How Markets Crowd Out Altruism

Writing in Boston Review, Harvard's Michael Sandel offers an essay-length summary of his new book, What Money Can't Buy: The Moral Limits of Markets. I've enjoyed this book quite a lot and think it's well worth reading in its entirety -- but, if you don't have the time, this is a great place to start. Key quote (from the book): "Economists often assume that markets are inert, that they do not affect the goods they exchange. But this is untrue. Markets leave their mark. Sometimes, market values crowd out nonmarket values worth caring about... [S]ome of the good things in life are corrupted or degraded if turned into commodities."

The idea that thinking about something in a market-based way might corrupt or degrade it may seem like a lot of moralistic finger-wagging. In fact, Sandel argues, it's a very real, measurable effect, and, cumulatively, it can change the way our society works. Consider this example from Switzerland:

For years, Switzerland had been trying to find a place to store its radioactive waste.... One location designated as a potential site was the small mountain village of Wolfenschiessen (population 2,100). In 1993, shortly before a referendum on the issue, economists surveyed the residents of the village, asking whether they would vote to accept a nuclear waste repository in their community if the Swiss parliament decided to build it there. Although the facility was widely viewed as an undesirable addition to the neighborhood, a slim majority (51 percent) of residents said they would accept it. Apparently their sense of civic duty outweighed their concern about the risks. Then the economists added a sweetener: suppose parliament proposed building the nuclear waste facility in your community and offered to compensate each resident with an annual monetary payment. Then would you favor it?

The result: support dropped to 25 percent. What’s more, upping the ante didn’t help. When the economists increased the monetary offer, the result was unchanged. The residents stood firm even when offered yearly cash payments as high as $8,700 per person, well in excess of the median monthly income.

It's a classic example, Sandel writes, of the way that putting a price on something -- in this case, civic virtue -- can actually change and even destroy it. Apart from the market, accepting the location of the storage site is virtuous; with the market, it's simple bribery. In fact, "83 percent of those who rejected the monetary proposal explained their opposition by saying they could not be bribed." It's what Sandel calls "crowding out": Introduce the market, and you "crowd out" other ways of thinking about a decision. Incentivize a behavior, and you might actually get less of it.

Economists, Sandel writes, aren't particularly bothered by crowding out; in their view, society is better off instituting market mechanisms wherever possible so as to reduce our reliance on altruism, which is a fickle and limited resource. But "to those not steeped in economics," Sandel argues, "this way of thinking about the generous virtues is strange, even far-fetched. It ignores the possibility that our capacity for love and benevolence is not depleted with use but enlarged with practice."

Read more at Boston Review, and buy Sandel's book here.