 Good evening. In the spirit of INET, which people tell me above all is to foment critical discourse, I couldn't think of a better pairing than to put the author of Plutocrats on stage with the author of What Money Can't Buy. Tonight we have, I will call one of the founding mothers of INET, Christia Freeland, who's been a friend for as long as I can remember, is probably the person who suggested to George Soros and I that we should get to know this interesting man named Jim Valsili. I believe that's true. And who is now a member of parliament here in Toronto. And by the way, she did not arrange that based on John Rostin Sol's advice from last night. She might have consulted him earlier, I can't account for it. But Christia has been a reporter with the Financial Times, with Reuters, many-time author, bright as a whip. Everybody please welcome Christia Freeland. Characteristically, Michael Sandell will engage in debate with an army of young people. But we decided, given how formidable Christia is, that we would give him some relief tonight and just the two of them could debate. In addition to representing what I think is one of the greatest dimensions of humanity, the capacity to explore, the capacity to debate, to discuss, to compromise, Michael Sandell is an innovator. When we got to know him at INET, much of the excitement and the promise was as we grew to understand how he's transformed the nature of communicating scholarship and ideas. This is a man who has probably the most watched social science course in history online called Justice. I understand over 30 million people in China have watched this online. I've seen him in front of 14,000 people in a football stadium in Korea. His scholarly work is covered by the BBC, NHK, was it WGBH, National Public Television in the United States and many other things. He's blazing trails in the way to communicate with people engaging both left and right and he's often said to me, more than anything else, what we have to do is get people talking again about what matters to us. Please welcome Harvard Professor of History, it's going to be Harvard Professor of Government, Michael Sandell. Well thank you Rob for that bracing introduction. Rob Johnson and INET have really created I think one of the most important movements connecting the academy and the world in trying to reimagine economics and it's a great pleasure to be a part of this and what an honor to share the platform with Christina Freeland, whom I so admire and she too connects the world of ideas with the world of public life. When I was first exposed to economics as an undergraduate, I was bedazzled by it. I loved its clarity and rigor and I especially loved the idea that the big questions of social and political life could be answered or so it seemed without engaging in messy subjective debates about values. Economics beckoned and inspired as a value neutral science of human behavior in social life or if not exactly value neutral as a science, as a method that seemed to rest on only a few uncontroversial assumptions about utility and choice. I no longer see economics that way. I now think that this way of conceiving economics is misguided, misguided but deeply influential. Influential not only in the academy but also in the world. Over the past three or four decades the public life of our democracies has been animated by a faith. The faith that market mechanisms are the primary instruments for achieving the public good. This faith is so deeply, we are so deeply in its grip that even the financial crisis has not really dislodged it. In many ways the new economic thinking we have to work out has some close affinities with very old economic thinking because what I think we need to do is to find a way to reconnect economic reasoning with moral reasoning. The classical economists understood their subject in this way. From Adam Smith to Karl Marx, John Stuart Mill despite their ideological differences, the classical economists did not view economics as a value neutral science or even as an autonomous discipline. They all understood it to be a subfield of moral and political philosophy and I think that we will succeed in recasting, in reinventing economics when we reconnect it with this long but largely forgotten tradition. I'd like to suggest what this might look like tonight by asking a simple question. Are there some things that money should not be able to buy? But to approach this question I suggest we start with an easier one. Are there some things that money can't buy? Most people would agree that there are at least a few. Friendship for example. Suppose you want more friends than you have. You have trouble making friends. It might occur to you to try to buy a few. But you would quickly realize that this wouldn't work. A hired friend isn't the same as a real one. You could hire people to do some of the things that friends typically do. Picking up your mail when you're out of town, looking after your children in a pinch, or in the case of a therapist listening to your woes and offering sympathetic advice. You could do all of those things. In fact, until recently, you could even bolster your online popularity by hiring some good-looking friends for your Facebook page for 99 cents per friend per month. Website sold them. So while all of these services can be bought, it actually turned out they were models. They were very good-looking friends and the site was shut down because these were not authorized images. But you can't actually buy a friend. Somehow the money that would buy the friendship dissolves it. Turns it into something else. Take another example that may be of interest to this audience. The Nobel Prize. Suppose you desperately want a Nobel Prize, but fail to get one in the usual way. It might occur to you to buy one. But here, too, you would quickly realize that it wouldn't work. The Nobel Prize is not the kind of thing that money can buy. This isn't simply because the Nobel Prize committee doesn't offer any of them for sale. Even if they did, even if they auctioned off, say, one Nobel Prize a year, the bought award would not be the same as the real thing. The market exchange, the money, would dissolve the good that gives the prize its value. This is because the Nobel Prize is an honorific good. And once word got out that the prize had been bought, the award would no longer convey or express the honor that people seek when they aspire to a Nobel Prize. These are easy cases. But now let's consider goods of a different kind. Goods that money can buy, but that arguably shouldn't be bought. Consider a human kidney, for example. Some people are in favor