The Moral Costs of Markets

01 January 2011

This week begins both a new year and a new season of Philosophy Talk.   Hard to believe, but we're into our  8th season.  It's been a great ride so far and we hope to keep building the program.  

To launch a new season and a new year, we take up the topic of  free markets, in particular the moral costs of free markets.  Free markets are, on balance,  wonderful things, I think.  When they're truly open and free and not monopolized by a few big players, or overly regulated by excessively intrusive governments, markets are amazingly efficient ways of providing people with the things they want and need.  They're the chief engines of economic progress, and are singularly conducive to human happiness. 

But my enthusiasm for free markets is not unlimited. It’s not that I don’t like free markets or that I am some kind of socialist – though I do think that democratic socialism of the Western European variety has something going for it.  In their place, markets are very good things. But I just don’t believe that every product or service is best distributed by the market.

To make a pretty basic point, take something as simple as the air we breathe. I doubt that even someone with boundless enthusiasm for free and open markets, would suggest that there should be a price on air. 

Now you could say that that is cheating, since nobody controls the air.  So nobody can stop you from breathing just because you won’t pay up.   There couldn’t be a market in air.   But of course there markets in air  -- sort of.  At least there are markets in clean air -- where companies get to buy and sell pollution credits.   That points to a different problem with markets.  You buy your gas-guzzling dream car.  The oil company gets rich.  The car company gets rich.  And me? I get to breathe dirty air.

Here  I’m talking what economists call externalities -- costs generated by economic transactions between two parties that are borne by somebody else, somebody not a party to the original transaction.  Markets can generate lots of different externalities and many of them are morally problematic. 

But that wasn’t my original point about markets in air.   My point was that even if there could be a market for air, nobody would accept it.  People have a basic and equal right to air.  And things to which we have basic and equal rights shouldn’t be subject to the whims of the market – you know… some folks having more, some having less, and some having none at all.

I know that there are, of course, lots of things that the rich have more of and the poor have less of.  The poor live in less luxurious houses than the rich; drive less expensive cars; go to less fancy schools, have less access to the political process.  Plus they eat less well and probably don’t wear as finely-tailored clothing.   And I admit that if we were  going to restrict markets wherever they generate inequality, we’d truly have our work cut out for us.

But I didn’t say that wherever markets generate inequality they're bad and ought to be regulated.   Still, markets are not divine.   They don’t have godlike wisdom into the right and just distribution of every possible good.  That’s because they pay attention only to the bottom line, not to considerations of justice and morality.  That’s why markets sometimes need to be regulated or even prohibited.  

Of course, that raises the question of what principles distinguish morally intolerable markets from morally tolerable ones.   Here’s a first quick thought about that.  Votes definitely shouldn’t be traded on the free market.  And public schools definitely shouldn’t be driven by markets.  Public schools should offer an education that’s good enough for rich and poor alike – independent of ability to pay. 

But of course, those aren’t really principles, are they?   Those are just examples.  I gave examples because, frankly, I don’t know what the right principles are.  I’m not even sure that all the moral limits of markets have to do with inequalities.  Markets in woman’s sexual labor seem wrong to me, for example,  but not because of issues about inequality -- not exactly, anyway. 

It seems clear that we need to call on somebody who has thought a little harder and deeper about this question than I have. That would be our guest, Stanford philosopher Debra Satz.  She's the author of the very fine book, Why Some Things Should Not Be For Sale: The Moral Limits of Markets.


Comments (5)

Guest's picture


Saturday, January 1, 2011 -- 4:00 PM

Hi Ken Taylor, Thanks as always for your progra

Hi Ken Taylor,
Thanks as always for your program.
Thank you also for reassuring us that you are 'not some kind of socialist'. It's important to always express that perfunctory loyalty to 'capitalism' - (which in america is defined to be absolute corporate control of markets, information, government policy and regulation) - you never know if someone might report you to the repub party leaders and then they would target npr and kalw for further punitive action. And I hope you aren't some kind of liberal either, or - god in heaven forbid - some kind of progressive. Interestingly, i've never heard anyone feel the need to say, 'not that I'm some kind of capitalist or something' - not once.
Anyway, yes markets are wonderful things - like motherhood and apple pie, as we all know. the market was one of the first systems to arise in the very first primitive cooperative societies (right after socialism ;).
But I find your discussion of 'externalities', as you put it, to be too narrow and also not really even consistent. Your point seems to be that there are certain goods and services (presumably including tolerably clean air, water, schools, and (dare I say it on ultra-conservative npr?) minimum health care - that everyone has a right to even if they can't pay for it. But that means you are in fact a socialist - because insuring these minimum rights requires redistribution of wealth (that is, taking some of joe-the-plumber's hard earned money from fox news and sharing it with someone less fortunate). So I guess we're all socialists, and that really isn't anything to be ashamed of, despite what mitch mcconnell says. It's sort of one of the minimum requirements of qualifying as a civilized human being instead of a mindless animal. We're just arguing over the number and extent of inalienable human rights and therefore the degree of our 'socialism'.
I also find it somewhat amusing that (apparently in defense of the perhaps regrettable but necessary consequences of our wonderful free markets) you charcaterize the 'poor' as having 'less luxurious houses', 'less expensive cars', 'less fancy schools', 'less access to the political process', while 'eating less well' and wearing less 'finely-tailored clothing', as the rich. Very diplomatic. But, you may be surprised to know that there are truly poor who have no homes at all, no car at all, fancy or otherwise, eat so poorly that their and their children's health are at constant risk, and have no effective access to the political process at all (when is the last time you heard a politician express concern for the 'poor' - the term, like 'socialist' - is toxic. Politicians only refer to the plight of the 'middle class' - apparently, anyone making less than around half a million per year).
But, your discussion of externalities ignores the well known 'tragedy of the commons' - that is, that any commodity that is not 'scarce' - like air, water, and generally, the common environment we live in, will inevitably be squandered or ruthlessly and recklessly destroyed in a purely capitalist system, until these commodities become truely scarce. Then markets will spontaneously arise for these once shared and ubiquitous, and now truly scarce, resources. And these markets will inevitably mean that the poor will be forced to breath 'less clean' air (read, 'toxic'), drink 'less clean' ('toxic') water, eat 'less healthy' ('carcinogenic') food, and lead correspondingly less enjoyable ('miserable') lives, and their children will have futures 'less bright' ('condemned to grinding poverty') than the rich, without the intervention of evil 'socialism'.
So, in the end, the argument is all about, on the one hand, what is that minimum floor of living standard that we we will support for the poorest members of society by redistribution, and to what degree do we, as socialists, defend the commons from that rapaciousness of capitalism, for our common benefit, the benefit of the helpless poor, and the benefit (or even the very survival) or generations yet unborn and therefore without voice.

