It’s the punchline to an old joke: “Well,” the economist says, “let’s first assume we have a can opener.” (More)

Markets and Morals, Part II: Freedom, Openness, Fairness, and Just-So Stories

This week Morning Feature considers the recent Boston Review Forum on markets and morality. Yesterday we began with Michael Sandel’s essay on the moral limits of markets. Today we examine rebuttals by Matt Welch, Herbert Gintis, and John Tomasi. Tomorrow we’ll conclude with essays on social value and inequality.

Matt Welch is a career journalist and now editor in chief of the libertarian Reason magazine. Herbert Gintis is a professor of economics at Central European University and the author of The Bounds of Reason: Game Theory and the Unification of the Behavioral Sciences. John Tomasi is a professor of political science and philosophy at Brown University, and the author of Free Market Fairness.

Kidneys and Freedom

Matt Welch’s rebuttal to Michael Sandel’s essay begins with the stark mathematics of kidney transplants – 18 people die every day while waiting for a kidney transplant – and asserts that allowing donors to sell their organs would increase the supply and “reduce the body count.” Welch then asserts that Dr. Sandel “doesn’t really care about preventable renal failure” and that Welch instead changes the topic to the morality of markets.

In fact, the morality of markets was the topic of Dr. Sandel’s essay, and the sale of human transplant organs was one of several examples offered to explore whether society is more or less moral when altruistic choices are driven by market forces. Indeed, Welch agrees with Dr. Sandel’s other examples, sort of:

No, I don’t want a society where everything is for sale, and thankfully we’ll never live in one as long humans retain both choice and prosperity. You cannot buy my friendship, my political loyalty, or my musical tastes. I choose not to buy sex, or wedding toasts, or (in most cases, anyway) gift cards. These are hardly outlier notions among my fellow libertarians.

So what do free marketers and Michael Sandel disagree about? This: he expresses no apparent concern about enshrining his market-aversions into law, fully backed by government force. Because he disagrees with people’s choices, he wants to take those choices away. [Original emphasis]

While Welch claims “I don’t want a society where everything is for sale,” he rejects government as a means of preventing that and proposes no other means except individuals’ own choices. And as Dr. Sandel notes in his response, Welch’s objection is not really about freedom – whether government should limit our choices – but whether paying donors would increase the supply of transplant organs and thus save lives. If evidence showed that it would, and would not compromise other moral values we hold equally dear, I suspect most progressives would support paying organ donors.

Markets and Openness

Dr. Gintis offers a different rebuttal, noting the effect of market societies on moral and societal evolution:

By focusing on the marketability of particular things, Sandel misses the larger effect of an economy regulated by markets on the evolution of social morality. Movements for religious and lifestyle tolerance, gender equality, and democracy have flourished and triumphed in societies governed by market exchange, and nowhere else.

Dr. Gintis summarizes his research alongside anthropologists who played standard economic behavior games with societies of hunter-gatherers, horticulturalists, nomadic herders, and small-scale sedentary farmers in Asia, Latin America, and Africa. Their studies found that societies who regularly engage in market activity with larger surrounding groups were more likely to sacrifice short-term individual gain to achieve fairness and reciprocity. “The notion that the market economy makes people greedy, selfish, and amoral,” he concludes, “is simply fallacious.”

Dr. Sandel’s response acknowledges Dr. Gintis’ data but rejects the implicit either/or framing:

But I do not argue against market economies, only against the tendency of market economies to devolve into market societies – places where everything is up for sale, and where market values and market relations invade every aspect of life. By keeping markets in their place, we can preserve the benefits of markets while avoiding their corrosive effects on family life, personal relations, health, education, criminal justice, civic life, and other domains.

Fairness and Just-So Stories

Dr. Tomasi advocates “bleeding heart libertarianism,” the theory that free markets can and should be structured to create rather than corrode social justice. He presents a thought experiment where OptionAir allows passengers to pay a premium and avoid airport security lines:

It’s the day before payday. Wanda, Bill, Carl, and Pauline are planning trips from Boston to Washington, D.C. Wanda is the wealthiest, Pauline the poorest. Bill decides to buy a plane ticket on OptionAir, though he must wait till his paycheck arrives the next day. Carl and Pauline can’t afford to fly, so they plan to buy tickets on BudgetBus and must also wait till payday. Wanda goes online to buy her plane ticket immediately, hang the cost. OptionAir offers a pass to cut the security line. Wanda buys the pass too.

Business is booming at OptionAir. Revenues from their pass program enable them to lower their fares, compensating customers for slightly slower security lines, and luring new customers. Carl, who had been planning to take the bus like Pauline, decides to fly instead. Losing customers to OptionAir, BudgetBus reduces its fare. Pauline buys her bus ticket for less than she’d planned.

Travel day arrives. Wanda cuts the queue. Bill, whose plane ticket cost less than he’d budgeted, buys a latte to sip while waiting in the line. Carl also stands in the airport security line, relieved to have avoided the bus. Pauline boards the bus, extra money in her pocket.

Like many economic thought experiments, this strikes me as a Just So Story. That phrase derives from a Rudyard Kipling book of fanciful tales for children, and in the social sciences it refers to stories that feel true but offer no supporting data and might not even be testable. Dr. Tomasi’s story reminds me of the joke about the physicist, the bodybuilder, and the economist stuck on an island with only a can of beans and no can opener. The physicist and the bodybuilder offer ways to open the can, predictably based on physics and brute force, neither of which seems likely to succeed. The economist responds: “Well, let’s first assume we have a can opener.”

Let’s assume OptionAir will pass on Wanda’s and others’ line-cutting premiums in lower airfares, rather than pocketing the profits. Let’s assume the lower airfare, apparently just enough for Bill to buy a latte at the airport, is also enough for Carl to afford the plane ticket rather than take the bus. And let’s assume the bus company could afford to and would reduce their fares.

If all of those assumptions happen, then yes, even Pauline benefits by Wanda’s wealth privilege. Just so.

Oh, and let’s assume Wanda isn’t a terrorist whose bomb would have been detected in the security line but will now explode in midair….

As Dr. Sandel notes in his reply, to argue that allowing the wealthy to evade the airport security line will benefit everyone – based solely on fare changes and latte purchases – is to ignore the basic question of whether and why we need an airport security line at all. If the purpose of the line is simply to provide a platform for wealth privilege, Dr. Tomasi’s argument works (again, given all of his assumptions). But if the purpose of the line is to make air travel safer, letting passengers pay a premium to avoid security corrupts that purpose … unless we assume those who could afford the line-skipping premium would never be dangerous anyway. Now about that can opener….

Tomorrow we’ll explore social values, inequality, and whether incentives work as well in Realworldia as they do in Ideologica.

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Happy Friday!