of markets in organs, human organs for transplantation. Other people are against. But if it's wrong to buy a kidney, the problem is not, as with the Nobel Prize, that the money dissolves the good. The kidney will work, the bought kidney will work, assuming a good match, regardless of the payment. So to decide whether kidney should or shouldn't be up for sale, we have to engage in a moral inquiry. Or take baby selling. Some years ago, Judge Richard Posner, a leading figure in the law and economics movement, proposed the use of markets to allocate babies up for adoption. Now, many people disagreed with Posner's proposal, but with baby selling, as with a market in kidneys, the market would not dissolve the good the buyer seeks. If there were a market in babies up for adoption, people who paid the going price would get what they wanted, namely a child. Whether such a market is morally objectionable is a further question. So it seems at first glance that there's a sharp distinction between two kinds of goods. Things that money can't buy, like friends and the Nobel Prize, and things that money can buy, but arguably shouldn't, like kidneys and children. But I would like to suggest that this distinction is less clear than first appears. If we look more closely, we can glimpse a connection between the obvious cases, where the money spoils the good being bought, and the controversial cases, where the good survives the selling, but is arguably degraded or corrupted or diminished as a result. We can explore this connection by considering some cases intermediate between friendship and kidneys. If you can't buy friendship, what about expressions or tokens of friendship? Take a wedding toast. Probably many of you here have been invited at one time or another to deliver a wedding toast for a dear friend. It can be an anxiety inducing request to come up with a speech that's apt, that's appropriate, that's funny, that's heartwarming, that captures the relationship. Now there's help. There are websites that will sell you a custom written wedding toast. One of these websites is called theperfecttoast.com. You go online, you put in some information about the bride and the groom, how they met one another, how you knew the couple. You say whether you want a funny speech or a tearjerker, and within three to four business days you get a custom written wedding speech for how much would you guess? Anybody? What? $200? $300? It's $149, including shipping and handling. Now a wedding toast then is something money can buy or can it? Is it the same good if it's bought? Is the authentic, spontaneous, handwritten one? Maybe not. How would you feel, here's one test, how would you feel if at your wedding, your best friend, delivered a wedding toast so moving that it brought tears to the eyes of everyone in the room? And then afterwards you learned he'd bought it online for $149. Would the value and meaning of it be the same? Probably not. Which suggests that a wedding toast is an interesting intermediate case. Money can buy it, but the buying of it does in some way diminish or corrupt or degrade the value and meaning of it. Now, honorific goods have a similar feature. You can't buy a Nobel Prize, but money can sometimes buy goods that are at least partly honorific without destroying them. Take admission to elite universities. Now, universities don't hold auctions for admission, at least not explicitly. And many selective colleges and universities could increase their revenues if they decided to sell seats in the freshman class to the highest bidder. But even if they wanted to maximize revenue, universities wouldn't auction off all the seats. Doing so would reduce demand, not only by reducing academic quality, but also by undermining the honorific aspect of admission. Think about it. It would be pretty hard to take pride in being admitted or having your child admitted to Stanford or Princeton if admission were routinely purchased and if this were widely known. At most it would be the kind of pride associated with being able to buy a yacht. But suppose that most of the places were were allocated according to merit, but a few were quietly made available for sale. And let's also suppose that many factors entered into the admission decisions, grades, SAT scores, extracurricular activities, racial and ethnic diversity, athletic prowess, legacy status, and so on. So that it was hard to tell in any given case which factors were decisive. Under conditions like these, universities could get away with selling some places to wealthy donors without undermining the honor that people associate with admission to a top school. Now, critics of higher education claim that this scenario comes pretty close to describing what actually goes on at some colleges and universities. But what this illustrates for our purposes is that college admission is a good that can be bought and sold provided the buying and selling takes place discreetly. Whether colleges and universities should do so, that's a further question. Now, there are two objections to putting seats in the freshman class up for sale, two ethical objections. One is about fairness and the other is about corruption. The fairness objection says admitting kids of wealthy donors in exchange for a handsome donation to their college fund is unfair to other applicants, those who lacked the good judgment to be born to affluent parents. But that's not the only objection. There's a further objection which is about corruption and institutional integrity. This objection says colleges shouldn't put admission up for sale because colleges and universities embody and exist for the sake of certain ideals, the pursuit of truth, the promotion of scholarly and scientific excellence, the cultivation of civic virtue, and so on. All universities need money to pursue their ends, but allowing fundraising to predominate to the point of auctioning off seats runs the risk of corrupting these ends, of corrupting the norms, the ideals that give universities their reason for being. These two objections about fairness and about the corruption of the defining ideals of an institution or a social practice, these two objections reverberate through debates about what money should and should not be able to buy. The fairness objection asks about the inequality that many market choices may reflect. The corruption argument asks about the attitudes and norms that market relations sometimes damage or dissolve. Take the example of a market in children. It would be possible to create such a market, but should we? Those who object actually offer two different objections. One is that putting children