Guest's picture


Sunday, January 2, 2011 -- 4:00 PM

by Market, i take it you mean the gathered relatio

by Market, i take it you mean the gathered relation of product, and it's availability to be exchanged with capital -- i'm not sure if you've even explicitly described how a Market could be Moral or not, but above all, if a Market should not be transparent through its products, or the process of the Market as the activity of product and capital exchange - in this way, the Market may not be available as itself, and in this way not appropriate for relation to consciousness. whether that's Moral or Immoral - i don't know.

Harold G. Neuman's picture

Harold G. Neuman

Monday, January 3, 2011 -- 4:00 PM

The title of this post is enigmatic. To me, at lea

The title of this post is enigmatic. To me, at least. Here is why I think so. I have never seen markets or the market as being moral or immoral. When it comes to profit; profit-making or profit-taking---oh, let's strip down the lingo: making money---the essential objective is amoral. Now, I admit that greed is one of the seven deadlies,under Christian dogma, and as such, it is a "moral" issue. But we get into some fine-line judgment calls when we try to separate the call for profit from the sickness which is greed.
It is a bit like saying the person who has one drink a day---beer, wine, or liquor---is an alcoholic. Probably not. I do not think so, anyway. There was an old adage I recall from many years ago that was based (allegedly) on a scriptural quotation: Money is the root of all evil. Later, I heard it this way: LOVE OF money is the root of all evil. Somewhere in there we have markets and somewhere, greed. Attorneys say: it depends. And, it does. If we didn't need money, would we still have greed? Probably---but would we kill for it? Hmmmm...

Guest's picture


Tuesday, January 4, 2011 -- 4:00 PM

Hey Ken, I am glad you hear you guys on your ne

Hey Ken,
I am glad you hear you guys on your new free podcast feed because ideas want to be free... :)
I am not certain that "Air" is the best example. Markets and prices are tools for allocating scare resources (and as of now there is enough air for everyone) and only makes sense when the item is excludable (if I am using it you cant be). When people think about "air" they have this mental idea that its a plentiful resource that just "out there" for the taking hence do not think clearly about the situation in which there would be a market.
Further, its important to keep in mind that prices have two functions: first as a way of allocating resources and second as a signal to determine which items are produced.
To discuss "air" we need a hypothetical.
Imagine we all lived on Mars. The earth has been destroyed. We each live in a small sealed apartment. Air canisters are connected to our individual units.
Situation 1: We produce air, but there is not enough to go around. The question is what is the "fair" way of allocating resources. Does everyone get an equal share? Do the people with breathing disorters get more? Do you just cut off the folks who will die soon anyway, so the other people all get enough? Does the person who complains the most get the first claim on the air?
Situation 1 is rarely a description of a real situation. In real situations there are more than 1 scarce resource, and there are tradeoffs.
Situation 2: Suppose now that life is very boring on Mars but there are a limited number of ipods remaining from earth loaded with music. Now we need to allocate air and ipods. Since there is not enough air to go around, is it fair for someone to choose to take a little less air (and maybe not live as long) in exchange for an ipod? Should everyone be forced to make the same choice? Alternatively, who should decide who gets less air and who gets the ipods?
And again, perhaps if we all worked harder, or worked on different things there would be enough air.
Situation 3: If everyone is forced to work 20 hours a day, we can produce enough air for everyone. Is that fair? How do we determine how to balance how much people work vs how much air we have? maybe some people want lots of air, but some people are willing to get bye with less air (and live a shorter life) in order to have some leasure time.
Markets are a way of figuring out BOTH how much air should be produced, how much should each person work, and what the "proper" trade off between leasure time, ipods and air is, and how these should be distributed....
So why exactly is the allocation of air different from anything else?
p.s. A wise professor once said to me, "Josh", said Ken, "the art of writing a great philosophy paper is that in the first half you make bold assertions, and in the second half you subtlely take them back."

Guest's picture


Sunday, January 9, 2011 -- 4:00 PM

Markets are crass. To borrow Oscar Wilde's definit

Markets are crass. To borrow Oscar Wilde's definition of a cynic, it knows the cost of everything the value of nothing. Yet, we are allowing its tentacles to enter all aspects of human endeavor, grossly diminishing the fullness of life. Education along with health care have become service industries for example. As individuals, we've become 'Consumers'. How ugly is that? How reductive of what it means to be human. At least, 'Citizen' requires greater analysis and offers imponderables. We participate in this by using the language of the market place. "What's the bottom line?"