Blog post

Michael Sandel on “the corrosive effect of money”

We’ve drawn attention to the strong synergies between Common Cause and the work of Michael Sandel before. He’s in the UK (speaking at LSE) tomorrow, and I’ve just read his latest book – “What Money Can’t Buy: The Moral Limits of Markets”.

The arguments that Sandel develops in the book revolve importantly around the way in which charging for a good or service changes its nature. He writes:

“Standard economic reasoning assumes that commodifying a good – putting it up for sale – does not alter its character” (p.113).

And he then argues that this is far from the case – that, in many instances, creating a market for a good or service profoundly effects its character. For example, paying people to give blood changes the nature of blood-donation.

“As markets reach into spheres of life traditionally governed by nonmarket norms, the notion that markets don’t touch or taint the goods they exchange becomes increasingly implausible” (p.114).

In another example (one also mentioned in the Common Cause Handbook), Sandel cites a study of community attitudes to nuclear waste dumps in Switzerland, finding that offering citizens financial incentives for supporting the local siting of a dump erodes their support.

In discussing this further, he presents some insights which Common Cause has itself worked to highlight:

(1)    Incentives need not be additive. As Sandel writes:

“You might think that adding a financial incentive would simply reinforce whatever public-spirited sentiment already exists, thus increasing support for the nuclear waste site. Afterall, aren’t two incentives – one financial, the other civic – more powerful than one? Not necessarily. It is a mistake to assume that incentives are additive.”

In the example he discusses (siting the waste dump), “the prospect of a private payoff transformed a civic question into a pecuniary one” (p.116).

In a study that I often talk about, Greg Maio at Cardiff University found similar effects in appealing to financial savings as a basis for encouraging uptake of car-share schemes. Greg explains such effects as arising from the priming of extrinsic or self-enhancement values through appeal to financial interest – leading to the corresponding suppression of intrinsic or self-transcendence values associated with civic concern.

Sandel concludes:

“When people are engaged in an activity they consider intrinsically worthwhile, offering them money may weaken their motivation by depreciating or ‘crowding out’ their intrinsic interest or commitment. Standard economic theory construes all motivations, whatever their character or source, as preferences and assumes they are additive. But this misses the corrosive effect of money” (p.122).

(2)    But Sandel is also clear (as is Common Cause) that what he is highlighting here is the need for trade-offs. Whether or not appeal to financial incentives makes sense will depend upon the specifics of the situation. Sandel poses the questions:

“What is the moral importance of the attitudes and norms that money may erode or crowd out? Would the loss of non-market norms and expectations change the character of the activity in ways that we would (or at least should) regret? If so, should we avoid introducing financial incentives into the activity, even though they might do some good?” (p.91)

Sandel’s story is at its most compelling where it connects most closely to Common Cause – in his discussion of the wider societal impacts of commodification. He discusses Richard Titmuss’s famous study of blood donation in the UK – and presents Titmuss’s argument that paying for blood donations “erodes people’s sense of obligation to donate blood, diminishes the spirit of altruism, and undermines the ‘gift relationship’ as an active feature of social life” (p.123-124). Titmuss reflects on the wider societal implications of this:

“It is likely that a decline in the spirit of altruism in one sphere of human activities will be accompanied by similar changes in attitudes, motives and relationships in other spheres” (cited in Sandel, p.124).

As I have argued many times, it may be that British people’s experience of (for example) the National Health Service is far more important in strengthening those values that will need to underpin any durable public commitment to proportional action on climate change than their experience of (for example) policies on feed-in-tariffs. Most people’s experience of the NHS, after all, is far more salient.

Titmuss writes:

“The ways in which society organizes and structures its social institutions – and particularly its health and welfare systems – can encourage or discourage the altruistic in man; such systems can foster integration or alienation; they can allow the ‘theme of the gift’ – of generosity towards strangers – to spread among and between social groups and generations.” (cited in Sandel, p.124).

Sandel examines the inevitable objections that orthodox economics levelled at Titmuss’s work. These objections turn on the fantastical argument that: “moral sentiments are scarce resources that are depleted with use”. The argument is that scarce resources of altruism can be ‘used up’, and we should only therefore rely upon them in those instances where economic incentives can’t do the job for us.

Here is what Harvard economist and former US Treasury Secretary Larry Summers said in a lecture on the hubristic theme of what “economics can contribute to thinking about moral questions”:

“We all have only so much altruism in us. Economists like me think of altruism as a valuable and rare good that needs conserving. Far better to conserve it by designing a system in which people’s wants will be satisfied by individuals being selfish, and saving that altruism for our families, our friends, and the many social problems in this world that markets cannot solve.”

So economics, according to Summers, prices things so that we don’t have to waste our precious kindness on them. Incredible.

By way of response, Sandel asks his readers, in typical understated fashion, to “[t]hink 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? Wouldn’t their love deepen, rather than diminish the more they called upon it? Would they do better to treat one another in more calculating fashion, to conserve their love for the times they really needed it?” (p.128)

Virtues like love, Sandel suggests, are like muscles that grow stronger with exercise: “to renew our public life we need to exercise them more strenuously” (p.130). Perhaps we should practice by lavishing love on leading economic professors and government advisors who are blind to the moral limits of markets. That should make for an effortful work-out.

Tom Crompton

About Tom Crompton

I'm Change Strategist at WWF-UK. For five years I headed WWF-International's Trade and Investment Programme (working on World Trade Organization issues, for example). While I was (and still am) convinced that international trade policy is crucially important in sustainability terms, I was frustrated by the glacial pace of change on this agenda - and the fact that even those trade negotiators I got to know who were personally quite 'radical' nonetheless felt impotent in a system where there was so little political space to pursue the changes that are needed. This led me to ask how organisations like WWF might begin to work to help create the political space for more ambitious change. What leads to more vocal expressions of public concern about sustainability issues? What motivates people to bring more pressure to bear on their elected leaders? These questions led to work with social psychologists and political scientists, and the publication of a series of reports: "Weathercocks and Signposts: the environment movement at a crossroads" (2008); "Simple and Painless? The limitations of spillover in environmental campaigning" (with John Thogersen, 2008), and "Meeting Environmental Challenges: The Role of Human Identity" (with Tim Kasser, 2009). These pieces of work culminated naturally in our new report, "Common Cause".