Can optimizing everything for maximum utility leave us in a sub-optimal situation? That’s the question posed this week in a very interesting book review of What Money Can’t Buy. The author surveys how market morality (the idea that markets always lead to optimal outcomes) permeates our everyday life now and challenges traditional social norms. He concludes rather provocatively, but thoughtfully:
Proponents of market morality claim that it imposes no belief system, but that’s just a smoke screen. Choosing to place utility maximization at the core of your belief system is no different from choosing any other guiding ideological precept. Every problem has an incentive-based solution; every tension can be resolved by seeking the maximally efficient outcome.
This is a depressingly reductive view of the human experience. Men will die for God or country, kinship or land. No one ever picked up a rifle and got shot for optimal social utility. Economists cannot account for this basic fact of humanity. Yet they have assumed a role in society that for the past 4,000 years has been held by philosophers and theologians. They have made our lives freer and more efficient. And we are the poorer for it.
Thinking about some of the examples of markets taking over social norms, I do feel indignant, even as an market-loving economist. When did we go from naming buildings and monuments after people who have built a legacy to naming them after people who made a lot?
In a rare case of an anachronism being something I am proud of, Yale refuses to name its new residential colleges after rich donors and instead only after alumni who have done something worthy of recognition. I think such a policy brings the best out of the community and gives people something to aspire towards — an externality unaccounted for by the market.
I really do feel that markets not only allocate goods and resources but they also express and promote attitudes towards the very goods being exchanged. Once we agree certain goods can be bought and sold, we implicitly label them as commodities and some things should be sacrosanct. People can’t sell their votes, organs, or freedom. Enabling the sale of them would effectively destroy the value they represent.
Markets, at the worst, could destroy a lot of things but at the very least, fail to capture or account for everything. Markets can make people do the right things some times but they cannot make the right motivations — in fact, oftentimes, they undermine the right motivations.
That said, people do a lot of good things without incentives everyday, though the number of things may diminish as markets permeate more and more of daily life. In my experience, there are still good people who don’t check first if the moral high ground isn’t on top of a pile of gold. When you find those people, you have to place a high value on your relationship because they are increasingly rare in today’s world, but don’t ever make the mistake of thinking you can put a price on them — or else you may have diminished the most valuable thing in the world.