 Llywydd ac yn iawn i'r cwcoddau'r hysrhoedd ymlaen. A mynd i fynd i'r ystyried wrth yr ysgrifennu, mae'n gwybod weithio ar ystod, mae'r gweithio cyhoedd gwahanol, lle mae Ymwyllgor Gwylwyr Rhaid-Gwylwyr, yr ysgrifennu ymwysig, yr yr ysgrifennu cyhoedd, yr yr ysgrifennu cyhoedd cyhaedd, ac ymwysig ymwysig yr ysgrifennu, ac ymwysig yr ysgrifennu ymwysig, ac mae'n gweithio'r hynny, Felly, mae'n fyddwch i gyd yn ddweud bod yw'n cymhwylltio'r cyllidau, y byddwch yn ddyn nhw'n gwneud, yng Nghymru Adam Smith, yng Nghymru Adam Smith, yng Nghymru Adam Smith, ac yng Nghymru Merchans Cwrtau sy'n gwneud hynny. Rwy'n ddweud, mae'n ddweud yng Nghymru Adam Smith, yng Nghymru Booth Festival, ac mae'n ddweud yng Nghymru Food Festival, yng Nghymru Hwyl Cymru sy'n ddweud yng Nghymru Marlon, a'r ddweud Michael, a ddych chi'n gwych, os yw ddweud yng Nghymru Adam Smith ar y mynd yw. Rwy'n ddweud twn yn gweithgaredd a'r adran yn y gynnig fath. Mae'n fryd i rhaid i'w cwmwys yw yr adran yng Nghymru Adam Smith. Rydyn nhw yddo ag rharfod, felly ddweud yng Nghymru Adam Smith, at y swyddin cyllid ddweud yng Nghymru Adam Smith i ysgol. A ddweud yng Nghymru Adam Smith arweithgaredd am ddweud, ac rhaid i ddweud when are trining with Ingolstadt. So, things have moved forward this year and I think we should be very proud of what's happening in Cacoddi. I've said before that you cannot understand Adam Smith's life. He wrote the wealth of nations, this great book, Living in Cacoddi, a book that is renowned throughout the world even to this day without understanding that he spent his early years looking out on the forth from Cacoddi, saw the boats coming in and out and it was there肉wg y gallwn i tynnu'r agori, fel e fair o'r casu tannu yma ydy yw teisio'r oherwydd yn cyfle i'r agori. A oherwydd, Michael Sondell, mae'r llythdoi wedi bod yn ei wneud â'i llwyddo eu gwleidio I hynny'n yw'r agori, mae'r suddeg y community oed mae'r ysgrifennu hyn yn y ddiwedd, mae'r ysgrifennu gyda'r maed i gyda, a ymgyrchu sylweddol yn y Y Chryffydd, mae'r MYD yn gweithio eich idea yma yn y cydnod o'i gilyddau, that we were all part of a community that had duties and obligations to each other, and that I believe is the theme of this evening that economics and every other science is underpinned by morality and ethics. We are so fortunate to have this evening the man who has done more to popularise philosophy throughout the world, the man who is an icon in Korea, he is a hero in Japan, He is a bestselling author in every part of Asia. He tells me and he is absolutely right because I checked to myself that 30 million people have heard his lectures in China. We've heard of TV lecturers. He is the first internet lecturer because all his lectures from Harvard University can be accessed on the internet, on the web, as a result of his willingness to distill all the wisdom that he has throughout the world free of charge on the internet so that you and everybody else in any country of the world can listen to it. And you know also he is the wreath lecturer who did magnificent lectures on the BBC radio a few years ago, the author of What Money Can't Buy, the author of this famous book Justice as well, and we are so fortunate to have him in Cacodi here this evening. It is the second time he's visited Cacodi so he's keen to come back. And I was able to show him and so was Marlon, ran Cacodi a few years ago, and persuaded him that he should consider at some point coming to do this lecture. Now what's the significance of it? In the post-war years in 1946, let me just finish with one story. Jean-Paul Sarge, the great philosopher, Simon de Beauvoir, the great feminist writer, Andrew Mulrow, who was a Minister for Culture, Arthur Kessler, who wrote Darkness at Noon, Albert Camus, who wrote so many novels that were so influential in the post-war years, they met together in Paris in the wake of the Second World War, and Albert Camus said to them, because they had been existentialists, he said to them, didn't we get it all wrong, he said, when we said there was no such thing as moral values. He said if we were to admit that we'd got it wrong and that moral values should underpin our society, then that, he said, would be the beginning of hope. And what Michael Sondell will tell you this evening is that morality is at the centre of all our lives, and it is that which gives us hope. I ask you to welcome the man who has done more to get a message about the importance of morality across to millions of people around the world. It is such a privilege to have him in Cercotti this evening. Please give a great welcome to Michael Sondell. Thank you so much, Gordon, for that warm and wonderful and generous introduction. I only wish my wife were accompanying me on this trip. She would love to have been here and heard it so that she could deliver a rebuttal. Actually, my wife and I were in Cercotti, as Gordon mentioned, and spent time with Gordon and Sarah, and we got a wonderful tour also of the Adam Smith birthplace, and so how could I not come back? This is a wonderful occasion, and I want to thank you all for the warm welcome. We're here to honour the memory and also the ideas of