Thursday, October 15, 2015

Does Money Poison Everything? Sandel and the Corruption Effect

The Worship of Mammon by Evelyn de Morgan

(Previous Entry)

There is a serious shortage of kidney donors throughout the developed world. This has obvious consequences for people with severe kidney disease. I’ll use my home country of Ireland as an example. According to one 2009 study, which covered the period 2000-2005, the average waiting time for someone on the transplant list was 8-15 months (with waiting times varying considerably depending on blood type). According to more recent figures from the Health Service Executive’s webpage, the average waiting time is two years, and at present there are over 650 people on the waiting list . These figures need to be appreciated in the appropriate context. A patient is only placed on the transplant list when their kidney damage reaches the point that they will require dialysis. So these are already people facing severe health complications. Also, Ireland is not that bad when it comes to kidney transplants. The lack of donors and length of waiting times is much more severe in the US (even taking into consideration population differences). There are currently over 100,000 people awaiting kidney donations in the US and the average (median) waiting time is 3.6 years.

Economists think that there is an easy way to solve this issue. The problem is a lack of supply. Transplanted kidneys come from two main sources: (i) deceased donors (who were in position to have their organs harvested); and (ii) altruistic donors (usually family members; sometimes strangers). We could easily increase supply if we added a greater incentive to non-family donors. How could we do that? Simple: we could pay people to donate their organs.

Paying people for kidney donation is an instance of commercialisation, i.e. the process of converting something (in this case one’s bodily organ) into a commodity that can be bought and/or sold for a price. Is this something we should get behind? In my most recent post, I looked at Sandel’s two main arguments against commercialisation: (i) the corruption argument and the (ii) the fairness argument. Following these two arguments, Sandel claimed there are some things that money shouldn’t be able to buy because the process of commercialisation either corrupts or undermines the value of the thing in question, or because it leads to an unfair allocation or distribution of that thing.

In this post, I want to dive deeper into the corruption argument. I’ll do so in four main phases. First, I’ll look at three examples Sandel uses to motivate his corruption argument and note something interesting about the structure of these examples. Second, I’ll look at the standard economist’s argument in favour of commercialisation in these kinds of cases. Third, I’ll outline Sandel’s responses to those arguments. And fourth, I’ll offer my own criticisms of Sandel’s views.

1. How Money Corrupts
The economist’s case for paid kidney donation is structurally interesting. It looks something like this: there is an outcome which we recognise as being socially beneficial (i.e. more kidneys being transplanted) and there are two pre-existing pathways to that outcome (deceased donors and altruistic donors). The economist’s claim is that we could open up a third pathway (paid donors) that would generate more of the socially beneficial outcome.

The argument is superficially appealing. It seems to feed upon standard and intuitive assumptions about how people react to economic incentives. Furthermore, it doesn’t involve anything like Sandel’s proposed corruption of a socially valuable good. Quite the contrary: it seems to promote something of social value. So where’s the problem?

Sandel’s claim is that it doesn’t always work like that. Opening up an additional (commericalised) pathway towards some social good may not have a beneficial effect and may actually cut-off some of the pre-existing pathways. This is the corruption effect. He uses three empirical studies to support this argument:

Nuclear Waste: Nobody wants to have a nuclear waste site in their ‘backyard’. This was a problem in Switzerland for years (apparently). One proposed site was near a small village called Wolfenschiessen. The Swiss like to have referendums about everything and so shortly before a referendum on where the waste site should be located, two economists (Frey and Oberholzer-Gee) conducted a study into what might motivate the local residents to agree. They conducted an initial survey which found that a slim majority of villagers (51%) agreed to their village being chosen as the location, largely out of a sense of civic duty. They then did what any good economist would do: they tried to see if more people would agree to it if they got annual monetary compensation. Oddly, this cut the acceptance rate in half to 25%.

