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Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 1.1.3 Degenerative economies, which explain the problems for people and planet with the way our current economies operate.
Section 1.2.1 Human-nature relationship, which explains the need to return to a worldview that sees humans as part of nature rather than separate from it.
Section 1.3.2 Values in the economy, which explains how values affect human behaviour, judgements, and the economic tools we choose to use in the economy
Section 3.2.1 Capitalism: definition and development, which explains what capitalism is and how it developed.
Section 3.2.2 Capitalism: an evaluation, which explains the positive and negative consequences of capitalism and how economic narratives support capitalism.
Section 3.2.3 Law and markets, which explains how law supports market and capitalist activities through creating trust, protecting private property, and establishing legal personhood for businesses.
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Section S.5 Causal loops, feedback and tipping points, which explains the feedback loops that can stabilise or destabilise systems.
Learning objectives:
discuss the ethical issues involved with using markets as a provisioning institution, including the impact on economic inequality and the crowding out of important social values
Schools worldwide strive to improve student learning, and motivation to learn plays a large role in students’ success. To increase motivation, some schools have experimented with paying students for good grades, hoping financial incentives would boost performance. These experiments have sparked intense debate.
Supporters argue that money is a powerful motivator and that students, like workers, could benefit from being financially rewarded for their efforts. Critics say that education should be driven by a love of learning and personal development, not financial gain. They worry that paying students for good grades might undermine their intrinsic motivation to learn. The outcomes of these experiments in terms of student performance have been mixed.
Political philosopher Michael Sandel argues that markets and their values, such as “paying” students for good grades, have entered areas of our lives where they don’t belong, such as education, healthcare, even criminal justice. Sandel warns that "without quite realising it, we drifted from having a market economy to being a market society", with a number of negative impacts.
Should everything be for sale?
What are the moral limits of markets?
What are the moral limits of markets?
If you have read other sections of this textbook, such as Section 3.1.4, you might already have some ideas about why using markets to meet human needs and wants can sometimes be ethically questionable. Sandel highlights a number of ethical problems with allowing markets to dominate so much of our lives:
markets reinforce economic inequality;
markets change the way we view and treat things;
markets undermine important social values.
Understanding these ethical problems is important for thinking about where markets do and do not belong in our lives.
Markets reinforce inequality
The growing presence of markets in everyday life worsens economic inequality. When things that were once free or shared become commodities for people to buy and sell, wealthier individuals gain even more access and power.
For example, parents who can afford private education can send their children to better schools, ensuring more opportunities for them. In contrast, children from less wealthy families may lack access to quality education. The same is true for healthcare. In a market-driven system, those with money receive better care, while those without may struggle to get any. This creates a reinforcing feedback loop in which the wealthy maintain their health, earn more money, and improve their social standing, while the poor fall further behind.
Social experiences and political influence are also affected. When access to cultural events or recreation spaces depends on money, only the wealthy can participate. Even when these events and services are for free, like New York’s Shakespeare in the Parks theatre performances, the wealthy have used paid line-standers to gain access to tickets. In some countries, political influence is increasingly bought through large donations to political campaigns, making it harder for those with less wealth to have their voices heard. Over time, the rich and the poor live in separate worlds, where wealth not only secures better material conditions, but also greater social and political influence.
Figure 2. In some places, professional line-standers are used by wealthy people to avoid lost time. What is the ethical issue with the marketisation of line standing?
(Credit: Alexandre Duret-Lutz, CC BY-SA 2.0)
Markets change how we view and value things and people
Societies vary in their understanding of what can be bought and sold in markets, often depending on their values. For a market to exist, the item being exchanged must be treated as private property, coded as capital or a commodity (Section 3.2.3). It has to be viewed in society and law as something that can be owned and transferred for profit. Many things in society should not be valued this way.
The moral justification for being able to sell something depends on whether we assign instrumental value to it, meaning we value it for its usefulness or profit. This is easier to justify when the item is viewed as distinct from humans. Section 1.2.1 explained that today most people consider themselves superior to and separate from the rest of the living and nonliving world, a worldview called human-nature dualism. This view has justified the exploitation of ecosystems and, more disturbingly, the treatment of human beings as commodities (Figure 3).
For centuries, human beings were bought and sold in markets, justified by the belief that slaves were less than human and part of nature. Only in the last 200 years has the explicit buying and selling of human beings largely been outlawed in many countries, although human trafficking still exists and is not explicitly outlawed in more than 90 countries.