Adam Smith, the distinguished son of Cercotti. And thinking about this lecture, my thoughts went back to when I studied economics as an undergraduate. And when I came across, was first exposed to economics, I was bedazzled by it. I loved its clarity and rigor, and I especially loved the idea that big questions of social and economic life could be answered, or so it seemed, without engaging in messy, seemingly subjective debates about values. That was an exhilarating promise. Economics beckoned and inspired as a value-neutral science of human behaviour and social choice. I no longer see it that way. In fact, I think this way of conceiving economics is misguided. It's misguided, but deeply influential, not only in the academy, but also in the world. And I think we won't be able to invigorate our democracies. We won't be able to morally invigorate the terms of public discourse unless and until we find our way to a new way of thinking about economics. In many ways, the new way of thinking about economics we need has a long history. And it goes back to Adam Smith. Because Adam Smith and the classical economists who followed him did not view economics as a value-neutral science, or even as an autonomous discipline, they understood, and Adam Smith understood, that economics was really a subfield, a branch of moral and political philosophy. Gordon mentioned Smith's work, A Theory of Moral Sentiments, which was a book about moral philosophy. And a central theme of the book was working out the ethics of sympathy and benevolence and fellow feeling. And one of the puzzles that he addresses, Adam Smith does, is a puzzle to do with the way in which human sympathies seem to be bounded to our own immediate concerns. And he gives us a thought experiment in a theory of moral sentiments. He says, let's suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake. And then he asks, let's consider how would a person of humanity in Europe who had no connection with that part of the world, how would that person be affected hearing the news of this dreadful calamity? Well, he would, Smith says, first of all express his sorrow for the misfortune. He would make melancholy reflections about the precariousness of human life. And if he were in the financial services industry, such a person would enter into speculation about the effects this would have on commerce and trade and business in the stock market. And when all this fine reflection was over, he would pursue his business or his pleasure with the same ease and tranquility as if nothing, no such accident had happened. And then Smith says, consider by contrast what this same, how the same person would react if he were to lose his little finger, he wouldn't sleep at night. And yet provided he never saw them, those people in China, he would snore, Smith writes, he would snore with the most profound security over the ruin of 100 million of his brethren halfway across the world. Well, that would be less interesting to him than his paltry misfortune, the finger, the loss of the finger. And Smith asks, why? Why is this the case? And if we can't justify it morally, what should we do about it? Well, how should we reimagine our moral circumstance, our relation to humanity, our moral and political obligations in a way that corrects for this tendency toward narrowness, toward parochialism and toward self-interest? So that's Adam Smith in a theory of moral sentiments. Today, few, if any, economists write that way or ask those questions. In fact, the most influential economists do something pretty close to the opposite of engaging in that kind of moral reflection. They argue that economics is traditionally concerned with trade in material goods, with what makes countries wealthy, with questions of distribution of income and wealth, with banks and deficits and trade. But these economists now say, that's not all economics is about. Economics is also a comprehensive theory of human behavior. And here's how one such economist, a Nobel Prize-winning economist at the University of Chicago, Gary Becker, describes it. In a work called the Economic Approach to Human Behavior, he said, It's a mistake to think that economics is about the allocation of material goods. The economic approach to human life can be applied, he argues. Regardless of what goods are at stake, it explains life and death decisions as well as the choice of a brand of coffee. It applies to choosing a mate and also to buying a can of paint. What is this method? What is this approach, this economic approach to human behavior? It's essentially seeing all human behavior as concerned with maximizing individual utility. He illustrates this claim with an economic analysis, as he calls it, of marriage and divorce. According to the economic approach he writes, a person decides to marry when the utility expected from marriage exceeds that expected from remaining single, or from incurring the cost of carrying on searching for a more suitable mate. Similarly, a married person terminates his or her marriage when the utility anticipated from becoming single or marrying someone else exceeds the loss in utility from separation, and so