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Economic Reflections 1: Market Economy vs. Market Society

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Michael Sandel, in What Money Can’t Buy: The Moral Limits of Markets, writes in concern that we are moving from “having a market economy to being a market society” (p. 10, original emphasis,) with the latter putting things up for sale that corrupt the moral fabric of society. He proposes two concerns: increasing inequality, and a morally corrosive tendency of markets. Inequality matters because “the commodification of everything [makes] money matter more;” moral corrosion happens because “[s]ometimes, market values crowd out nonmarket values worth caring about” (p. 9.)  At stake are scarce goods, in greater demand than the supply can satisfy at zero opportunity cost. The criteria to allocate scarce goods can make a critical difference: markets allocate by price, an egalitarian polity allocates by coercive redistribution, queuing allocates by first come first served, raffles allocate by chance, cronyism allocates to one’s buddies, etc.

Market relationships, based on comparative advantage, are defined by one’s differences with others; non-market social relationships generally emerge from common interests or relational bonds. A society requires both; the moral hazard of monetizing the allocation of some rights must be considered.

Sandel misses an important private/public property distinction. Premium airline boarding may give better bin access to those who pay, but no passengers are displaced; line-jumping privileges to amusement rides displace non-premium users. Let the market sort out private property access rights by consumer pressure.  Public entities, however, must balance access to public goods. HOV lanes are to encourage conservation; selling single occupant access undermines that intent, signaling that money buys political privilege and exception.

Regarding Sandel’s example of lobbyists using line-standing services for access to Congressional hearings, I see no difference whether a lobbyist’s staffer or a contractor stands in line. Given a first-come first-served allocation, attendance requires committing time in line; one’s opportunity cost may be in time rather than money, but it is not clear that line-standing services materially alter access to public hearings for those who really want to be there.  While the monetization of line standing may not be entirely neutral, that is but a small aspect of a far deeper problem of full time lobbyists buying privilege and access to government.

* This is adapted from a series of one page papers I wrote for an independent study in micro- and macroeconomics; the material included the excellent text The Economic Way of Thinking by Heyne, Boettke, and Prychitko, as well as several texts I brought in from communitarian, market anarchy, and experimental economic perspectives.

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