Today, most people consider the sale of humans to be morally wrong, showing how values can shift. But people still debate whether it is acceptable to sell parts of humans, such as organs, or to pay for the use of human bodies, such as in surrogacy, when a woman is paid to carry and give birth to a baby for others. These markets are legal in some places and banned in others, reflecting differing societal views on the intrinsic or instrumental value of those things.
Figure 3. A 1906 Punch cartoon depicting the Belgian King Leopold II as a snake attacking a rubber collector in the Congo. Belgium enslaved local populations, killing and maiming countless people to obtain rubber.
(Credit: Punch/Wikimedia Commons, public domain)
Economists often argue that pricing in markets provides a financial incentive to get more supply of certain goods and services. We might have more organs for transplant if we could legally buy and sell them. We might also have less damage to nature if we put a price on our shared resources.
But what is the right way to view the rest of the living world? While most would agree that it is wrong to assign instrumental value to humans, we do the same to other living organisms every day. Would that situation get worse or better if we actually put a price on nature? If we want to move to regenerative economies, we need to have discussions about how we value the rest of the living world too.
Philosophers ask what we lose as a society when we shift to an instrumental view of the way we value humans and the rest of nature. A market-based, instrumental view and value of people and things can make it easier for powerful people to exploit vulnerable people and things for their own benefit.
Figure 4. Bee’s pollination ‘services’ are worth billions to farmers globally. Does knowing that change the way you think about bees?
(Credit: Pixabay, Pexels licence)
Crowding out social values
Another issue with values is that getting paid for an activity that is normally voluntary can actually reduce the motivation to do it. Humans are often motivated to do good deeds by wanting to help others and a sense of community duty. This is called intrinsic motivation. However, when money is used to motivate, this is an extrinsic motivation, something outside humans. This process is called crowding out.
Extrinsic motivators, like money, are powerful. But research has found that intrinsic motivation is stronger and lasts longer. In the situation described at the start of this section, where students are paid for good grades, the question is whether their intrinsic motivation to learn is crowded out by the extrinsic motivation of money. While the money might motivate in the short run, what happens in the long run? Or if the payment stops? Some research shows that once intrinsic motivation is crowded out, it may not come back.
Another example is blood donation. In some countries, people donate blood voluntarily, motivated by civic duty and altruism. In other countries, people are paid for their blood. Some research shows that where money is involved, the quality and safety of donated blood may decrease. When people are paid for their blood, the act becomes a financial transaction and may weaken the sense of community and the values of generosity.
What is the role of ethics and values in markets?
What is the role of ethics and values in markets?
Sandel and others argue that some things should not be exchanged in markets. Health, education, nature, voting rights, and access to justice are essential parts of a fair and just society, having intrinsic value that should not be reduced to money. When profit values enter these areas, they deepen inequalities and damage social cohesion.
This reminds us that economics is fundamentally about ethics and values (Section 1.3.2). Markets can be powerful tools for organising economic activity, but they are not suited for everything. It is important to carefully consider where markets, their prices, and profits are used in our economies so that we don’t damage the values that strengthen our relationships to each other and wider ecosystems.
Activity 3.2.5
Activity 3.2.5
Concept: Systems
Skills: Thinking skills (critical thinking)
Time: Varies, depending on the option
Type: Individual, pairs, or group
Option 1: Where are markets appropriate?
Time: 30 minutes
Consider the goods and services listed in Table 1, and decide to what extent we should let businesses in markets provide them.
Check the box that indicates the level of market involvement and for each one explain your reasoning.
If you can, discuss your ideas with a partner, small group or whole class.
Option 2: Discussion - Should children be paid for doing housework?
Time: 30-40 minutes depending on how much time is allocated to prep and discuss
There is a debate among parents who can afford it, about whether children should be paid to do household work. Using a discussion format that is familiar to you:
Consider the arguments in favour of and against paying children for housework. Make sure to integrate ideas from this textbook section.
If you do this activity with a class, you might want to divide students into groups to consider each side of the argument to tease out as many points as possible before opening up the discussion.
After the discussion is finished, you could write or audio record your position on the question, identifying which arguments you found the most compelling.
Option 3 - Should we put a price on nature?
Time: 40+ minutes (depending on amount of time for prep and discussion)
There is a heated debate in economics about whether we should put a price on nature.
