Roth and Satz on repugnant/noxious markets

by Ingrid Robeyns on November 19, 2012

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.

{ 17 comments }

1

Tim Worstall 11.19.12 at 11:00 am

The four parameters: no particular problem with any of them. Yet it’s entirely possible to legitimately hold very different views on any or all of them with respect to a particular market or product. Different people will find different markets repugnant for different reasons.

As an example (and something Roth has done a lot of work on) I don’t find a paid market in kidneys, as Iran has, repugnant. Many others do. So whose views on repugnancy should prevail? Mine? The others? The government of Iran (yes, I’m aware of the oddity of being on “their side” over anything at all)? Of the UK? US?

What actually is the solution to who gets to impose their views of repugnancy on others? Democracy doesn’t quite do it: there are endless examples of such leading to what the majority regards as being repugnant being outlawed in a manner that over rides civil liberty.

Perhaps we just need a market in markets?

2

prasad 11.19.12 at 12:10 pm

For me the problem with “noxious market” talk is going beyond the existence-proof level. I’m quite happy to stipulate that there are types of market exchanges that should not be allowed because of damage to “human values” or whatever (how odd it should be if there weren’t). But the people generating this literature quite frequently find pick out their examples of “bad markets” by examining their pure and beautiful consciences. And they tend to be unconcerned with anything so mundane as weighing the cost of maintaining unsullied human values against costs of a more tangible nature.

Michael Sandel, I’m looking at you here. So Sandel finds markets in carbon credits morally troubling, and it’s very hard if you don’t share his intuitions what he could even be on about. He also objects to schemes to compensate people undergoing drug trials. From my perspective, that simply says that consumers, drug companies and shareholders can all benefit from a human being risking his health upon a potentially unsafe drug, but that this person himself shouldn’t be allowed to. As with the carbon case, Sandel literally finds correcting market externalities objectionable. To me this just seems like the market version of Leon Kass style bioconservatism…

3

prasad 11.19.12 at 12:13 pm

Quickly rereading, the last sentence is strange. I don’t mean that Leon Kass approves of externalities, just that Kass in the bio-realm makes arguments that are similarly heavy in relying upon intuitions and first person introspection.

4

Collins 11.19.12 at 12:40 pm

I don’t think you meant “hard to underestimate”. My impression from context was that you meant “hard to overestimate”…

5

Ingrid Robeyns 11.19.12 at 12:44 pm

Collins, you’re right, I will make the change in a second.

Prasad, there is a reason why I didn’t discuss Sandel in this post: I find his book way too rhetorical (rather than philosophical), and weak in analytical rigor which can’t be said of Satz’s argument.

6

Z 11.19.12 at 1:02 pm

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.

The market transactions involved in these putative markets seem to me to be quite different in nature. Markets are supposed to reflect decisions of nominally free agents, but children are not considered to be free, so a “market” in child labour seems to me to be a contradiction in terms. What is usually called child labour is more precisely adults exploitation of child labour, but that can’t be a market, lest the word loses any specific meaning. Likewise, if I understand the term correctly, a “market” in women’s sexual labour (which I take to be surrogate pregnancy, not say ovary donation) involves another human being whose consent has not been assessed (the child), and the fact that it can’t be doesn’t mean it should be weighted as zero in the “market” transaction; quite the contrary in fact on prudential ground.

I guess Satz discusses all this but I’d be interested in the clarification she offers.

7

Glen Tomkins 11.19.12 at 1:32 pm

The market in health care insurance, at least as conducted in the US, seems to hit on all four cylinders.

8

tomslee 11.19.12 at 2:22 pm

Sorry to drag Sandel back in, but there was so much publicity around his book that it seems unavoidable in this context. I suspect many of us with some interest in the topic will have gone to it and not to other, less woolly-headed books because of the hype. I know I did. So I am very glad to read about Satz’s book, because my reaction to Sandel was the same as Ingrid’s and prasad’s. I kept on turning the page expecting to see the argument taken further, and then…. it just wasn’t.

9

BenK 11.19.12 at 2:47 pm

I like this framework for a number of reasons; particularly because it opens up the analysis of a larger number of markets and prescribes conditions for ameliorating their toxicity. For example, the market on used cars or food could be noxious if there is an information imbalance between the parties. The FDA label laws are meant to restore health to markets in food and medicine; ‘lemon laws’ create parity in similar ways, without actual lemons being incarcerated. This could be analogized to the markets in other noxious goods opening up once parties are made aware of the dangers inherent in participation – like securities or gambling (sometime similar), or alcohol and tobacco.

Some things have such a short term appeal and such a long term toxicity that no trade in them could ever be allowed in a healthy society, or at least in specific contexts. Recognizing that there are unique populations open to ‘poor judgement’ and requiring some parochial protections is important and a blind spot for libertarians. Nobody should sell guns outside the divorce court. This extreme example is on a continuum.

