The Harvard political philosopher Michael Sandel offers a thought-provoking essay, \”Market Reasoning as Moral Reasoning: Why Economists Should Re-engage with Political Philosophy,\” in the just-released Fall 2013 issue of the Journal of Economic Perspectives. Like all JEP articles, it is freely available on-line courtesy of the American Economic Association. (Full disclosure: I\’ve been the Managing Editor of the JEP since its first issue in 1987.) The article makes a number of arguments about the extent to which \”putting a price on every human activity erodes certain moral and civic goods worth caring about.\” Here, I\’ll focus on one argument presented late in the paper, which is the claim that it is a good thing to let markets based on self-interest function in many areas, because it conserves on scarce resources of altruism.
Sandel makes a persuasive case that a number of economists hold this view, although it is not always stated openly. Here are a few examples. The eminent British economist Sir Dennis Robertson gave a prominent 1954 lecture on the topic \”What does the economist economize?\” Here is Sandel\’s discussion:
Robertson (1954) claimed that by promoting policies that rely, whenever possible, on self-interest rather than altruism or moral considerations, the economist saves society from squandering its scarce supply of virtue. “If we economists do [our] business well,” Robertson (p. 154) concluded, “we can, I believe, contribute mightily to the economizing . . . of that scarce resource Love,” the “most precious thing in the world.\”
Kenneth Arrow made a similar argument in a 1972 essay, Sandel notes:
“Like many economists,” Arrow (1972, pp. 354–55) writes, “I do not want to rely too heavily on substituting ethics for self-interest. I think it best on the whole that the requirement of ethical behavior be confined to those circumstances where the price system breaks down . . . We do not wish to use up recklessly the scarce resources of altruistic motivation.”
Or for another example, here\’s Sandel describing a speech that Larry Summers gave at Harvard\’s Memorial Church in 2003:
Summers (2003) concluded with a reply to those who criticize markets for relying on selfishness and greed: “We all have only so much altruism in us. Economists like me think of altruism as a valuable and rare good that needs conserving. Far better to conserve it by designing a system in which people’s wants will be satisfied by individuals being selfish, and saving that altruism for our families, our friends, and the many social problems in this world that markets cannot solve.\”
As Sandel notes with some asperity, this notion of altruism as a scarce resource, \”like the supply of fossil fuels,\” is highly contestable. Might it not be possible instead that when people act in a way that displays altruisism, generosity, or civic virtue, that the social supply of these virtues tend to expand? It seems plausible to think that altruism, generosity, and even love may be socially created, not just used up.
At one level, Sandel\’s critique seems to me fair and well-made. There is actually a reasonable-sized literature in economics and other social sciences looking at how the level of trust and generosity varies across societies. It seems incorrect to think of altruism as a fixed quantity, unaffected by other social institutions.
But at some other level, I feel moved to defend my economist brethren a bit. Focusing on whether whether altruism is a fixed can be a debater\’s point that focuses on the specific phrasing of an argument, rather than the underlying issue at stake. After all, none of the economists are arguing that altruism, generosity, and social virtue are bad ideas or that we should have less of them. Instead, they are arguing that in the real world there exists a division of labor, if you will, in which real-world people choose between altruism and self-interest in different settings. They are arguing that in practical terms, it seems unlikely that social norms of private altruism and generosity by themselves be able to achieve important social goals like supplying food, housing, health care, education, and the necessities of live, as well as helping the poor or protecting the environment. In such cases, it will be important to consider the interactions of self-interest with the compulsion of law.
Sandel focuses on the arguments for how market forces might impinge on civic virtues worth preserving, which is plenty for one essay. But there is also potential for conflict between civic virtues and any institution of society, at least in certain settings. For example, governments around the world can also easily impinge on civic virtues worth preserving. I do think the issues concerning potential conflicts between market forces and moral virtues are real ones. In the style of eminent philosophers, Sandel poses his argument about not as a set of strong claims, but rather as a set of questions for consideration, and I commend his article to your consideration in a similar spirit.