SOSC 2340

Intermediate business & society

Lecture 5: Markets & morals

The dominance of the market

Today, people are more dependent on the market than at any other time in history. The market is also expanding to include items which, previously, have not been exchanged on markets.

We speak of “commodification” when a good becomes a commodity, i.e. something that is bought and sold.

Extending the markets: examples

Prison cell upgradesThe right to immigrate to the USAThe cellphone number of your doctorThe right to shoot a rhinocerousYour forehead (as a place on which

firms can place adverts)Places in the queue for congressional

hearings in WashingtonInsurance on the life of a personSource: M. J. Sandel (2012) What Money Can’t Buy, pp. 3-5.

Two arguments for the market

1) Libertarian: markets allow for the greatest freedom.

2) Utilitarian (economic theory): free markets maximise social welfare.

Utilitarian (economists’) view

Voluntary market exchange represents a Pareto improvement.

An exchange brings about a “Pareto improvement” if the welfare of at least one of the transactors increases whilst the welfare of other transactor(s) does not decrease.

Limiting the market

If a good or service cannot or should not be bought and sold for money, we speak of a limit to the market.

What are these limits?

People

Slavery

Parts of people (kidneys, blood, parts of liver, teeth)

Politics

Electoral votesPolitical office

Rights: freedom of speech, religion, press

Protecting people from themselves

Health and safety laws (hazardous jobs)

Narcotics, guns

Prizes and honours

Who gets the Order of Canada?

Why don’t we award students with grades in accord with who is willing to pay the most?

Love and friendship

Can one buy another person’s love or friendship?

Reasons for limiting markets

a) An exchange can transgress our rights.

b) Some exchanges are impossible: they corrupt the good being exchanged.

c) Some exchanges are blocked because they would lead to harm.

d) Some goods should be allocated according to non-market means.

Cannot and should not

Some items (e.g. friendship, love, prizes) cannot be sold on the market without being transformed into something else.

Other items (e.g. kidneys, places in queues, narcotics) can be sold in markets but should not be.

Are markets fair? Coercion and inequality

People’s choices in markets appear to be free, but are some people coerced by their circumstances to enter into some exchanges?

Examples: hazardous jobs, joining the army, prostitution, selling kidneys.

Are markets fair?

Markets allocate goods to those willing to pay for them.

Economists assume that if you have a high willingness to pay, you should get the good in question because you desire or value it most.

But poor people have high willingness but little ability to pay (healthcare, housing, education).