up for sale would price less affluent parents out of the market or leave them with the cheapest supposedly least desirable children. That's a version of the fairness argument. But even to state that argument suggests that's not all that would be wrong with it. The other, I think deeper objection, is that putting a price tag on children would corrupt the norm. What norm exactly? Well, the norm of unconditional parental love. The inevitable price differences would reinforce the idea that the value of a child depends on his or her race or sex or intellectual promise or physical abilities or disabilities. This is an instance of the corruption argument that an important norm constitutive of good parenting on conditional love would be undermined. It's important to notice that while the fairness argument points to the ideal of consent, how voluntary was this transaction? The corruption argument appeals not to consent, but to the moral importance of the goods at stake. So to decide whether, for example, college admission should be bought and sold, we have to debate. We have to come to some view about the moral and civic goods that colleges should pursue. To decide whether to have a market in babies, we have to ask what norms should govern the parent-child relationship. And we have to ask whether buying and selling children would undermine these norms. So far, I've identified two different kinds of objections to buying and selling certain goods. But this sets us a difficult challenge if we're to decide about the moral limits of markets. Because before we can decide whether a good should be allocated by the market, we have to decide and we have to debate what kind of good it is, how it should be valued, how it should be valued. And this requires us to make a moral judgment, a moral judgment that economists, at least in their role as economists, as social scientists, hesitate to make. Part of the appeal of market reasoning is that it seems to offer a non-judgmental way of allocating goods. Each party to a deal decides what value to place on the goods being exchanged. That's the idea. If someone is willing to pay for sex or for a kidney, and a consenting adult is willing to sell, the economist doesn't ask whether those parties have valued the goods appropriately. Asking questions like that would entangle economics in controversies. Controversies about virtue and the common good, about the proper way of valuing social practices. And so it would violate the strictures of a purportedly value-neutral science. And yet it's impossible to decide where markets are appropriate without addressing these questions. Now, the textbook approach or the standard approach evades this quandary by assuming, usually implicitly, that putting a price on a good doesn't alter its meaning. It assumes without argument that the activity of buying and selling doesn't change or diminish the value of the things being bought and sold. This assumption may be plausible in the case of material goods. If you sell me a flat screen television or give me one as a gift, it will be the same good. The television will work just the same either way. But the same may not be true when market practices extend their reach into human relationships and civic practices. Sex, child rearing, teaching and learning, voting, civic life and so on. And so when market reasoning travels abroad, as it increasingly does these days, when it reaches beyond the domain of televisions and toasters, then market values may transform social practices and not always for the better. Let me illustrate this with some controversies about the role of market mechanisms, including cash incentives to try to motivate outcomes in education and including the use of tradable quotas or permits to achieve important social goals. I think the problem of trying to motivate students in schools, especially kids from disadvantaged backgrounds, to work hard and to apply themselves to their studies. A number of big city school districts in the United States have been experimenting with cash incentives to motivate kids to achieve academically. $50 for an A, $35 for a B. They've tried versions of this in New York City, in Washington, D.C., in Chicago. In Dallas, Texas, they have a program that pays second graders, eight-year-olds, $2 for each book they read. Now, some people think this holds some promise of motivating kids to academic achievement. Others worry about it. Consider another use of a market mechanism to solve the fraught question of immigration policy. Gary Becker, the Nobel Prize-winning free market economist at the University of Chicago, has offered a solution. To resolve the contentious debate over whom to admit, countries should simply set a price and sell citizenship, or at least the right to reside for $50,000 or maybe $100,000. Immigrants willing to pay a large entrance fee, he reasons, would automatically have desirable characteristics. They'd be young, skilled, ambitious, hard-working, and unlikely to make use of welfare. He even suggests that charging admission would make it easier to decide which refugees to accept, namely those sufficiently motivated to pay the price. Now, asking a refugee fleeing persecution to hand over $50,000 may strike you as callous. So consider another market proposal to solve the refugee problem that doesn't, in a way that doesn't require the refugees to pay out of pocket. A law professor has proposed the following, to deal with the fact that there are not enough places for the number of refugees each year who need asylum. The proposal is this, let an international body assign each country a yearly refugee quota based on national wealth. Then, so that they'll accept higher quotas, let the nations buy and sell these obligations among themselves. So, for example, if Japan has allocated 20,000 refugees per year but doesn't want to take them all, it could pay Poland or Uganda to take them in. Now, according to standard market logic, everyone benefits. Poland or Uganda gains a new source of national income, Japan meets its refugee obligations by outsourcing them, and more refugees are rescued than would otherwise find asylum. So the market logic for this proposal is impeccable. And yet, there is something distasteful about it. But what exactly is it? Maybe it has something to do with the fact that creating a market in refugees changes our view of who refugees are and how they should be treated. Somehow it encourages the participants, the buyers, the sellers, and those whose asylum is being haggled over. It encourages them to think of refugees as burdens to be unloaded, or as revenue sources, rather than as human beings