on. Since many persons are looking for mates, a market in marriages can be said to exist. That's the idea. The idea is that all goods, all good things in life, all human experiences can be translated into a single uniform measure of value, call it utility, and all human behavior can be explained from the standpoint of maximizing utility. Moral philosophers question this utilitarian theory, the one that underlies the economic approach to human behavior. One of the questions they ask is whether it really is possible and whether it's morally and humanly plausible to translate all goods, all human concerns into utilitarian terms, which in practice means translating everything into money. Now, I myself would like in the course of this lecture in our discussion to raise some questions about this way of thinking, this economic approach to human behavior. But I'm reminded of an early example, practical example, of some of the sometimes folly of thinking and reasoning about everything in this way. Back when I was a graduate student here in the UK, I was at Oxford for graduate studies, and this was in the late 1970s, and back then they still had many all-male and all-women colleges, many were not yet mixed. And the all-women colleges had rules against overnight male guests, but now these rules were rarely enforced and easily violated, or so I was told. And by the late 70s times had changed and there was pressure to revise this rather old-fashioned rule, the parietal rules, and there was a debate on the subject at St Ann's College, which is one of these all-women colleges. Now, there were traditionalists on the faculty who were against the change on traditional moral grounds. They thought they were responsible for the virtue of the young women who attended, but they were embarrassed to give the moral grounds of their objection, so they translated their argument into utilitarian terms. If we allow overnight male students, they argued the cost to the college will increase. How, you might wonder? Well, they said those men will want to take baths and that will use our pot water. Not only that, they said we will have to change the mattresses more often. The reformers met their argument by adopting the following compromise. Each woman student could have a maximum of three overnight male visitors each week, provided each visitor paid 50 pence to defray the cost to the college. The next day, the headline in the Guardian read, St Ann's Girls 50 Pence a Night, which illustrated the folly of trying to translate all values into monetary terms and should be a cautionary note for Becker and others who believe that all human experiences and values can be translated into a single measure of value such as utility. Well, why does this theory matter? The theory that economics is a value neutral science of human behavior. What's at stake really in challenging it? The reason it matters is not only that it makes for a narrow way of studying and teaching economics. It also matters for the world. It matters for politics, for the way we live our lives. Because in recent decades, roughly speaking the last three or four decades, this way of thinking about economics and money and markets has increasingly come to dominate public life. Today, there are very few things that money can't buy. If you were ever sentenced to a jail term in Santa Barbara, California, just in case you find yourself in that predicament, you should know that if you don't like the standard accommodation in the cell, you can buy a prison cell upgrade. It's true. Take another very different aspect of life, books. Now, books have always been commodities, market goods, in a sense. You can't walk into the book shop and just walk out with a book. You have to pay for it. So books are market goods in a way, but they've never been market goods in the thoroughgoing sense of a commodity. Take the practice of paid product placement. We're familiar with paid product placement in movies and on television. In fact, my sons and I are great fans of James Bond to mention another local Scottish reference, and they're full of product placement, and that's almost part of the fun of it. But books, books typically don't have product placement. Until recently, some years ago, a fairly well-known British novelist, Fay Weldon, have you heard of her? She accepted a commission from a company to write a novel that would mention the company in the novel, paid product placement. The company was the Italian jewelry company, Bulgari, and the contract committed her in exchange for a fee to mention Bulgari at least a dozen times. The book was entitled, aptly enough, The Bulgari Connection, and she exceeded the required number of paid product references mentioning Bulgari 34 times. Some critics pointed out that this didn't make for such terrific writing. They complained about the clunkiness of the product-laden prose. Do you want to hear one of them? Here's one. Quote, a Bulgari necklace in the hand is worth two in the bush, said Doris, or here's another one. Quote, they snuggled together happily for a bit, all passion spent, and she met him at Bulgari that lunchtime. Fortunately, this hasn't really