Roth and Satz on repugnant/noxious markets

Repugnant markets is one of the research topics of Alvin Roth, one of the two winners of the 2012 Nobel Prize in Economics. These are markets where a ‘yuck’-factor constraints them from being accepted by the public as legitimate. Examples are the markets in human organs or markets in babies. We (or perhaps better: most of us) find such markets repugnant, and this repugnancy works as a constraint on such a market. Roth argues that economists should take this repugnancy constraint into account when studying markets, but also argues that economists have “an important education role of pointing to inefficiencies and trade-offs, and costs and benefits” [of the persistence of such repugnancy] (p. 54).

What struck me when reading Roth’s paper, is that he doesn’t explicitly include values in his analysis. Yet an explicit considerations of how values are affected by certain markets could be helpful in at least two ways. First, values could help explain why seemingly similar markets sometimes do provoke repugnance, and sometimes don’t. For example, “while dwarf tossing is repugnant in many places, wife-carrying, another sport that involves persons of disparate stature, has North American and world championships” (p. 43). Yet from the perspective of values-analysis, it seems not that difficult to explain why dwarf-tossing provokes repugnance while wife-carrying does not. One could make the argument that dwarf-tossing violates the value of human dignity, since it reduces people to a mere object by making use of their physical vulnerability, which is not the case for the women who are carried by men in a competition of wife-carrying. Hence we sometimes have good reasons for judging differently in seemingly similar activities. Second, without having an explicit understanding of which values are relevant, it is impossible for Roth to answer which allocation mechanisms are most desirable (such as the market, regulation, lotteries, rationing, etc.). Yet this is a question which Roth himself points out as an important question – and rightly so.

Hence economists would benefit from explicitly introducing values in their analysis of repugnant markets (and markets in general). But how should they do this? Luckily for them, Debra Satz has been working on such questions for more than a decade, and brought her research together in Why Some Things Should Not Be for Sale: The Moral Limits of Markets , published in hardback in 2010 but now also out in paperback.

Satz aim is more specific, namely to analyse which reasons we might have to block certain markets, which she calls noxious– “toxic to important human values” (p. 3). She doesn’t want to limit her analysis to considerations of economic desperation or injustices in the distribution of income or wealth (a point often made by liberal-egalitarians). She also argues that some markets form and change societies and its citizens, and that because of that effect on our identities and personhood, some goods should not be for sale on a market. On the one hand Satz relies on earlier traditions in political economy and political philosophy, since authors such as Adam Smith, John Stuart Mill, David Ricardo and Karl Marx were more sensitive to such processes than most contemporary writers in mainstream analysis of markets. Yet Satz moves beyond a revival of these important historical sources, by developing her own analytical framework to judge the normative status of contested markets. She subsequently applies this framework to a number of quite specific markets: the market in women’s reproductive labor; in women’s sexual labor (prostitution); child labour; voluntary slavery; and the market in human kidneys from living donors.

In order to judge whether a market is particularly objectionable, we should analyze how a market scores on four parameters. The first two parameters characterize the consequences of a market; the third and fourth parameters characterize the sources of a market, focussing on the conditions of the market agents.

The first parameter is harmful outcomes, either to participants in the markets or to third agents. An example is a market that leads to a fueling of a civil war or to genocide. The second parameter is extreme harm to society, which can be the case when the market undermines the social background needed for people to stand in a relation of equality to each other (these are the “preconditions necessary for individuals to make claims on one another and interact without having to beg or to push others around”. p. 95). The third parameter is very weak or highly asymmetrical knowledge and agency among participants on the market. This is not just a matter of the case of imperfect or asymmetric information, but also of not knowing one’s future preferences. An example is a woman who never had a child who is selling her ability to have one. One could also argue that many financial products that have been sold before the financial crisis may be goods of that sorts – costumers often had no clue what they were buying since the products were so complicated, but the authority of ‘financial specialists’ lead them to do so. The fourth and final parameter is underlying extreme vulnerabilities of some of the participants on the market. An example is a market where participants have highly unequal needs for the good or service that is being sold.

Satz stresses that she is not offering us a formula or algorithm that we can use to determine whether a market is objectionable or not. Rather, we need to use our judgement when performing a normative analysis of a specific market. I think this is a very sensible approach, and I would strongly recommend this book to anyone interested in repugnant or contested markets. Still, as with virtually all books, I do have some comments/point for discussion.

First, the contextual and ‘judgments-based’ (rather than algorithmic) method may run the risk that such judgements will be biased because the groups or individuals making those judgements are not representative for the considered judgements of all those involved. For example, Satz argues that the market for prostitution (excluding forced prostitution) is morally objectionable since it increases gender inequalities – not just between the prostitute and her pimp, but between men and women at a more general societal level. My students find this unconvincing, and I also strongly doubt that this (in large part empirical) claim is true. One could hypothesize that in a country that has lifted most taboos on sexual activities and sexuality, this need not be the case. In other words, a limitation of a contextual analysis is that it will be more strongly influenced by sensitivities and social norms that are local. An advantage of such an approach is that it may give us more tools to actually be policy-relevant at a local and national level, but a disadvantage is that such an analysis is more vulnerable to cultural relativism.

Second, after reading Why Some Things should not be for sale, I kept wondering whether Satz’s analytical framework could also be used for assessing market that are not regarded as repugnant or contested but that still raise normative questions, such as regular labour markets or markets for higher education. Another question that keeps bugging me is how the analysis of particular markets relates to the analysis of the market-system. Satz writes in the first chapter that “in order to understand and fully appreciate the diverse moral dimensions of markets, we need to focus on the specific nature of particular markets, and not on the market system.” Yet how (if at all) do these two relate? Is the sum of the analysis of all markets equal to the analysis of the market system? That seem intuitively incorrect to me, but it if that intuition is correct, then the question remains how one could move from the analysis of specific markets to the analysis of a market system.

Anthony Atkinson, eminent welfare economists at Oxford University, wrote a paper a few years back arguing that economics should (again) be considered to be a moral science (subsequently published in Economica). In my view, most of economics has drifted away quite some distance from moral questions and values-analysis, and hence we will need bridges to re-connect normative political philosophy and moral philosophy with economics. In those circumstances, Satz’s book can be seen as such a bridge. I think in this day and age, it’s hard to overestimate how important such bridges are, and I hope Satz will build some more in the future.