in peril. Now, someone might concede this point, might acknowledge the degrading effect of a market in refugees, and still conclude that this scheme will do more harm than, more good than harm. It's possible. But what the example illustrates is something related to the larger theme, which is that markets are not mere mechanisms. They embody certain norms. They presuppose and promote certain ways of valuing the goods being exchanged. Economists sometimes assume that markets are inert, that they do not touch or taint the goods they regulate. But this is untrue. Markets leave their mark on social norms. And often, market incentives erode or crowd out non-market goods worth caring about. Let's go back to the case of cash for good grades. Why hesitate to pay a child for getting good grades or for reading a book? The goal is to motivate the child to study or to read, and the payment is an incentive to promote that end. Economics teaches that people respond to incentives. And while some kids may be motivated to read books for the love of learning, others may not. So why not use money to add a further incentive? It may turn out, as economic reasoning would suggest, that two incentives are better than one. But it could also turn out that the monetary incentive undermines the intrinsic one, leading to less reading rather than more. Or to more reading in the short run, but for the wrong reason. What this brings out is that the market is an instrument, but not always an innocent one. What begins as a market mechanism becomes a market norm. The obvious worry with the scheme is that paying kids to read may habituate children to think of reading books as a chore, as a way of making money. And if that's the lesson it teaches, it will erode or crowd out or corrupt the intrinsic good of reading. A friend of mine pays his young kids one dollar for each thank you note they write. If someone takes them out to dinner or sends them a gift, I've received some of these thank you notes. And I can tell by reading them that they were written under a certain pressure. My wife and I look a scans at this practice. We wonder how these kids will turn out. Now it could be that by being paid to write thank you notes they get in the habit of writing them and in so doing, gradually acquire the real reason for a thank you note, which is to express gratitude. And if that's what happens, then when the money stops and they grow up, they'll continue to be grateful. But it could work the other way. It could be that the monetary payment will teach them that thank you notes are a form of peace work for which you get paid. And if that's what they learn, they may, if that's what they learn when the money stops, so will the thank you notes. And they may find it difficult ever to learn the virtue of gratitude. It could go either way. But the point is that markets leave their mark and in deciding when and how to use them, we have to take account of this. There's a famous study of some Israeli daycare centers that illustrates this point. The centers faced a familiar problem. Many of you have heard of this study. Parents coming late to pick up their children. A teacher had to stay with the children until the tardy parents arrived. And so the child care center imposed a fine for late pickups. And what do you suppose happened? Late pickups increased. Now if you assume that people respond to incentives, this is a puzzling result. You'd expect the fine to reduce, not increase the incidence of late pickups. So what happened? Introducing the fine changed the norms. Before, parents who came late felt guilty. They were imposing an inconvenience on the teacher. Now parents considered a late arrival a service for which they were willing to pay. Rather than imposing on the teacher, it was as if they were simply paying for a babysitting service. The parents were treating the problem, to put it in other words, the parents were treating the fine as if it were a fee. But that difference matters even where the monetary amount is the same. Fines register moral disapproval. Fees are simply prices that imply no moral judgment. Consider the case of parking spaces reserved for the physically disabled. Suppose a busy but able bodied contractor wants to park near his building site. He can't find any other convenient place. For the convenience of parking his car in a place reserved for the disabled, the contractor is willing, let's say, to pay the rather large fine. He considers it a cost of doing business. Even if he pays the fine, wouldn't we consider that he's doing something wrong? And what he's doing wrong is he's treating the fine as if it were simply an expensive parking lot fee. But in treating the fine as a fee or mistaking the fine for a fee, he fails to respect the needs of the physically disabled and the effort of the community to accommodate them by setting aside certain parking places. In practice, this distinction between a fine and a fee can be unstable. We see this in China, where the fine for violating the government's one-child policy is increasingly regarded by the affluent as simply a price for an extra child. China's family planning officials have sought to reassert the punitive aspect of the sanction by increasing fines for affluent offenders, denouncing celebrities who violate the policy, and so on. The authorities regard the fine as a penalty. They want to preserve the stigma that's associated with it. They don't want it to devolve into a fee. Now, in figuring out what should be the role of markets and market mechanisms, we have to figure out what is the meaning of the social practice? What are the attitudes and norms that are embodied in those practices? And then ask whether buying and selling will diminish or corrupt those attitudes and norms. In Switzerland, some years ago, they were trying to decide where to locate a nuclear waste site. No community wants one in its backyard. The government identified a small town in the mountains as likely to be the safest place, but under the law, they had to get the approval of the community first. And so a survey was done of residents of this small town in the mountains of Switzerland, and they were asked, if the parliament chooses your town, would you vote to approve the siting of the nuclear waste site here? Despite the risks, 51% said yes. Then they asked a follow-up question. They sweetened the deal. They said, now suppose parliament chooses your town and offers to compensate every resident of the town with a yearly sum of some 6,000 euros. Then what percentage of the people said they would be willing to accept it? Any guesses? Just one number. You can call