caught on, paid product placement in books, but with the advent of digital publishing, I suspect that the activity of commercial advertising is going to come in closer and closer proximity to the activity of reading. A few years ago, Amazon put out two versions of its Kindle reader, the standard version, and another version for $49 less, the only difference being that for the cheaper model, you have to be willing to put up with banner ads on the screensaver and on the homepage. Commercial advertising, the reach of markets and market thinking, are extending into reading, but also many other aspects of life. These are small examples, but markets and market reasoning are also playing a growing role in large public institutions. We see the advent, for example, of for-profit schools, for-profit hospitals, for-profit prisons. Or consider the way we fight our wars. In Iraq and Afghanistan, there were more private military contractors on the ground than there were US military troops. Now this isn't because we ever had a public debate about whether we wanted to outsource war to private companies. Somehow it just happened. Over the past three decades, we've drifted almost without realizing it from having a market economy to becoming market societies. The difference is this, a market economy is a tool, a valuable and effective tool for organizing productive activity. But a market society is a place where almost everything is up for sale. It's a way of life in which market thinking and market values begin to dominate almost every aspect of life. From family life and personal relations to health and education, politics, law, military service, civic life. The question I would like to put to you this evening is why worry about this? Should we worry about it? About approaching a condition where almost everything has a price tag? There are at least two reasons to worry. One of them is to do with inequality. The more things money can buy, the more affluence or the lack of it matters. If the only thing that money determined access to were BMW cars and yachts and fancy vacations, that's all that money decided inequality wouldn't matter very much. But as we approach a condition where money governs access to the most important things in life, decent health care, good education, living in a safe neighborhood rather than a violent, ridden neighborhood, political voice and influence, where money comes to govern these domains, inequality matters a lot more, and life becomes harder, the commodification of everything sharpens the sting for those who lack it. So that's one reason to worry. But there's also a second reason beyond the concern with inequality. And that has to do with the tendency of marketising certain practices, the tendency of markets and market values to drive out or crowd out or undermine non-market values and motivations worth caring about. To illustrate this crowding out tendency of market values, let me put to you a question and see how you would think about it. There are many schools where there are kids who struggle academically, in part because they come from families that didn't encourage the love of learning and reading, the habit of studying hard. And so some economists have proposed a solution, a market-based solution, a cash incentive for kids in school to get good grades, high test scores to read books. They've actually tried this in New York, Chicago, Washington, D.C., $50 for an A, $35 for a B. In Dallas, Texas, they have a program that pays eight-year-old kids $2 for each book they read. Now, the goal is clear and it's a worthy, important goal to improve the academic performance and motivation of kids who may lack it. So some approve of this idea and others object. I'd like to see what you think and we'll have a bit of a discussion here if you're willing. Would it be possible to put the house lights up just a little bit so that we can see because I want to take a survey, a poll. Let's suppose you're the head of a school and someone comes to you with this proposal and let's suppose even they come to you with, it's a trust or a foundation that will provide the economic resources to pay these incentives. So you don't even have to take it out of your own budget. Let's see a show of hands, how many think it's worth a try at least and how many would object in principle. How many first think it's at least worth a try, raise your hand. And how many object, how many would the majority object but I'd say maybe a quarter of the audience say it's worth a try. Let's see now if we can get to the reasons people have for voting one way or the other. Let's first hear from those who object, who think this is a bad idea on principle and who would rule it out, who will get our discussion going and we have microphones on either side. Who can explain why he or she would reject this policy? What's wrong with it? Yes, the woman sitting right here toward the middle, we'll get you a microphone. Stand up and tell us your name and why you would object. Hello, my name is Shazia. I would object because of the cash incentive. If the incentive was some other soft form, for example, I don't know, like more books or other