Thursday, July 31, 2014

What Money can’t buy by Michael Sandel


Economist E.F. Schumacher talks about two types of problems from a conceptual level. One is “convergent” problem where more one iterates, chances of arriving at an appropriate solution increases and the other “divergent” problem where more effort only increases the options and differences. He cites bicycle wheel design as an example of convergent and how to teach children as an example of divergent which has been in debate for the last 100 years if not more.

Clearly, this book's author has embarked on a pesky divergent problem. He discusses the moral limits of the markets. We all intuitively know that there are limits to what money can buy. But when you read this kind of work, you worry that the number of such things may be minuscule. I am tempted to agree briefly with Malcolm Forbes, who famously said, “those who say, money can’t buy happiness are shopping in the wrong places”.

The strength of this book comes from the examples. They are well thought out and convincing for me. However, in the end, author does not provide a final verdict and leaves it all to us. He leaves a philosophical framework for us to ponder. Let us look at some examples.

Black Rhinos and Walrus Hunting: Black Rhinos were on the brink of extinction. From 20,000 it fell to 600. Then market solution appears in the form of eco-tourism with a twist – Pay $150K for hunting one Rhino. Good news is that, the money brought back Rhinos from the brink. Still to me, it appeared like a Faustian bargain because it is depressing to kill them for a payment. Author concurs saying, it is like saving the ancient redwood forests by allowing the wealthy donors the right to carve their names/initials in the same trees. Even more sober story for Atlantic Walrus. They are valued for meat, skin, and oil. They are completely defenseless as well as harmless. In 1928, Canadian government banned Walrus hunting with an exception for aborigines Inuit group which has been depending on it for the last few thousand years. By 1990, they approached Canadian government with proposal to sell their rights to wealthy hunters and was given the go-ahead. Inuit people now guide the killing for a fee of $6-$7K.  Walrus move so slowly, hunters come very near and shoot. Since Walrus hunting is banned hunters can’t even carry back anything as memento. In terms of actual challenge it is next to nothing. As NY times puts it “a long boat ride to shoot a large bean bag chair”. Author discusses nuanced points about fine and fee. I thought, I knew the difference but I am not so sure now.

There are something people don’t do for money and when that aspect is brought in, things take a different twist as in case of nuclear dump in Switzerland. 51% of citizens in a Swiss village said they would OK the nuclear dump site because their sense of civic duty outweighed safety concerns. Subsequently, when a sweetener was added declaring that government would offer some financial compensation, acceptance dropped to 25%. Then quantum of compensation was increased only to learn that acceptance dropped even further. Remember the advertisement “There are something money can’t buy. For everything else, there is a Master Card”. Looks like nuclear dump permission is not Master card friendly!

Author explains that there are two kinds of goods. The things like friends, Nobel prizes that money can’t buy. Things like kidneys, Children which money can buy but arguably shouldn’t. He confesses the distinction is less clear than it appears. His main point is that, we have seamlessly digressed from market economy to market society where almost everything is up for sale. Good grief for Credit cards of the world. In the introduction he gives some stunning examples. He also discusses the scary case of viaticals. His observation is when fully driven by market, it breeds inequality, and hence market reasoning is incomplete without moral reasoning.

Author talks about insurance as one of the moot areas. His profound remarks are thus: “Life insurance has always been two things in one. A pooling of risk for mutual security and grim wager, a hedge against death. The two aspects always co-existed as an uneasy combo. In the absence of moral and legal restraints, the wagering aspect threatens to swamp the social purpose that justifies the insurance in the first place. When the social purpose is lost or obscured, fragile lines separating insurance, investments and gambling come undone”. To get the full import of this one has to understand viaticals deeply.

He talks about advertisement in police cars and other public utilities which are worth a serious thought. I liked his view points on advertisements in schools / educational institutions. I am also weary of such marketing spins inside such locations. To quote him “Advertising encourages people to want things to satisfy desires. Education encourages people to critically examine their desires and restrain or elevate them. The purpose of advertisement is to recruit customers and purpose of education is to cultivate citizens”. It reminds us of the paradox “liberty and equality”. As we all know, when the liberty (freedom) goes unhindered, albeit it appears to be a virtue, breeds inequality in the long run. Similarly, if we focus too much on equality (again a virtue by itself), it will result in too much of restriction or lack of freedom over the long run. Hence, the slogan Liberty-Equality-Fraternity, the 3rd higher force which hopefully regulates the first two virtues for a healthy balance.