out the number. Some say 90, some say 25, 40. It's like an auction here. It fell in half from 51% to 25%. After the money was offered. Now from the standpoint of standard price theory, this is a paradox. Normally, if you offer people money to do something, more people, not fewer, are willing to do that thing. So what happened here? Well, it could be that the offer of the money made the people think, gee, this must be riskier than I thought. They're willing to pay me. But they tested for that and they found that the estimate of the risk by the participants was about the same before as after the offer was made. So something else must explain the result. And what probably explains it is that the monetary offer changed the meaning of the choice. What had been the 51% were willing to make a sacrifice for the sake of the common good out of a sense of civic virtue. They were willing to make that sacrifice. But when money entered the picture, what had been a civic question became instead a deal, a transaction, a pecuniary relationship. People were asked, why did you change your mind? And they said, we didn't want to be bribed. But why would the payment be understood as a bribe? Because now they were being asked not to make a sacrifice for the common good, but to put at risk their health and the health of their families for the sake of money. And that felt like a bribe. That was different. Now why worry? Why worry about the tendency of markets to crowd out non-market norms? For two reasons, one fiscal, one ethical. The fiscal reason is social norms can, if you can rely on them, they're a great bargain. You can get the nuclear waste site located if social norms and civic virtue animate the public and save huge amounts of money. But that's not the only thing that's at stake. There is also the intrinsic value of the duty to show up on time or the intrinsic love of reading in the case of the books or the sense of civic virtue in the case of the Swiss nuclear waste sites. Once we see that markets and commerce changed the character of the goods they touch, we have to ask where markets belong and where they don't. And we can't answer this question without debating and deliberating about the meaning and purpose of goods and the values that should govern them. We hesitate to do this. And the reason we hesitate to do it is that deliberations such as these touch inescapably on competing conceptions of the good life. This is terrain on which we often fear to tread. For fear of disagreement, we hesitate to bring our moral and spiritual convictions into the public square. But shrinking from these questions does not leave them undecided. It simply means that markets will decide them for us. This is the lesson of the last three or four decades. The era of unquestioned market faith has coincided with the time when public discourse has been largely hollow, empty of moral and spiritual substance. One of the greatest tolls that this hesitation, this refusal to engage in substantive moral discourse about the meaning of goods. One of the deepest tolls it's taken. One of the most corrosive effects of the marketization of everything in recent decades has been on commonality, the sense in which we are all in it together. Because the more things money can buy, the fewer the occasions when people from different walks of life encounter one another in public spaces and common places. Against the background of rising inequality, putting a price on everything means that people of affluence and people of modest means lead increasingly separate lives. We live and work and shop and play in different places. We send our children to different schools. This isn't good for democracy nor is it a satisfying way to live. Even for those of us who may be able to secede from public spaces, why not? Because democracy, democracy doesn't require perfect equality, but what it does require is that citizens share in a common life. What matters is that people of different backgrounds and social positions encounter one another, bump up against one another in the course of everyday life. For this is how we learn to negotiate and abide our differences, and this is how we come to care for the common good. We can see this writ large but also writ small. One of the most influential studies of the corrosive effects that markets can have on social goods and on commonality was a study about blood by a sociologist Richard Titmuss in the early 1970s. He did a study comparing the U.S. and the U.K. system of blood donation. In the U.K., it could only be donated, given voluntarily without pay. In the U.S., it was a mixed system. It was a market in blood and it could be donated. Titmuss showed that in economic terms alone, the British system was actually more efficient. But his main point was that allowing the purchase and sale of blood would have the effect and did have the effect of crowding out or eroding the gift relationship not only with regard to the giving of blood, but also with regard to altruism and civic virtue and social solidarity. This book stirred up a wide controversy. It was much debated and one of the sharpest critics of Titmuss' account of blood was one of the most distinguished economists of his generation. Kenneth Arrow wrote a long essay critical of Titmuss' study. Now, Arrow was no Milton Friedman-like proponent of unfettered markets. His earlier work had analyzed imperfections in markets for healthcare, but he took strong exception to Titmuss' critique of economics and market thinking. And in doing so, Arrow invoked two key tenets of market faith, two assumptions about human nature and the moral life that economists often assert but rarely defend. The first is that commercializing an activity doesn't change it. Arrow insisted on this. He doubted that the practice of giving blood could be damaged or diminished by introducing a market. Why should it be, he asked, that the creation of a market for blood would decrease the altruism embodied in giving it. People could still go on giving even though other people were buying and selling. The second tenet of market faith that Arrow invoked is the idea that ethical behavior is a commodity that needs to be economized. His idea was this, we shouldn't rely too heavily on altruism, generosity, solidarity or civic duty because these moral sentiments are scarce resources that are depleted with use. Markets which rely on self-interest, he said, spare us from using up the limited supply of virtue. So if we rely on the generosity of the public for the supply of blood, there will be less generosity left over for other charitable purposes. That was his argument. Like many