kinds of cultural activities, I wouldn't have such an objection. What was the cultural activity you mentioned? I don't know, like museum trips or art lessons or something like that. And why would you not offer them cash though you might offer them a museum trip? Well, this is not so relevant to me, but to my nieces and nephews and things, they're marketed to you all the time. They're consumers from a really young age and I just feel that turning them into little people hungry for money from such a young age is not ideal. It's a bad thing. I think so. Tell me your name again. Shazia. Shazia, let me make it a little bit harder. Suppose it actually works. I don't want to play this game. Well, I might try to encourage you to play along a little bit further by offering a cash incentive. Something from Bulgaria? Actually, I wasn't thinking of Bulgaria. I really had in mind a museum trip. I'm already here. All right. Suppose it actually did work to improve the grades and the reading. Then would you still stick to your scruples against turning these kids into people driven by money, as you say? I don't know. As someone who studied economics in the past, I would say that I would want to see, I mean, there must be sort of like a guinea pig group who would determine if it made them into stable individuals in the future or not, how that cash incentive, what the long-term effects of that are. All right. Thank you for that. You've done great. Thank you for that. Thank you. Now, I want to hear from someone who disagrees with Shazia, someone who thinks it is worth trying. Who's in favour who can give a counter argument, who can explain why he or she is in favour of trying this policy? Yes. Go ahead. Sitting on the aisle. Alice to give. It's surely worth while experimenting. I think one of your own points was that. Unless you experiment, you'll never find out and never make any progress, surely. Right. So, wait, wait, wait. Keep the microphone. Can I have my watch now? But what do you say to Shazia's argument that the very offer of the money, even if it leads to better grades and more books read, has a kind of corrupting effect. It teaches these kids to be a kind of, it gives them a basic training in the consumer society. It encourages them to be motivated by money rather than higher things. Shazia, that's your objection, right? What do you say to that, Alastair? I think these are entirely good principles in life. The good principles being, you mean being motivated by money? Knowing the value of money from an early age. That's a good thing to teach. Being rewarded for effort and having the choice to allocate your own rewards. I think the disadvantage of a museum trip is you might not be interested in a museum. Right. As you well know, money is a medium of exchange. You can spend it anywhere you want. I think it's a great incentive in life. I might choose to use what I earned from a good grade to buy a museum ticket, but I might prefer to buy a video game. I should be free to make that choice. Getting in the habit of reading or studying to make money, that's teaching good habits, not bad habits. I think so, yes. In the school context, I'm assuming the books are desirable titles. All right. Stay there and I want to hear someone who disagrees and who has a reply. Someone who disagrees with Alastair. Yes. Hello, Wendy Smith. I believe to reward with money from such a young age that you would promote exclusion. You're rewarding people who, for whatever reason, aren't achieving. What about the people that you're missing out? So, therefore, you're starting an exclusion process from the very young. I don't agree with that. What I would do is I would find the reason why these children aren't achieving is that the school system that's letting them down and putting the money there is not to reward a child for getting an A, B or C. It doesn't work. Expectation grows. Where do you go from there? Where's the answer? Right. You think that next year they'll want more money to read? Possibly. Or will they want more depending on what A they get? One A is better than another A. Where does it stop? Right. And if the book, how much would you have to pay them to read? A war and peace, maybe. I wouldn't agree with paying them money. It's instilling the wrong value into them. It's instilling the wrong value. Wendy says, paying them money, even if it works, maybe especially if it works, instills the wrong value that Alistair said it instills the right values, namely learning that working hard gets you ahead and gets you paid. That's for later. For when you have achieved your employment and you go on that ladder of achievement, education should be universal for all. And that's, I firmly believe that. And instilling the wrong value, what is the wrong value that's instilled if you pay a kid to read a book or to study hard? Don't bother reading because you're going to get paid to do it if you don't bother. And is the worry that when no one's paying them, they'll stop reading and learning? Absolutely. So what is the higher value that you want to instill in kids in school with regard to reading and learning? I think... Why should they do