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The Debate

TED video: As the U.S. drifts from a market economy to a market society, Michael Sandel asks: In our current democracy, is too much for sale?

Are there things that simply shouldn’t be bought and sold? The Harvard University political philosopher Michael Sandel has issued a sharply-argued call for limits on market forces in his TED talk "Why we shouldn’t trust markets with our civic life." Drawn on his new book What Money Can’t Buy: The Moral Limits of Markets, Dr. Sandel draws on scores of examples of market incursion into civic life – from the ability for well-off inmates to buy a better class of prison cell to buying and selling of future payoffs on elderly people’s life-insurance policies to pay for medical care.

He uses these to ask a key set of questions about our public life: “Do we want a market economy, or a market society? What role should markets play in public life and personal relations? Where should money’s writ not run?”

Should there be a limit to what markets can touch in public services and civic life? Mr. Sandel says there should. We’ve drawn together a panel of top economic and public-policy thinkers to examine the question from a number of divergent angles. Read them all, and decide whose perspective is the most promising.

The Debaters

Debate contributor
Ben Dachis Senior policy analyst, C.D. Howe Institute
Markets aren’t about money but about incentives, and governments need them
Debate contributor
Armine Yalnizyan Senior Economist, Canadian Centre for Policy Alternatives
We shouldn’t be relying for vital goods on free markets but rather on careful regulation
Debate contributor
Frances Woolley Professor of Economics, Carleton University; economics blogger
Our life is market-based whether we like it or not; we need better, not fewer, markets
Debate contributor
Donald Savoie Author of Whatever Happened to the Music Teacher? How Government Decides and Why
Market-based public-service experiments have all failed. Our bottom line should be based on values

The Discussion

Debate contributor

Ben Dachis: It may come as a shock, but economics isn’t always about money. Before you tell me to hand in my economists’ guild card, I should tell you that the way economists look at the world is rooted in a simple idea: people respond to incentives. That incentive often is money. Sometimes it is not: in scientific research, for example, the incentive that drives people to do world-class research is often scientific prestige for its own sake, not whether an invention will make money.

Economists, and sometimes governments, tend to be on the lookout for cases where the incentives that some people confront are going to lead to harm for others.

If we put a cost on polluting, companies will do less of it. That is how the United States and Canada dealt with acid rain — through a market for sulphur dioxide emissions permits. If we had not, and acted as if the quality of the environment had no financial value, we would have been in more trouble than we are now.

And of course the environment has value in its own right, and putting a cost on polluting it has been one way of dealing with the fact that it is common, shared, property. None of us bears the full cost of the things that we do that harm it: changing financial incentives so that we do confront actual costs can help.

Incentives can also play a role in our currently government-provided services such as health care, public transit or postal services. The lack of markets is a root cause of many problems of high cost, poor service or both. Rather, there’s little bottom-line incentive for anyone to do a better job.

But adding markets does not mean governments ceding control of crucial government services to free-market privateers. Instead, governments can create a market in which companies and existing employees compete for the right to provide services on the government’s behalf.

Profit is an incentive for corporations to find ways to keep costs down so they can outbid their competitors. As long as governments penalize poor service from those who win the bids, the public can get the same, or better, service at a lower cost.

Contracting need not mean privatizing. Government workers often are the best option. They can go head-to-head with private sector bidders. A market can create the incentives that unleash the good ideas they’ve had for doing their jobs better. Markets drive that saving.

Governments around the world are increasingly relying on private companies to operate waste services, water and wastewater, postal services, and public transit.

In the case of some health-care services, governments can instead put money in the hands of people in need and let companies compete to serve them. This is what Nordic countries do for patients in long-term care.

In all these areas, there are often good reasons for governments to have some role in setting service standards or providing subsidies, but adding market forces can result in incentives for better and lower cost services.

Rather than decrying the role of money and markets, let’s give incentives a chance.

Debate contributor

Armine Yalnizyan: Markets are often sold as the best way to promote efficiency in resource allocation, consequently minimizing waste and maximizing potential and innovation. Indeed it seems you can find a market that sells anything these days, from trips to outer space to human organs.