economists, Arrow wrote, 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. It's easy to see how this economistic conception of virtue, if true, provides yet further grounds for relying more and more on markets. If the supply of altruism, it's like the supply of fossil fuels fixed by nature, then we should try to conserve it. The more we use, the less we have. The classic statement of this idea actually was articulated by Sir Dennis Robertson. He was a Cambridge University economist, a former student of John Maynard Keynes. In 1954, at the Bicentennial of Columbia University, he gave a lecture asking, what does the economist economize? And his answer was love. He said, if we economists do our business well, we can contribute mightily to the economizing of that scarce resource love the most precious thing in the world. Now, to those not steeped in economics, this way of thinking about the generous virtues is strange. It ignores the possibility that our capacity for love and benevolence is not depleted with use but enlarged with practice. Think of a loving couple if over a lifetime they asked 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? Similar questions can be asked about social solidarity and civic virtue. Should we try to conserve civic virtue by telling citizens in times of national crisis to go shopping until their country needs to call upon them to sacrifice for the common good? Or does that develop bad habits? Does civic virtue in public spirit atrophy with disuse? Now, Robertson offered his observation in a lighthearted speculative spirit. But the notion that love and generosity are scarce resources depleted with use continues to hold to exert. A powerful grip on the moral imagination of economists even though even if they don't argue for it explicitly, it is not an official textbook principle like the law of supply and demand. No one has proven it empirically. It's more like a piece of folk wisdom to which many economists still subscribe. Almost half a century after Robertson's lecture, a distinguished economist was asked to give a talk at Harvard. They called the morning prayer in Harvard's Memorial Church. He chose as his theme what economics can contribute to thinking about moral questions. He concluded his talk with the reply to those who criticize markets for relying on selfishness and greed. Quote, 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 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 social problems in this world that markets cannot solve. So here, 50 years later, Robertson's adage is reasserted. 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, or so it seems to me, more like muscles that develop and grow stronger with exercise. One of the defects of the market societies we inhabit is that they let these virtues languish. To renew our public life, we need to exercise them more strenuously. Thank you very much. I'm starting with a non-market transaction. Oh, there's time. Okay, great. Well, first of all, thank you so much, Professor Sandel. That was absolutely fantastic. And I have been one of the people who was not at all surprised by Professor Sandel's Internet stardom because long before the Internet was invented by Al Gore, when I was a Harvard undergraduate, his class was considered to be the best, most perfect one because it left you smarter, but it was also really fun to attend. He actually made it interesting, and I think you've all seen how brilliantly he does that. So thank you very, very much. And I have to say, I was with you apart from your parenting tips because if you took bribery and threats out of my arsenal with my three kids, they would be barbarians on the streets even more than they already are. So if you don't deploy those tools, I'm impressed that your sons have turned out so well. And I did also want to start just by saying, welcome to Toronto and to Canada, everybody. Isn't it great here? And for all of the visitors to Toronto, I'd like to assure you this balmy, beautiful weather, we get it 365 days a year. It's really always like this. So I wanted to start and, okay, we officially have 22 minutes. I'm going to take the liberty of saying, why don't we make it half an hour? And then I'll ask questions for about 15 minutes and then I'll throw it open to everybody else. Everybody cool with that? Will we civically be virtuous? Yeah, okay, good. I want to start by asking, in the acknowledgments of your book, you talk about how these ideas have been ideas you've been wrestling with since you became a Harvard professor in 1980. Can't believe it's been that long. What impact did the collapse of the Soviet Union and of that system have both on your thinking about the morality of markets and on our own broader thinking? It's easier for me to answer, I think, with regard to the impact on our broader thinking. I think we misread the end of the Cold War. We read the end of the Cold War, I think, in triumphalist terms as if there were only two systems, only two ways of organizing social life. There's lost in ours one and that induced a kind of complacence that distracted us from the obvious fact that there are many different versions of capitalism and of democratic capitalism and we see them in very different forms around the world. And I think by not attending to the varieties of capitalism and simply thinking, well, ours one therefore markets are, after all, the primary instrument for defining justice and seeking the common good, we reinforced an uncritical acceptance of the market faith. So I think it reinforced a tendency that was already present and I guess for my own thinking it didn't have a deep influence because I never took seriously the models, the old Soviet model that had failed. I was not never part of a generation that was in even remotely tempted by that. So I was more concerned with what we were doing here and worried that we were inhaling too deeply of a complacence born of over-reading or too simply reading the meaning of the end of the Cold War. You've spoken to us just now about lots of different areas in which using market reasoning perverts and corrupts what we're doing. I'd like to ask you about money in politics and you're an area of obvious interest to me. Your Supreme Court is taking the view that restrictions on money, broadly, that restrictions on money in politics are restrictions on free speech. What's your view? I think that that's a mistaken view and it's disastrous for democracy and unfortunately the court is so wedded to this view that money is a form of speech that I think we're going to have to explore creative alternatives to which may include, I would