Keynote Address by Professor Michael J. SANDEL

The Ethics of Market-based Social Impact Work: 'What are the limits of markets to deliver social good?'


  • Michael J. SANDEL Anne T. and Robert M. Bass Professor of Government, Harvard University

The session started with a question from Professor Sandel: “What should be the role of market thinking and market mechanism in solving urban challenges?”. This question, he said, stemmed from the growing tendency for philanthropists to use market thinking and mechanisms in their work. 

Professor Sandel argued that the use of market thinking and mechanisms represented a slow, almost imperceptible change from being a society that used a market economy, where money was used as a tool for commerce, to being a market society where the reach of money extended beyond commerce and was used in every sphere of life, including civil society. There might be two reasons we would worry about this: Firstly, society was seeing increasing inequality, which could be especially harmful for the poor, as elements of a good life such as quality education and a political voice could only be obtained with financial resources. Secondly, the use of money in the social sphere might crowd out certain values.

The professor further engaged the audience by asking:  Are there some things that money simply should not buy?

To answer this, he directly asked the audience a related question: Are they some things that money cannot buy?  Many audience members spoke up, pointing to virtuous behaviours such as true love, respect and happiness as things that were not for sale. Professor Sandel agreed these items could not be bought, because the simple act of purchasing them dissolved their value. He offered another example of the Nobel prize, saying that even if a wealthy person were able to buy a Nobel prize, it would not be as valuable as one earned through scientific discovery, as a purchased prize would not have the same honour associated with it.

However some arguments, Professor Sandel observed, were less clear cut – and he polled and challenged the audience on how they would view the use of money to drive positive social results in four scenarios: (1) paying criminals or murderers to attend classes and rewarding them with cash payments for each month that they did not commit a murder; (2) creating a market for organs to save lives on transplant lists; (3) paying the obese to lose weight and save the government future medical costs; and (4) paying young children to read more books.  For each scenario, guided by Professor Sandel’s questions, the audience discussed the merits of using money to drive impact, having regard to the importance of preserving the moral imperative, the creation of perverse incentives and the benefits of developing virtuous habits.

After this lengthy debate, Professor Sandel pointed out that such tools were not neutral and the use of money could crowd out social values. Therefore, there was a need to assess if the use of a specific method for creating good actually created a better society. To highlight this point, he gave the example of a pre-school that began to fine parents for being late to pick up their child. This led to an increase rather than a reduction in the frequency of tardiness, as parents could now pay a small fine to alleviate their guilt of being late.  Importantly, the late pick-ups persisted even after the fines were removed, showing that the loss of the moral imperative was persistent. In the same way, young students who were asked to raise funds for a charity outperformed their classmates who were offered a financial incentive as part of the fund-raising (either 1% or 10% of funds raised). This was because the addition of the incentive turned the exercise into a job, whereas the first group were working to reflect their altruistic beliefs.

Professor Sandel concluded by saying there were two assumptions made by economists that needed to be challenged.  Firstly, that markets were inert and did not influence the items being traded on them.  The discussion showed that this was not the case and that the choice of using market mechanisms was of itself a judgement that carried real implications. Secondly, that altruism was a scarce resource that could be used up, and therefore that market mechanisms could help in preserving altruism for its highest and best use.  On this second point, he noted that issues such as civic spirit, generosity and love were not depleted when they were used. Rather, they were more akin to muscles that got stronger with use and exercise. Based on this idea, the professor called on us all to strengthen the use of these civic muscles to deepen our commitment to the common good.

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