, Ollion, and Algan 2015) for another take on the ambition and position of economists.)

This creeping ambition makes the ‘amorality’ of economists especially troublesome, according to Sandel. “Most economists prefer not to deal with moral questions. […] The price system allocates goods according to people’s preferences; it doesn’t assess those preferences as worthy or admirable or appropriate to the circumstance.” But as markets shift from the allocation of widgets to the allocation of organs, political rights, humans, moral reasoning becomes much more salient.

Combined with this moral abstentionism, economists are (Sandel claims) characterized by a couple peculiar semi-empirical beliefs.

The first strange belief economists have is a willful (?) ignorance of the “commercialization” effect. This is basically just a claim that economists incorrectly disagree that market mechanisms can corrupt the goods they allocate.

The second wrongheaded belief of economists is that prosociality is a limited resource. To describe this belief, he cites Kenneth Arrow: “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.” Sandel grants that this belief would go a long way toward justifying a multitude of markets, but seems to reject the belief as strange and 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?”


Fourcade, Marion, Etienne Ollion, and Yann Algan. 2015. “The Superiority of Economists.” Revista de Economía Institucional 17 (33). Revista de Economía Institucional: 13–43. http://www.maxpo.eu/pub/maxpo_dp/maxpodp14-3.pdf.

Frey, Bruno S, and Felix Oberholzer-Gee. 1997. “The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out.” The American Economic Review 87 (4). JSTOR: 746–55. http://www.jstor.org/stable/pdf/2951373.pdf.

Gneezy, Uri, and Aldo Rustichini. 2000. “A Fine Is a Price.” The Journal of Legal Studies 29 (1). The University of Chicago Press: 1–17. http://www.jstor.org/stable/pdf/10.1086/468061.pdf.

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


  1. The structure of the summary does not mirror the structure of the book. Any faults there are my own.

  2. If incentives were purely additive, arguments about corruption would have much less force. The corruption might mean that the market incentives weren’t effective, but they’d leave the original incentives intact and so the bundle of incentives as a whole would never be strictly worse.