Donation Day: There is an annual ‘Donation Day’ in Israel. High school students go door-to-door collecting money for worthy causes. One year, a group of economists conducted a study to see whether they could motivate students to collect more money. They divided the students into three groups. All three listened to a motivational speech about the importance of the cause. For one group, that was all they got. The other two groups were told that they would get a small percentage of the money they raised (1% and 10% respectively). This would not be directly deducted from the donated money, but would come instead from another fund. The results were interesting. The first group of students raised the most money. The students who were paid 10% raised the second-most. And the students who were paid 1% raised the least (by a considerable margin).

Day-Care Pickup: This is another famous Israeli case study. It involved children being picked up from day-care by their parents. Day-care centres had a problem with late pick-ups. They tried to do something about it by introducing fines for parents who were late arriving to pick up their kids. Again, oddly, this actually increased the number of late arrivals (nearly doubled it, in fact). What’s more, when the day-care centres tries to reverse their policy after 12 weeks, the elevated rate of late pick-ups remained.

In each of these cases, commercialisation seems to have had a negative impact on the desired outcome: it made villagers less likely to agree to the location of a nuclear waste sit; made students less motivated to collect money for charity; and made parents more likely to pick-up their kids late. Of course, it is slightly more complicated than that. The Donation Day example shows that money can have some motivating effect (the students getting 10% did significantly better than the students getting only 1%), and it is possible that in each of these cases including the monetary incentive de-motivates because they think ‘Oh you could get other people to do this for money, instead of me’ or ‘Oh, now I can simply pay more for the privilege of picking up my kids late’.

Sandel insists that the examples show the corrupting effect of commercialisation. In this respect, the structure of the scenarios is again worth noting. The structure is like the kidney donation scenario. There is some desired outcome (agreeing to the location of the waste site; raising money for charity; picking up your kids on time) and there is one pre-existing motivational pathway to that outcome. I’ll call this the ‘sense of duty’-pathway. The economists then propose adding a second pathway to the desired outcome (the ‘commercialisation’ pathway) in the hope that this will improve the outcome. But this is not what happens. On the contrary: opening up the commercialisation pathway actually cuts-off the sense of duty pathway, and hinders achievement of the desired outcome. This is corruption in action.

2. The Economic Objections and Replies
Sandel notes that economists resist this conclusion. They have two standard arguments they proffer by way of reply. The first can be called the ‘no-harm’ argument. According to this, Sandel (and others like him) are wrong because commercialisation doesn’t harm the social good in question. It is still possible to achieve that good. Here’s how Sandel describes the objection:

…commercializing an activity doesn’t change it. On this assumption, money never corrupts, and market relations never crowd out nonmarket norms…If a previously untraded good is made tradable, no harm is done. Those who wish to buy and sell it can do so, thereby increasing their utility, while those who regard the good as priceless are free to desist from trafficking in it. 
(Sandel 2012, 125)

Of course, this objection seems pretty unpersuasive in light of the three examples mentioned above. In each of those cases, commercialisation didn’t simply open up an independent (parallel) pathway to the beneficial outcome. All it did was cut-off the pre-existing pathway and open up a less efficient one. So it’s hard to see how anyone could find solace in the ‘no-harm’ argument.

But I wonder whether this is slightly misleading. I think an economist could object to the artificiality of the three examples Sandel uses to support his argument. Each of those examples involved some enforced policy of commercialisation. The villagers were told they would get monetary compensation if they agreed to the nuclear waste site; the students were divided up into groups against their will; and the parents were threatened by a fine. This is not at all like opening up a free market in some currently non-commercialised good. Take, for instance, kidney donation, or adoption, or surrogacy. Economists have argued for the commercialisation of all three of these things. I think you could make a decent argument that in those cases opening up a commercial pathway may not have the same corrupting effect. So if you wanted to donate a kidney altruistically, this would still be permissible. Or if you wanted to conceive a child in the traditional manner, no one would stop you (indeed, most people would, presumably, prefer this route if it were available to them — they would only resort to surrogacy if this fails). Commercialisation may consequently be a genuinely parallel pathway to the desired outcome.

