Assuming Money Gives Everything a True Value

I have mentioned previously Michael Sandel's recently published book 'What Money Can't Buy' that has had many reviews and extracts published in recent weeks.  Much has been made of the various examples he offers of the way in which things he thinks shouldn't have a monetary value palced on them have been drawn into markets of one kind or another, from blood donation in the US through to the interestingly negative effects of experiments of offering monetary rewards in cases where moral imperatives are felt to be a more important driver (e.g. in charity collections or even a community which is felt to be the right palce for nuclear waste to be stored).

An article I read recently goes behind the examples that have been widely quoted to an extract that gets to the nub of the question about why the market seems to have aquired a status in tjhemselves as an arbiter of what is important:

'A fascinating question he addresses is why the financial crisis appears to have scarcely put a dent in public faith in market solutions. "One would have thought that this would be an occasion for critical reflection on the role of markets in our lives. I think the persistent hold of markets and market values – even in the face of the financial crisis – suggests that the source of that faith runs very deep; deeper than the conviction that markets deliver the goods. I don't think that's the most powerful allure of markets. One of the appeals of markets, as a public philosophy, is they seem to spare us the need to engage in public arguments about the meaning of goods. So markets seem to enable us to be non-judgmental about values. But I think that's a mistake."

Putting a price on a flat-screen TV or a toaster is, he says, quite sensible. "But how to value pregnancy, procreation, our bodies, human dignity, the value and meaning of teaching and learning – we do need to reason about the value of goods. The markets give us no framework for having that conversation. And we're tempted to avoid that conversation, because we know we will disagree about how to value bodies, or pregnancy, or sex, or education, or military service; we know we will disagree. So letting markets decide seems to be a non-judgmental, neutral way. And that's the deepest part of the allure; that it seems to provide a value-neutral, non-judgmental way of determining the value of all goods. But the folly of that promise is – though it may be true enough for toasters and flat-screen televisions – it's not true for kidneys."

Sandel makes the illuminating observation that what he calls the "market triumphalism" in western politics over the past 30 years has coincided with a "moral vacancy" at the heart of public discourse, which has been reduced in the media to meaningless shouting matches on cable TV – what might be called the Foxification of debate – and among elected politicians to disagreements so technocratic and timid that citizens despair of politics ever addressing the questions that matter most.  "There is an internal connection between the two, and the internal connection has to do with this flight from judgment in public discourse, or the aspiration to value neutrality in public discourse. And it's connected to the way economics has cast itself as a value-neutral science when, in fact, it should probably be seen – as it once was – as a branch of moral and political philosophy."'


I was struck by a comment at a recent conference entitled ‘God Talk’ (in Leicester on 24 May 2012) that since the enlightenment we live in a secular society which is thought to offer a level playing field for any belief or faith (in this context religious belief).  One can see how the operation of certain aspects of our society such as markets and by extension economics as a (social) science being value-free could be seen as useful.  But just as no branch of social science operates in a neutral way like the physical sciences are believed to, so economics and markets are influenced by the actions and beliefs of human beings.

For classical economics and the so-called efficient markets hypothesis to work, markets need to have perfect information and for the actors to be always logical in their responses.  The money markets in their reactions to the situation with the Euro show how there is less than perfect information (we have significant uncertainty (as opposed to risk, which one can measure) because nobody knows what will happen – this is a very good example of Keynes’s saying that you cannot extrapolate the future from the past) and markets tend to over-react through the effect of the crowd).  For a more thorough demolition of classical economic theory and markets, see Steve Keen’s book ‘Debunking Economics’ that I referred to on 13 January 2012.  Some prefer so-called Behavioural Finance or Economics but as Keen shows, that is not without its weaknesses and really one needs to understand the mathematics of probability much better.  He argues that many economists have ignored some of the key points of the mathematics and it certainly requires some close reading to follow the argument about how the mathematics might properly work.
 

What all this seems to suggest is that we don’t live in a world of simple relationships and that it is dangerous to abdicate responsibility to assumptions that we do.  It also suggests that what may, or may not, be relevant for some very specialised parts of the economy such as stock or bond markets is not so for much of the rest of life, or even many of our own more modest and infrequent economic transactions.
 

The ‘God Talk’ conference, which was supposed to be about how to speak of God amongst the challenges of lack of religious understanding and rapid change, seemed to me to be a bit too much like theologians talking to theologians, but there were some interesting points to which I might return, as I am supposed to be taking some time off work this week!