What Money Can't Buy review
Mood: tired
Posted on 2012-05-29 11:46:00
Tags: reviews books
Words: 1318

What Money Can't Buy: The Moral Limits of MarketsWhat Money Can't Buy: The Moral Limits of Markets by Michael J. Sandel
My rating: 5 of 5 stars

The subtitle "The Moral Limits of Markets" is a very good description of this book. I've thought about some of these things from time to time, and I found the book to be very thought-provoking and had a lot of good discussions about particular issues. Let's dive in:

- It lists a number of ways that you can pay to save time: buying premium tickets at theme parks so you get to cut to the front of the line, paying to use HOV lanes even if there's only one person in the car. One poignant example is New York's Public Theatre, which puts on free performances of Shakespeare in Central Park every year. Tickets are free, but there are a limited number and you have to line up early to get them. Some people who don't want to wait in line have taken to hiring people to wait in line for them. (the theatre has spoken out against the practice)

From a traditional economics perspective, this is just correcting market inefficiency - clearly, tickets to the public theatre are worth more than $0, since people are willing to pay for them, so the canonical economic "solution" is to increase the price of the tickets until anyone who would pay $X for them can buy one. (or auction them off, which has the same effect) Or, even if the theatre doesn't want to do this, the person who's paying for the line waiter is clearly getting an economic benefit (since he hired him!), and the line waiter is also getting an economic benefit - presumably he has more time but would like more money, so it's win-win.

Except, out here in the real world, something feels wrong about this. If the only way to see a "free" show in the park is to pay for it, that excludes a lot of people from being able to see it. Again, from a theoretical perspective, how much people want to see the play is reflected in how much they're willing to pay for it, but of course people have a vast range of different financial resources, and that has to be taken into account as well. The "market-based" solution is to allocate the tickets to who will pay the most, but the "queue-based" solution is to allocate the tickets to who is willing to wait the longest, and in some sense time is a more equal commodity than money, in that at least we all have the same amount (more or less).

The book is filled with interesting situations like these. I personally don't have much of a problem with people paying to take the HOV lane (really, this is just a variation on a toll road), but buying tickets to a free public show seems wrong to me.

- There's an interesting discussion of paying students for good grades and whether it helps their performance. In New York, paying kids for good standardized test scores didn't improve their academic performance, but in Dallas, paying second graders $2 per book they read made them end up with higher reading comprehension scores, and in Texas, paying kids $100 for passing an AP tests had an expressive effect which made taking AP tests cool. It seems unclear what kinds of things will work and which won't, though.

- Speaking of incentives, the danger (which I've read elsewhere) is that buy adding money to the mix, you can turn people's internal motivations into external ones, which means you have to pay them to do things in the future, plus external ones are less strong than internal ones.

- There's a famous story about an Israeli day-care center that was having a problem with parents being late to pick up their children. To solve it, they imposed a fine for late parents, but that actually increased the number of late parents, because then they saw it as just paying for a service instead of a moral obligation to be on time. Economically, this makes no sense, but in the real world it makes a lot of sense.

- The difference between a fee and a fine is there's no moral judgment for a fee, while there is for a fine (i.e. you should feel bad). In the day-care center example, the parents treated the fine as a fee. In some countries like Finland, fines for speeding are imposed proportionally, so if you're rich you pay hundreds of thousands of dollars if you're caught speeding. This is an interesting way to try to impose fairness and discourage rich people from just paying a piddling (to them) fine.

- There's a discussion about gift giving and how it doesn't make sense economically - just giving cash is more efficient! But of course a gift to someone is also a signal that you spent time thinking about them and tried to find something they'd like in particular. Even gift cards have some signaling value if you pick a store you know they'll like. There's also a site called Plastic Jungle where you can buy and sell gift cards to various stores, which is interesting. In some respects, it makes gift cards less of a good gift (since you can sell them for cash), but on the other hand it's convenient if you know you're going to spend money at a particular store you can buy a gift card for less than face value.

- Much like the day-care center, there's a story about nuclear waste that makes no economic sense. In Switzerland, they get a lot of power from nuclear plants, so they have to store the waste somewhere. In a small village, economists asked if they would be willing to store the waste there, and 51% agreed. Presumably this was due to a sense of civic duty of some sort. Then economists asked if they would be willing to store the waste if everyone got a small stipend from the government, and only 25% agreed. Most people said they were offended and it felt like a bribe.

- Another one! AARP asked some lawyers if they would be willing to help out some senior citizens with legal matters at a very reduced rate ($30/hour), and most said no. Then AARP asked if they would be willing to donate their time for free, and most said yes. To me, this makes a great deal of sense - you can feel good about donating your time in a way that you can't about "not charging people as much as usual".

- There's an interesting discussion about economics and virtue. There's a famous talk given by Sir Dennis Robertson (a former student of John Maynard Keynes) that claims that, while economics doesn't deal directly with virtue, it can help by letting people "conserve" their virtue - by letting people make choices solely in their own self-interest most of the time, they can save up their virtue and "spend" it when it really matters. (when dealing with family, etc.) This is, to put it gently, insane. It sure seems that virtue is more like a muscle where using it more is good for it than an expendable resource like cash. Of course, you can "use up" your willpower, but if you develop virtuous habits you can get to the point where it doesn't take extra willpower to do virtuous things.

- There's a bit at the end about naming rights to stadiums and such. Frankly, I can't get my gander up about this - yeah, non-corporate names for stadiums are nicer, but whatever. (he also talks about how Moneyball is bad, which I didn't really understand)

Well, this was a long review, but I very much enjoyed the book, and I have a paper copy so it's available for borrowing. The summary: capitalism is great, but not everything should be subject to market forces.

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Comment from andrewhime:

There's actually 4 major gift card sites (giftcards.com, Plastic Jungle, Gift Card Rescue, and CardPool) and one new entrant that I'm still checking out, along with one that feels very scammy.

Comment from andrewhime:

I'm 99% that I've used all 4 (only for buying), and have never had a problem. Well, except GCR drags their feet a smidge on mailing the cards.

Comment from djedi:

This sounds like an awesome book. I'm already convinced.

Comment from gregstoll:

Yeah, I was afraid the book was going to be overly dogmatic, but it really wasn't. Yay for thought-provokingness!

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