To be clear, some natural resources are already priced. States, for example, may require firms to pay for resource extraction through licence payments. There is also a carbon market that attempts to charge businesses a price for their carbon emissions, essentially putting a price on the use of our carbon budget. However, there are a great many natural resources that are used for free, or priced very low.
However, some people argue that it sends the wrong signal to price nature at all. What do you think?
Should we put a price on nature?
In addition to the text in this section, you can use what you may have learned about the uses and limitations of markets in other sections or materials. Here are a few additional interesting sources, but you can also find others online if you want to do more research:
The great experiment to put a price on nature - a long form news article highlighting the sticky issues involved with putting a price on nature
The call to put 'a price on nature' can be appealing - commentary outlines arguments against putting a price on nature
Bees are worth billions to farmers across the globe, study suggests - article about the economic worth of bees highlights the potential advantages and disadvantages of pricing ecosystem services
Ideas for longer activities and projects are listed in Subtopic 3.5 Taking action
Checking for understanding
Checking for understanding
Further exploration
Further exploration
What Money Can’t Buy - a series of videos from the Institute for New Economic Thinking (INET) about the moral limits of markets. Difficult level: easy/medium
Justice - a very popular free, online course from Harvard University introducing students to moral and political philosophy, with professor Michael Sandel. Includes material on the moral limits of markets. 12-weeks long, 3-6 hours per week, self-paced. Difficulty level: medium
Popular repugnance contrasts with legal bans on controversial markets - an interesting research paper on widespread attitudes and laws on prostitution, surrogacy, and kidney exchange. Difficulty level: high
Mum. How are cigarette companies allowed to still exist? - an article that explores how certain goods - cigarettes, alcohol, unhealthy and ultra-processed foods, opioids, gambling, social media, computer games and vapes - are addictive by design. The article also explores the business strategies that create and maintain markets for harmful products while hindering political action to stop it. Difficulty level: medium
‘For me, there was no other choice’: inside the global illegal organ trade - a long-form article from The Guardian about the exploitation of vulnerable people in the global trade in human organs. Difficulty level: medium
Sources
Sources
Institute for New Economic Thinking (n.d.). What money can’t buy. https://www.ineteconomics.org/perspectives/videos/what-money-cant-buy
Patel, R. and Moore, J. (2020). A History of the World in Seven Cheap Things: A Guide to Capitalism, Nature, and the Future of the Planet. London: Verso.
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House
Sandel, M. (2012). What Money Can’t Buy: The Moral Limits of Markets. New York: Farrar, Straus and Giroux.
van Bavel, B. (2016). The Invisible Hand. Oxford: Oxford University Press.
Roth, A. and Wang, S. (2020). Popular repugnance contrasts with legal bans on controversial markets. Proceedings of the National Academy of Sciences (PNAS). https://doi.org/10.1073/pnas.2005828117
Terminology
Terminology
Link to Quizlet interactive flashcards and terminology games for Section 3.2.5 Moral limits of markets - in order of appearance
incentive: something that motivates or encourages someone to do something
intrinsic motivation: an incentive to complete a task simply because we find it interesting or enjoyable
value: ideas about what is important or good
economy: all the human-made systems that transfer and transform energy and matter to meet human needs and wants
ethics: a set of moral principles about right and wrong that affect how people make decisions and lead their lives
economic inequality: unequal distribution of income and opportunity between different groups in society
wealth: the total value (stock) of someone’s assets such as money, house, or investments
power: the ability to influence events or the behaviour of other people
reinforcing feedback: a situation where change in a system causes further changes that amplify the original change which can lead to tipping points in a system
market: a system where people buy and sell goods and services for a price.
private property: the ownership of property by private individuals and groups
capital: assets or valuable resources used to generate income
commodity: something that can be bought and sold, often, though not always referring to raw materials
profit: total revenue minus total cost
instrumental value: when something has value for its use for human beings
human-nature dualism: the worldview that human society is fundamentally separate from and superior to the rest of the living world
exploitation: using and benefiting from resources; the term is often used negatively to imply using power to take advantage of a situation
ecosystem: the interaction of groups of organisms with each other and their physical environment
surrogacy: a process in which a woman carries and delivers a child for a couple or individual
extrinsic motivation: the incentive to complete a task for an external reward
crowding out: to push something out of a place or situation by filling its space with something else
social cohesion: the extent to which people in society feel connected to one another and share common values
economics: the study and practice of how we organise ourselves to meet human needs and wants in the planetary ‘household.
ecosystem services: any positive benefit that ecosystems provide to people
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