it? If not for money, what's the higher motivation? For themselves, for their progression, for their... To develop their capacities. Absolutely. I think that the bigger picture... I mean, we're not talking about the very young here, but I'm looking at the bigger picture. I think there's enough pressure put on children to see that they have to succeed without starting that in the school. They should be given every single bit of chance and help that they need. And that's why I think the money that you would be given to those children would be better spent giving them more support, giving them people who will inspire them and who will encourage them. Okay, I want to thank Alistair and Wendy for this exchange and everyone who's joined in the discussion. Now, one of... What emerges from this discussion, if you listen carefully, it's really a debate about whether paying kids to read or to study changes their motivation and expectations. Wendy worries that it does, and for the worse, because Wendy thinks that if kids get paid, they'll begin to think of studying and reading as a chore to be done for money, in which case when no one's paying them, presumably they'll stop. That's the worry. Rather than to read for the intrinsic love of it, the love of learning and self-development. Alistair argues, one of the values we want to instill is the idea that if you work hard, you will get paid, you will get rewarded. So why not start sooner rather than later? I should mention what's happened in these experiments with paying kids for academic achievement. The payment for the grades and the test scores does not seem to have worked very well. There was not a very high correlation between paying and higher test scores or grades. But those kids who were paid, offered $2 for each book they read, did read more books. They also read shorter books. But the larger question, the larger question which has emerged in this discussion, is whether a monetary incentive or a market mechanism actually changes the meaning in the motivation behind the activity. That's the issue. And what this brings out is that something economists often assume, may not be right, economists often assume that two incentives are better than one. Some kids may read for the love of reading. And if there are others who aren't motivated that way, why not offer them money? Because that will simply add to the incentives. It's the idea of aggregating incentives. But it might be that incentives are not additive in that way. It could be, this is Wendy's worry, that the monetary incentive will actually erode or undermine the intrinsic one, leading to less reading in the long run rather than more. Now this question about the effect of market mechanisms and cash incentives on attitudes and norms, this question arises in many aspects of social and public life. Some years ago in Switzerland, they were trying to decide where to locate a nuclear waste site. No community wants one in its backyard. And they identified a small town in the mountains of Switzerland is likely to be the safest place. But under the law they had to get the approval of the residents of the town before locating the waste site there. And so they did a survey of the residents of this small town in the mountains and asked them if the parliament chooses your town, would you vote to approve? Despite the risk, 51% said yes. Then they asked a second question. They sweetened the deal. They said, now suppose parliament chooses your town for the nuclear waste site and offers to pay each resident of the town an annual sum in compensation of up to 6,000 euros, I think it was. Now how many people do you think said yes? What would you say? How many? What percentage? From 51 to 95? 40? 78? This is like an auction here. The number fell in half from 51 to 25% when the money was offered. Now from the standpoint of standard economic analysis, this is a puzzle. According to price theory, when you offer to pay people to do something, more people, not fewer people are willing to do that thing. So what happened here? What do you think explains the fact that the price effect was confounded, contradicted by the offer of money? What would you say? What's that? We'll get you a microphone. They put a value on? A risk. They put a value on the risk, the risk of something going wrong. So maybe that could be true. It could be that when the money was offered, the people said, if they're offering to pay me all that much money, it must be worse than I thought. That could be. But they tested for that effect. It's interesting. And it turned out that the estimate of the risk before and after the monetary offer was about the same. So that suggests that something else must explain this result. Who has another explanation? It says something about yourself as a person if you accept cash. You kind of belong to the people who are paying you the money. So that would be at odds with a sense of independence. What else? Yes? The price is too low. Sorry, go ahead. The person in the orange sweater. If the nuclear waste went there, they knew it was the safest place. So it's altruism. They were helping the rest of the country. And they didn't