Anyway, I like the framework and will bear it in mind.

10

Trader Joe 11.19.12 at 2:51 pm

Worstall at 1 poses exactly the right question? Who gets to decide?

I’ll take it one better – interjecting ‘values’ into the secular discusion of ‘worth’ is the moment at which we get differences between the interest of the state and religous interests within the state.

In the Iran analogy noted by Worstall, the state and the religious interests are presently intertwined (another discussion entirely as to whether they should be)…which is why objection to a noxious market in this case, even if valid by the standards of outsiders, will be muted among those within that market.

Any market that inhabits a more fractured environment will produce hundreds of markets that at least some will call noxious…pornography, marijuana even alcohol and contraception are viewed with a noxious eye by some (let alone the much more obvious example examined by Satz)- who gets to decide?

In a democracy its the elected leaders (and the money that backs them), but forgive me if I don’t always find that a satisfying answer. That’s why ‘value economics’ is so tempting despite its folly.

11

prasad 11.19.12 at 2:54 pm

Ingrid, I am especially glad to hear you weren’t impressed by Sandel’s book, because with me that lends weight to your liking Satz’s. Added it to my read list.

12

hartal 11.19.12 at 5:38 pm

Not interested in the analysis of the market system as such but only in particular and particularly noxious markets? Seems to be the abandonment of macro for micro economics, and thus an expression of neo-liberal ideology. There are good combined analytical and normative analyses of the market system by Charles Lindblom and Kaushik Basu. And recently Alain Supiot has written a passionate social democratic critique of the market system as such. On the market in kidneys I heard an interesting interview with Timothy Lewens on philosophy bites.

13

tomslee 11.19.12 at 6:40 pm

@hartal:

Not interested in the analysis of the market system as such but only in particular and particularly noxious markets?

Surely you are overreaching. “Interested in particularly noxious markets” does not imply “not interested in the analysis of the market system as such”.

the abandonment of macro for micro economics, and thus an expression of neo-liberal ideology.

Neither clause makes any sense to me. An abandonment of macro for micro economics is like “an abandonment of baking for roasting” or something. Surely they are just different. And “thus an expression of neo-liberal ideology” seems like a complete non-sequitur.

14

tomslee 11.19.12 at 8:09 pm

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.

I have seen some places where writers assert that in cases of asymmetric information the market is somehow loaded against those who have less information, but that’s not what the theory says. I hope Satz does not fall into this trap. The problem is not that ill-informed people buy lemons, but that neither buyer nor seller can complete a transaction for a good quality car, even though the transaction would benefit both.

15

andrew 11.19.12 at 11:26 pm

You could also look at Kieran Healy’s work “Last Best Gifts: Altruism and the Market for Blood and Organs”

http://www.amazon.com/Last-Best-Gifts-Altruism-Market/dp/0226322378/ref=sr_1_1?ie=UTF8&qid=1353367553&sr=8-1&keywords=kieran+healy

16

Rhys Williams 11.20.12 at 12:55 am

“costumers often had no clue what they were buying since the products were so complicated”

Scratched my head for an embarrassingly long time over that one (whale bone corsets? detailed ruffs?)

17

Bruce Wilder 11.20.12 at 4:51 pm

One might notice that every functioning institutionalized market (and every market is institutionalized), defines some goods or services as for sale, and other goods or services as not-for-sale. Public goods frame and contain every market; you cannot make a market in those framing public goods, without altering the market in the neighboring private goods. Repugnancy is just one of the moral senses we put to labor in protecting the public good structural framework, which contains and structures the honeycomb of social cooperation through “markets”. We constrain behavior to shape behavior, and we do so, in a decentralized system, in which people are behaving strategically, to alter the shape of the structure and its constraints, even as they operate within it — how they operate within, is itself strategic. “Markets in everything” libertarianism is self-consciously subversive of the established (moral and political and economic) order.

So, there are always frontiers of “repugnancy” and breakdown of order, as well as frontiers on which order is being built, by the construction of scandal, morality tales and other methods of establishing taboo or standards of moral purity. Corruption of the public order is as constant as entropy. And, a public order is necessary.

Repugnancy is a means to an end, and the end is in the behavior of people engaged in structured productive social cooperation. I don’t think there’s likely to be a one-to-one relationship between the strategic application of repugnancy or lack-thereof and behavior. It is in the nature of these things, of strategic behavior breaking down established order, that changing the rules is always the intervention for good or ill, and not the particular rule. Introducing a “market” might be building a better social order at one point along the path, and ginning up repugnancy might be, at another. There’s a dynamic, not a final equilibrium.

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