There are widely accepted limits to market logic. Free-market principles do not govern access to the smallpox virus or to bazookas, nerve gas or radioactive matter. Once it is agreed a that line should sometimes be drawn, where do you draw it? Laws and regulations vary from place to place, and social norms change over time. For example, once upon a time slavery was acceptable; today it is not.

Free markets sometimes open up opportunity. Sometimes they do the opposite.

Think of health care and education. Left simply to markets, a sub-optimal portion of the population could have access those things that maximize their individual potential, and, in turn, the potential of a society. That's why most advanced economies ensure that basic elements of health and education are mostly not market-driven. Increasingly, though, better quality or quantity of service is available to those with deep pockets, in health and education as for consumer goods. Turn a blind eye to this phenomenon and watch how inequality begets more inequality, from childhood through to the golden years.

Market forces shape production possibilities, propelling advances and adoption of such wonders as electricity and telecommunications. Regulations govern access to these utilities because they literally power the production possibilities of whole societies. If only market forces ruled, it wouldn't be long before rates varied in a way that would discriminate against smaller players and non-urban geographies, limiting the pool from which the next innovation springs.

Markets are notoriously bad at pricing externalities that can affect markets themselves. What were once considered quasi-infinite goods, such as water and the air, can be ruined by expansion of the market itself, raising costs and possibilities for everyone. Same for financial markets, whose limits know no bounds... until they collapse on themselves and bring the whole system down with it.

The internal logic of markets also leads to greater corporate concentration, something that is becoming increasingly obvious in the wake of the 2008 crisis. Markets create competition, it is said -- but competitors hate competition. The whole point of competition is to get rid of your competitors. Without anti-trust rules and regulations vigorously enforced, our compass-setting leads us straight to a Blade Runner economy.

The growing consolidation of market power spills well beyond the marketplace, into the markets for ideas. The powerful get more face-time with politicians, hire lobbyists to influence legislation, and pay to influence your thinking.

What's the message they're selling? That the most important thing one can do is make money, at any cost, human or environmental.

I don’t think so.

Debate contributor

Frances Woolley: Michael Sandel asks where markets belong and where they don't, as if it were possible to shut out markets, to insulate ourselves from the basic laws of supply and demand. This is a fantasy. Markets are everywhere. An online dating site is a market. So is Canada’s health-care system. It doesn’t matter whether people exchange money, or roses, or personal favours. By definition, where there is trade, there is a market. So it is pointless to talk, as Mr. Sandel does, about limiting market reasoning. The conversation worth having is about creating better markets.

As income inequality increases, disparities in the ability to command resources grow. Multi-millionaires do not wait in line – not for a ride in Disneyland, not to board a plane, not for heart surgery. Mr. Sandel might decry fast-track passes. But, realistically, the alternative to multi-millionaires openly buying their way to the front of the line is multi-millionaires using hidden influence and connections to get to the front of the line. I prefer the former.

Ultimately, who benefits from limits on markets? I am not convinced that college athletes benefit from the NCAA’s rigorous defence of their unpaid, amateur status, or that Canadian egg donors are better off receiving “indescribable joy,” plus a token compensation for expenses, than a monetary reward.

The threat to the commonality Mr Sandel values is not the market; it is inequality in income and wealth. That is worth fighting against.

Debate contributor

Donald Savoie: Governments throughout the western world have, over the past thirty years or so, sought to make the public sector look like the private sector. They have been busy trying as best as they can to invent a bottom line where no bottom line comparable to the private sector can possibly be fabricated.

In the absence of a profit motive and market forces, governments have launched numerous efforts to evaluate programs and the performance of individuals and government departments. None have lived up to expectations.

Partisan politics, managing the blame game, coping as best one can with divided loyalties and pursuing the public interest (however nebulous a concept that is) is what the public sector is all about. In brief, government is about many things, but promoting human dignity is central to its very purpose. The Charter of Rights is about promoting human dignity.

Putting in place a viable regulatory regime is about ensuring everyone knows the rules of a well-functioning society. Having politicians speaking out on the importance of Canadian values does not cost money but done well it makes for a better Canada.