need money put on it. Right. And what's your name? Dee. Dee? So Dee says that when they first answered, the 51%, they were acting out of altruism or maybe out of a sense of the commitment to the common good. The country needed the energy. The waste had to go someplace. They were willing to bear a sacrifice for the sake of the public good. But then when money entered the picture, when they were offered money, the meaning of the question changed. Now what had been a civic question became a deal, a transaction, a pecuniary one. In fact, they asked some people who changed their minds, why did you change your mind when money was offered? And many of them said we didn't want to be bribed. So why did it feel like a bribe? Well, they were willing to make a sacrifice for the sake of the common good. But they weren't willing to sell out for money to sell out the health and safety of themselves and their families. That felt like a bribe. So what this story about the Swiss town brings out is that price theory doesn't always predict people's reactions, and the reason it may not is that sometimes a cash incentive or a market mechanism may change the meaning of the goods at stake. In Israel one day a year high school students go door to door raising funds for charitable causes. One year some economists did an experiment. They divided the students into three groups. The first group was given a short speech about the importance of the charitable causes and the students were sent on their way. The second group was given the same speech, but also offered a 1% commission on all the funds they raised. The third group, same speech, but a 10% commission. Which group do you think raised the most money for charity? What would you guess? Just shout out. Everyone says the first group? It was the first group. Now this is getting too easy. Now here again you could ask the same question we asked about the other cases about the nuclear waste site. Doesn't this contradict standard economic reasoning? If you increase the incentive why do you get less success? In fact it is true the price effect held to this extent. The people who were paid 10% did raise more than the people paid 1%. But the students paid nothing, raised more than either group. What makes sense of this is the idea we have been discussing. That often non-market norms may matter and sometimes they may be eroded when money is offered. What does this mean for the way we do economics? What our discussion and these examples suggest is that an assumption that runs quite deep in standard economic reasoning may be false. That's the idea that markets are inert. They do not touch or taint the goods they exchange. These examples show that that may be untrue. It may very well be in some cases that introducing a market mechanism may transform the meaning of a practice and may drive out attitudes and norms of a non-market kind that people care about. Now if that's true I should say first of all that the economy standard assumption about markets not touching or changing the meaning of goods may be true enough for material goods, cars, toasters, flat screen televisions. If you sell me a flat screen television or give me one as a gift it will work just as well either way. The mode of acquisition, gift or market, gift or money doesn't change the value of that television. It's a material good but the same may not be true when we're talking about personal relations, family life, teaching and learning, civic life, civic sacrifice. In those domains introducing markets may drive out attitudes and norms worth caring about. What are the consequences of this for the way we do economics? Well if markets sometimes erode or corrupt attitudes and norms that give social practices their meaning then before deciding where markets belong and where they don't it's not enough just to talk about efficiency. We also have to engage in moral reflection and argument and deliberation about the meaning of goods and social practices, health education, military service, civic life, prisons, families. We have to engage in moral argument in reflection which is to say that we can't that economics conceived as a value in neutral science can't help us, not on its own. Economics has to reconnect with moral and political philosophy. Now I suggested at the outset that this isn't just, even if it's true, this isn't just about the way we do economics. It also suggests something about the way we do politics, about the way we conduct our public discourse. If you look at almost every democratic society in the world today there is a frustration with politics and with politicians and with political parties. And I think that frustration has something to do with the emptiness, the moral and spiritual emptiness of public discourse. Most of what passes for political discourse these days consists either of shouting matches where we shout past one another in partisan ways or in narrow managerial technocratic talk which inspires nobody. What's missing is an engagement in public with big moral questions including questions of justice, the common good, the role of markets, how we should value goods and social practices, what