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Economic Reflections 4: Markets in Life and Death

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In ch. 4 of What Money Can’t Buy, Michael Sandel discussed markets in life and death: janitors insurance, viaticals, “ghoul pools,” terrorism futures markets, death bonds, all markets that trade value in others’ deaths. I was startled by the breadth of reduction of people to the statistical evaluation of their death in corporations, insurance, finance, and gaming.

Regarding workers on whom their employers had bought life insurance, frequently without workers’ knowledge, Sandel wrote that it “objectifies them; it treats them as commodity futures rather than employees whose value to the company lies in the work they do” (p. 136.)  Viaticals may provide needed cash to the dying, but “wagers on death … give investors a rooting interest in the prompt passing of the people whose policies they buy” (p. 139.)  Hedging costs is one thing; life insurance on employees as a tax-free “strategy of corporate finance” (p. 134) is another.

Unlike commodities traders, a speculative market in celebrities’ deaths—so-called “ghoul pools”—serves no purpose in regulating the supply of scarce goods. Perhaps though it should be no surprise that a reductivist view of the other inheres in markets that operate in self-interest. For Kenneth Arrow and Sir Dennis Robertson, markets economize ethical behavior (p. 126) and do not squander virtue or the “scarce resource Love” (p. 128.) Consider the 1765 event in which 800 German refugees were abandoned outside London without shelter or provision, on whom some speculators bet how many would die within a week (p. 145;) no virtue was squandered in that market. Though an extreme example, the question seems fair: is that the market Arrow and Robertson had in mind?

In my view, people cannot flourish in a society that trades broadly on the death of others, as basic attitudes about social life and life itself are changed. As noted previously, markets change the nature of things traded. How would one feel to find that a life-long friend had secretly bet on one’s death? That is not a morally neutral market transaction; it is a betrayal, and the same transaction against an unknown other is no less a betrayal of the dignity of the other. Adam Smith saw human good emerging from virtuous self-interested exchange within a moral paradigm of sympathetic “fellow-feeling;” I stand with Sandel that “Wanton wagering on death is corrosive of human sympathy and decency” (p. 153,) and thus of the social fabric.

* 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.

2 Responses

  1. Robert

    so would the purchase of life insurance for yourself be self betrayal?

  2. Michael Brennen

    Interesting question; thanks.

    Sandel summarized the history of life insurance over the last few centuries, and there were some surprising twists in England a couple of centuries ago about it being a speculative enterprise, as I briefly mentioned in the short piece. The focus on life insurance when it came to the US was more on prudence than speculation, but there has long been an uneasy tension between life insurance as speculation and as prudent provision.

    Life insurance purchased on oneself is a fundamentally different proposition than you purchasing life insurance on, say, me, particularly without my knowledge. A key difference is this: I cannot gain from my own death, but those who depend on me can – gain in the sense of having provision that would be lost upon my death that they would have had were I still alive.

    Were you to bet on the timing of my death in a “ghoul pool,” or purchase life insurance on me – particularly without my knowledge – our relationship would be profoundly transformed from one based on intrinsic relational value to one of instrumental utility. You do not depend on me, and the loss of income at my death would not affect you in the slightest; our relationship is not defined in any way by financial interest. Were you to buy insurance on me though, I am worth more to you dead than alive. I cannot have that same interest in my own death.

    I suppose there is a case of life insurance on oneself being a self-betrayal. The example that comes to mind, of all things, is the movie “Airport” from the late 60s. For unknown reasons I still recall the guy’s name – D.O. Guerrero – that took out a life insurance policy on himself with his wife as beneficiary and blew himself up in the aft head of the plane.

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