like to try to get at this indirectly by saying the reason they need to raise so much money is to buy television time but why do they need to buy television time? The airwaves are licensed to television networks presumably for the public interest so I would make a condition of licensing the public airwaves that certain amount of free time be allocated among the parties and candidates at election time and in return that there be no that we demarketize the buying of television time for political campaigns. A number of European countries do this and then the restrictions tearing down the restrictions on campaign contributions would matter much less because you would have this deal where you want the free television time you have to agree not to spend private money on it. You've spoken a lot about the areas in which it's a mistake to apply market principles what about those among us and I know there are many such people here today whose main job is to work in the markets CEOs investors how should they judge their actions in an era of maximizing shareholder value demanding investors how is a business person to be a moral person? Well I think that first we have to distinguish between having a market economy and becoming a market society over the past three decades we've drifted from the one to the other a market economy is a tool it's a valuable and effective tool for organizing productive activity a market society is different 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 reach into almost every aspect of life and that's what I'm against I'm not against market economies and so I think the test for for any business or company is what are companies and businesses for ultimately they are social organizations whose purpose is to advance the public good by engaging in the production of goods and services I think that finance is another matter finance is a harder question because the social purpose of finance is to allocate capital to socially useful purposes building factories building homes and so on but much financial activity today is unrelated to that legitimate and important social purpose and there I think we should have a public debate about the social purpose of finance and and what financial activities and institutions really do contribute to the effective allocation of capital and what ones are essentially basically casinos betting on events with no productive effect and is there anything morally wrong with casinos be they on wall street or in las vegas well I think so yes we've seen that they come with certain costs including the cost of systemic risk in the case of the financial industry and in the case of casinos in las vegas the standard kind there are the traditional questions about who's drawn there and whether this isn't a heavy tax on the poor the same can be said of state lotteries as an instrument of fiscal policy I think it's striking that if you that since the 1970s there has been not only not only has the economy have been financialized to a very considerable extent but at the same time certainly in the U.S. I'm not as familiar in Canada restrictions on casino gambling and state lotteries have completely fallen away during the same time and so I think we need a public debate about the ethics of speculation and I think we need that debate should address the question of whether there is a principal distinction between productive investment financial speculation and outright gambling so I do think there there are serious moral questions about the version that takes place both in las vegas and in some sectors of wall street okay and since Paul Martin our former prime minister and minister of finance is here in the audience I'm going to take the liberty rob of suggesting a panel for you for your next INET conference which is to have professor Sandel and Paul Martin debate precisely this issue because speaking on behalf of Canada I'm going to say he did a heck of a job regulating our banks to avoid many of those successes and you did much better here your banks did much better here than ours did did much better than ours did yeah and I want to hear Paul tell us whether it's because he's a more moral guy than his us counterparts that's that that is the reason isn't it there you go so while we're talking about wall street and financial excess when you were talking about your parking example right and the danger that finds financial fines might be seen as a cost of doing business right do you think that applies to financial fines on wall street and does that mean we should be jailing miscreants more often maybe or or shaming them or making the fines weighty enough so that they can't simply be treated as a cost of doing business you've said shame and you spoke you referred a few times to notions of shame and stigma yes do we not have enough shame and guilt and stigma today do we need more of that I don't know that it's a quantitative matter maybe maybe the maybe we need to maybe some of what we currently have is misplaced and we should redirect it to the proper proper objects of stigma but we could get into where you could get in perhaps to the area where you feel there's a surplus Christy and then we could discuss where we're going to redirect it do you do you have any ideas on that score well a lot of them the moral and civic progress that we've that managed to achieve over the last say 50 years has been to remove illegitimate sources of stigma in the area of personal life and sexuality and that doesn't mean we've succeeded in redirecting it to places where it belongs but that can be a further project to ask you you've talked a lot about moral thinking and market thinking and where they intersect and not and as you were speaking one of the great mysteries of American politics today came to mind for me and this is the sense of moral outrage that American billionaires are feeling and we hear it a lot particularly with the Hitler metaphors right it seems like a month doesn't go by that we don't hear an American billionaire compare social you know the direction of American politics to some form of Hitler how right you know we've had Tom Perkins we had Ken Langone we had Steve Schwartzman how do you explain that moral sense well it's an interesting question and I actually think it has a serious subterranean source there is a sting in accusations that people who have accumulated through in the financial industry who've accumulated bass sums they are stung by the suggestion that they don't deserve it and this question of who deserves what and why is part of the debate I think we need to have and bring out into the open I think one of the reasons there