it means to be a citizen. These are big questions, big ethical questions. People are hungry to debate them in politics and yet there's precious little room or so it seems in the existing terms of public discourse. Now an economist might listen to this and offer the following objection. I'm arguing that we need to bring a more robust moral and spiritual vocabulary into politics. And Adam Smith worried in the passage with which we began about sympathy, the reach and range and bounds of human sympathy and benevolence and altruism in moral sentiments. But some economists might reply along the following lines. One of the virtues of markets is that they spare us, they save us from using up the scarce supply of altruism and benevolence and sympathy and civic virtue. In fact one of the most famous studies of markets, the crowding out effect of markets was by a sociologist named Richard Titmuss in the early 1970s. Titmuss did a study about blood in the US and the UK, the provision of blood for transfusion. In the UK there was no buying and selling of blood, only the giving of it. In the US you could donate blood or you could sell it, there was a market. He found that on economic grounds alone the British system was better, more reliable supply, less tainted blood and so on. But he also made a moral argument. He said a society that permits the buying and selling of a fundamental human good such as blood in that society the impulse, the gift impulse, the altruistic impulse will be eroded and damaged, not only with regard to blood donation but also more widely. That was his worry. The study generated a lot of debate and one of the most distinguished American economists of his generation, Kenneth Arrow, wrote a long critical review of Titmuss's book. One of the arguments he made was, we should not rely where we can avoid it on altruism. Because markets which rely on self-interest spare us from using up the limited supply of virtue. So for example if we rely on the generosity of the public for the supply of blood, there will be less generosity left over for other social or charitable purposes. That was Arrow's worry. He put it this way, quote, like many economists I do not want to rely too heavily on substituting ethics for self-interest. I think it best on the whole that the requirement of ethical behavior be confined to those circumstances where the price system breaks down. We do not wish to use up recklessly the scarce resources of altruistic motivation. Now it's easy to see how this economistic conception of virtue, if true, provides yet further grounds for extending markets into every sphere of life. Because if the supply of altruism and generosity and civic virtue are fixed, as if by nature, like the supply of fossil fuels, then we should try to conserve it. The more we use, the less we have. Now to those not steeped in economics, this may seem a strange way of thinking. Because it ignores the possibility that our capacity for benevolence and virtue and love is not depleted with use but enlarged with practice. Think of a loving couple. If, over a lifetime, they ask little of one another in hopes of hoarding their love, how well would they do? Wouldn't their love deepen rather than diminish the more they called upon it? Would they really do better to treat one another in more calculating fashion to conserve their love for the times they really needed it? Now similar questions can also be asked about social solidarity and civic virtue. Should we try to conserve civic virtue by telling citizens to go shopping until their country needs to call upon them? Or does civic virtue and public spirit atrophy with disuse? This idea of conserving through the use of self-interest in markets altruism and civic virtue runs deep in the assumptions, often the unspoken assumptions of economists. Just a few years ago, a famous economist gave a speech in Harvard's Memorial Church about what economics can teach us about morality. And he concluded this speech with the reply to those who criticize markets for relying on selfishness and greed. Here's what he said, we all have only so much altruism in us. Economists like me think of altruism as a valuable and rare good that needs conserving. Far better, he said, to conserve it by designing a system in which people's wants will be satisfied by individuals being selfish. And saving that altruism for our families, our friends and the many social problems in this world that markets cannot solve. So here's the idea again. But I think it's mistaken. This economistic view of virtue fuels the faith in markets. It propels their reach into places where they don't belong. But the metaphor is misleading. Altruism, generosity, solidarity and civic spirit, these are not like commodities that are depleted with use. They are more like muscles that develop and grow stronger with exercise. One of the defects of our market-driven societies is that they let these virtues languish. To renew our public life, we need to exercise them more strenuously, which is yet another reason why economics should reconnect with moral and political philosophy, just as Adam Smith do it must. Thank you all very much.