What Money Can’t Buy: The Moral Limits of Markets

Economists are increasingly being pulled into moral debates and considerations, because areas of life traditionally not governed by market norms are now becoming so. An economic approach to all aspects of human behavior rests on the assumption that all people, in all decisions and choices, are seeking to maximize their welfare by weighing up costs and benefits.

Financial incentives are being offered in some schools in exchange for students’ good grades. There have been mixed results in studies assessing the effectiveness of these schemes: Some students achieved better reading comprehension scores, in other cases attendance improved, while in other cases there was no discernible change. In other cases, teachers have been paid for students’ performance in low-achieving schools.

Economists studying the scheme found that increasing the bonus for passing courses didn’t have an impact on the numbers of students passing; the impact of the scheme was more subtle, and seemed to work most effectively when it made academic achievement “cool” in schools where it was traditionally viewed as not socially desirable.

In America, some patients are involved in schemes that randomly reward them with cash prizes if they take their blood-thinning medication. In the United Kingdom, patients are paid to take monthly schizophrenia and bipolar injections.

Many American companies, including General Electric, offer bribes and incentives for employees to quit smoking or participate in fitness schemes. On the other hand, unhealthy employees are charged more for health insurance. Various schemes in America and the UK have paid individuals to lose and keep off weight.

These schemes are criticized for a number of reasons. Some people believe that it is unfair that overweight people should receive money from the government for an issue that they should be intrinsically motivated to manage themselves. Others point out that people whose weight gain is caused by medical conditions are unfairly disadvantaged by the scheme. Others believe that the intrinsic motivators for good health are negated by financially incentivizing them. Seeming to support this, findings show that incentives do not create long-term change; people tend to put weight back on and start smoking again. Therefore, cash incentives may undermine the very goals they are trying to achieve.

Children who are paid to write thank-you notes to friends and relatives for gifts may not learn the intrinsic importance of expressing gratitude. Similarly, children who are paid to get good grades or read books might lose their intrinsic motivation for these goals and the habit may diminish in the long run.

Some economists in the 1970s proposed that American immigrants should have to pay a large fee to enter the country, which would discriminate based on desirable qualities of financial self-sufficiency. This came into effect in a sense in 1990, when a law was introduced whereby foreign individuals who invested $500,000 into the United States could apply for green cards if the investment created at least 10 jobs. In 2011 a scheme was proposed whereby individuals buying a $500,000 house should receive a visa.

A law professor proposed that an international body should assign countries annual quotas of refugees based on their wealth, and that these quotas could be bought or sold among countries, allowing wealthy countries to “pay their way out” of taking refugees and providing income to countries, like Uganda, for example, to take them. Many would problematize the minimization of a humanitarian problem as an economic prospect, which leads Sandel to point out that markets imbue values on the goods they trade.

When an Israeli childcare center began charging a fee for late pickups, more parents came late to pick up their children: The fee changed the parents’ conception of the late pickup from an inconvenience to another person to a service they could pay for.

Individuals who treat a fine as a mere fee fail to understand the moral message behind the fine. For example, it would be considered distasteful to decide to use disabled parking spaces as an able-bodied person in return for paying the fine.

Finnish speeding tickets are calculated based on the individual’s income, in order to ensure that wealthy individuals don’t disregard subjectively insignificant fines based on their income.

A group of Parisian commuters began an insurance fund that they could pay into each month that would cover their fines if they were caught not buying metro tickets; this was cheaper than buying tickets to ride the trains.

There are social values that dictate whether something should be considered a fee or a fine.

China instigated a fine for violating the one-child policy, but it became more like a fee for the affluent to pay if they wanted more children. To retain the stigma of the fine, the government started banning celebrities who had paid the fine from appearing on television, or preventing business owners from being granted government contracts.

In 1964, economist Kenneth Boulding proposed a system whereby women were allocated two permits to have children, which could be bought or sold. This could alleviate poverty, he suggested, as well as curbing the population problem. It is generally accepted that this would corrupt the principles of parenthood through monetizing children.

There is debate over whether there should be fines on companies that produce carbon emissions, or whether there should be tradable pollution permits. The concern over tradable permits—a concern shared and articulated by Sandel—is that there should be a moral stigma for polluting and a sense of shared sacrifice in reducing pollution, both of which are undermined by tradable permits.

Nevertheless, emissions trading is the favored way of imposing limits on pollutants: Utility countries can trade and buy the right to release pollutants into the air. The Kyoto Protocol introduced these on an international level in the 1990s, although the United States did not sign on. Sandel worries that permits for pollution allow the outsourcing of an obligation that should be global.

Companies, such as airlines, offer a payment to offset carbon emissions. Sandel worries that the act of paying will allow people to feel absolved of personal responsibility for activities that pollute the environment; some people liken them to indulgences from the church.

In some parts of Africa, in order to curb the hunting of endangered species, such as black rhinos, hunting permits were monetized and regulated. Hunters could pay $150,000 to hunt a black rhino. Owners of large nature ranches then have an incentive to breed and protect these creatures to cash in from the permits. This solution is working in many areas, yet it comes with a moral cost: Sandel questions whether allowing the animals to be killed is a fair price for the conservation of the species more broadly, or if it is pandering to the sins of the rich.

The walrus population was decimated through the 19th and early 20th century when Canada was colonized. Canada limited walrus hunting to Indigenous groups, who had depended on walrus flesh, fat, and hides for tens of thousands of years. A law change was made so that Indigenous groups could sell their hunting licenses to others and act as the guide to the hunt.

It is easy to kill the defenseless walrus, which has no defense mechanisms. Many rich hunters do so to complete a list of arctic kills that involves a caribou, musk ox, polar bear, and walrus. Sandel believes that this corrupts the meaning and value of the Indigenous exception, despite the fact that it benefits them financially.

Economics has broken its traditional bounds of prices, inflation, depressions, and unemployment and has come to encompass human interaction more generally.

The idea of incentives has come to define the study of economics. “Incentivize” is a new verb, coined in 1968. Its use has increased by 1400% since 1990. Economists believe that most problems can be solved through shaping behavior via positive or negative incentives. However, as the Israeli childcare center example demonstrates, incentives change norms, and therefore real-world situations do not always follow market principles—i.e., market principles would have suggested that incurring a fee on late pickups would reduce them, but the fee instead changed the attitude of the parents toward the nature of late pickups. No one is regulating the change of values being incurred from increasing incentivization.