Of course, this is somewhat speculative. The important point is that the studies cited by Sandel may not have the argumentative power he claims. The other possibility is that Sandel thinks the motivational pathway to the outcome is partly constitutive of the good in question. Thus, he may argue that donating altruistically or agreeing to a policy out of civic duty is part and parcel of the alleged social good. If that were the case, there may be more to be said against opening up the commercialisation pathway (I discussed this briefly in a previous post when I raised the example of honorific goods: in those cases how one achieves the outcome really does seem to matter).

This brings us to the second leading economic objection. This one can be called the ‘depletion’-argument. It claims that we should open the commercialisation pathway to at least some beneficial goods because the alternative motivational pathways are in short supply. In other words, they claim that there is a limited amount of altruism or civic-duty in the world. If people expend some of their altruism and civic-mindedness on one set of outcomes (like kidney donation or agreeing to the location of a nuclear waste site), then they will have less to expend on other desirable outcomes. It is best then to reserve our altruism and civic-mindedness for the cases that really matter, and rely upon commercial incentives when we can.

Sandel finds this dubious. For one thing, it ignores the evidence cited above suggesting that commercial incentives can be inferior. For another, it ignores the possibility that acting on our generous virtues may amplify, rather than deplete, our supply of altruism and civic-mindedness. As he puts it:

To those not steeped in economics, this way of thinking about the generous virtues is strange, even far-fetched. It ignores the possibility that our capacity for love and benevolence is not depleted with use but enlarged with practice. Think of a loving couple. If, over a lifetime, they asked little of one another, in hopes of hoarding their love, how well would they fare? Wouldn’t their love deepen rather than diminish the more they called upon it? 
(Sandel 2012, 129)

Sandel admits that there is little empirical evidence for this alleged amplification (and he certainly doesn’t cite any), but there is little empirical evidence for the depletion effect too. In fact, Sandel thinks it is merely a piece of ‘folk wisdom’ to which economists subscribe. His folk wisdom is just as good as theirs.

3. Is Sandel Right?
So much for Sandel’s corruption argument. Is it any good? I have already expressed some doubts about the studies upon which he relies and how generalisable they might be. I want to wrap up by suggesting two broad lines of criticism.

First, I want to accept that in some cases commercialisation may have a corrupting effect. Indeed, I think this is almost certain to occur when the non-commercialised pathway to the desired outcome is partly constitutive of the value inherent in that outcome. But in other cases, I think the corrupting effect will be highly contingent. In some instances commercialisation might reduce the desired outcome; in other cases it might actually increase the desired outcome. Kidney donation may be an example of the latter. Iran is (as far as I am aware) the only country in the world that pays donors for organs and, according to some evidence it suffers from no backlog or waiting list. So the commercialised pathway has improved things. Now, to be clear, the Iranian case is complex. The commercialisation process has gone through a few iterations, and the market has been carefully managed by the government (though less so in recent times). Nevertheless, it does suggest that Sandel’s argument is not as robust as he seems to suggest. Thus, I would submit that his elaboration of the corruption argument moves it away from being an ‘in principle’ objection to commercialisation, and turns it into a contingent ‘in fact’ objection.

Second, I think that Sandel’s argument is ill-equipped to deal with cases in which there is a pre-existing black market for a good or service (e.g. recreational drugs, sex work, some organ donation). You could argue that these cases are different because the outcomes in question (supply of drugs or sex workers) are not obviously socially valuable. Fair enough. We could dispute this, but let’s not. The point is that the markets exist and we need to do something about them. There are two basic options: double-down on the policy of making them illegal, or legalise them. Oftentimes, economists are very keen to push for legalisation is these scenarios. The argument being that there is already a commercial pathway to the particular outcomes, but because it is illegal, it makes things worse for the workers in those illegal markets, and for society in general. Legal commercialisation is consequently the better option. So even if we might worry about the corrupting effect of commercialisation, we sometimes have to live with the reality of pre-existing black market commercialisation. In light of that reality, legal commercialisation may be the preferable option.

Anyway, those are my quick thoughts on Sandel’s arguments. What do you think?

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