I closed this book saying to myself, toughest non-technical problems in this world are not solved - they are merely grappled with. It is not without reason data base guru Jim Gary said “May all your problems be technical”.

Thanks for reading this far.

Regards

madhu

7 comments:

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ESR said...

Some good quotes from the book:

Market values crowd out non-market values worth caring about.
Slavery was appalling because it treated human beings as commodities. Something similar can be said of other cherished goods and practices
Some of the good things in life are corrupted or degraded if turned into commodities
Without quite realising it, we drifted from having a market economy to being a market society. A market economy is a tool for organising productive activity. A market society is a way of life in which market values seep into every aspect of human endeavour. Social relations are then made over in the image of the market.

Beyond these, the book is a bit disappointing, coming from a person like Sandel. He is far more capable of making a point , as may be seen from his Harvard lectures. After going in great detail on what money can buy, he seems to have given up on giving equal space to the degradation that sets in a market society.

Suresh S said...

Nice writeup Madhu.

I guess I can comment better once I read the book but yes, this market-shall-decide attitude has some major problems. Especially in countries like India where we not only have class divide but also caste divide. Govt intervention is a must in many cases.

Srini Krishnan said...

Would like to understand how these observations relate to behavioral economics. Analyzing market forces, social outcomes etc are attempts to gain insight or try to fit an explanation on why people make a particular choice. Or why people do something different from what they say they are doing or will do. Why people don't wear helmets unless there is regulation. Nothing may seem more irrational than not caring for ones own life. Instead of aggregating and generalizing, observing at individual level seem to provide more insights into behavior and clue to experiments for triggering change. Design thinking , jobs-to-be-done approaches are in that direction. Also money is only one aspect. Trade off can be in terms of time, effort, custom, status etc. We need action bias than research to bring out positive changes.

Mohanakrishnan said...

Nice summary Madhu. Now I have no reason to write mine :-)
What attracted me to this book is the fact he raised this essential question - should market control all human transactions. Utilitarians might love the idea of putting a dollar number against everything, but is it the best thing to do?

What I loved about the book is something that is absent in the book. He discussed a framework to guide the discussion on where to keep markets out in quite some detail. He provided many examples where this discussion is very relevant. However, he did not prescribe the answer. I consider that was brilliant as the goal of the book was not to prescribe a solution but to create a discussion.

P.Varadarajan (Varad) said...

Madhu, just curious about how the blood money collected for killing one Rhino helped to `bring the rhinos back from the brink'.....some kind of financial encouragement directly funneled to the rhinos (aadhaar cards?) to encourage faster and more prolific breeding? And why would anyone pay 8K usd to kill a sitting walrus? I thought hunting is done to satisfy a rush or get a high of outwitting some animal or.....!! In both cases, man overdoes something, creates an artificial scarcity when there need not have been any, then government decrees the situation needed control and creates a market; now, voila, money can buy something which was not available earlier.....God must be laughing away somewhere at the stupid manipulations of mankind.

Re kidneys and children - agreed there should never be a market for these and many similar `things'. But the logic of someone who sells one kidney to get some money and does something for his family could be impeccable. All this can be so circumstantial that specific cases may always be justified while attempts to commoditize should be decried.

Re fees and fine...I think for some things in life one pays fees in advance and if he failed to do that, pays fine later....there are cases you can only pay fines because fees are not acceptble in such cases!!

Sounds like a good read, this book.
Thanks.

Varad

Ramesh N Raghavan said...

Madhu, good summary and I should probably read the book to see all the examples. The nuclear dump example is a little intriguing. I was thinking about it and probably the reaction is due to the fact that we often associate getting paid as being compensated for some loss. Even if the nuclear dump was well planned and the risk level was really low, the fact that this was offered could have triggered more doubts and increasing the compensation could have only increased the doubts. So, I am not sure if it was the moral outrage at being offered cash for doing their civic duty that triggered this behaviour or the doubts seeded by that action. Just a counter thought on this specific example. I personally do agree that we should not put a price tag on everything and there should be a few things which allow us to detach ourselves from this correlation..
I also agree to some of the other comments where some have suggested that there could be some circumstances when it may be agreeable to do some things for money.. I am somehow reminded of a ironic story where a husband and wife trade some of their precious possessions for cash to buy a gift for the other, and finally find that the gift becomes pointless as the other person had traded the part that would have benefitted from the gift..