is such sensitivity about about whether they deserve the huge bounties that have befallen them is maybe they too sense that the legitimacy of it may be in doubt and that's aren't we the most sensitive about accusations when we glimpse at least with part of ourselves that maybe there's something in it this goes back to what we were discussing about the ethics of speculation when you asked me if I think there's something morally questionable about gambling either in casinos or on Wall Street and what the deepest moral and civic question at stake I think has to do with the fact that we've now embraced what is a kind of casino capitalism at least in those sectors and we've grafted it on to a social ethic that still believes in meritocracy still believes in working hard to get ahead you know bell clinton kept saying if you play hard if you work hard and play by the rules you deserve you know not to be poor a decent life and so on and the reason and obama has appropriated that very line people who work hard and play by the rules deserve to get ahead deserve an opportunity deserve for their kids to be able to get a college education deserve decent health care the reason that mantra is so politically resonant is that it touches people's sense that it isn't really true anymore that the meritocracy is not what allocates rewards and that's the same reason I think why the people who have won at the casino capitalism are so sensitive they're feeling guilty really guilty would be a little bit too strong no I don't think I don't think they're feeling guilty exactly but I think they sense that the moral legitimacy of their claim to this bounty is a little bit in doubt and that's why they're all the more sensitive to the suggestion that it's that it is I'd like to talk to you a little bit more about the issue of meritocracy and fairness in an area that you discussed really fascinatingly which is university admissions and you talked about how paying for admissions would challenge our notions of fairness raise concerns about corruption how far back in the life of a child does paying for admissions go and and to explain that question further I want to put to you a dilemma around meritocracy that larry summers put to me so he says that when he was president of harvard he used to like to occasionally drop into the deliberations of the admissions committee right I read about this in your bookocracy yeah okay yeah so and the kid who spoke mandarin the kid who spoke mandarin yeah right so maybe not everybody read this example I'm sure you all have I there will be a quiz after but in case you didn't so when larry dropped in and I'm sure his drop-ins were really welcome by the admissions committee also one discussion that he dropped into was about the kid who spoke mandarin so larry says there's this kid has great SATs great grades but nothing else super distinguishing which would guarantee him that place at harvard except according to larry the kid speaks great mandarin and most impressively from larry's point of view hadn't studied it at high school had had a tutor who came in four days a week from the time he was in grade nine and taught him mandarin so the moral dilemma as larry saw it was on the one hand shows it's a pretty determined kid who four days a week is going to be studying mandarin on his own but it also shows it's a pretty privileged kid because how many people can afford a mandarin tutor for their kid four days a week so what's your verdict on that one well I think it's a close call but I do think that it's a serious question how even the meritocratic system you know the SAT was set up originally as an instrument of meritocracy so that kids who came from not well-known schools not from private schools could show their smarts but now and and when I went to college and I walked in and took the SAT not really knowing much about it whereas when my kids took it all of their friends were taking SAT prep courses and having tutoring and getting all those books and practicing did your kids do that yeah yes yeah well I worked with them on the books we didn't we didn't send outsources it's pretty high quality tutoring not I'm not really very good at those logic questions or the science part of it but so my kids were ahead of me on that but so now all of this has actually become a source of class advantage you see it someone did a study of the top 146 most selective colleges and universities in the united states not just the ivy league the top 146 that's that's the place where those are the places where everyone is trying to get in and the percentage of kids in those places from the bottom quartile of the income distribution is anybody guess it's three percent and if you take the bottom half the percentage of kids in those in the top schools from the bottom half of the income quartile is only 10 percent now this isn't true at the most well endowed ivy league places and stanford and so on because we have the endowment to fund full financial need and to admit students without regard to need but I think that's pretty staggering and what that suggests is that notwithstanding even before we get to buying your way in the selective colleges and universities are replicating the the class essentially and freezing in place a kind of class system and you see this when you look at social mobility one generation to the next the american dream always said look we don't have to worry so much about equality because people can rise people aren't stuck in their in income categories for more than a generation they can rise but now the mobility measures show that the us is way behind most european countries in mobility behind canada behind canada the place with the most mobility is actually danmark so the american dream is alive and well and living in danmark but we have a lot of work to do i have some more questions of my own but i've lied to you and there are only 11 minutes left so let's throw it open okay i'm going to start with bill please do people have to speak into mike's rob do you have a viewer can people just speak loudly or mike is coming okay i think i think rob is videoing all of this so so first of all a congratulation a hearty congratulation on managing in the mass popular culture in this country to reintroduce the young marks and the process of commodification through the cash nexus into american discourse without ever having to mention the name but second this is this is the question um you've been addressing appropriately with your students this these issues in the context of a kind of methodological individualism we have to make these choices but these choices are in practice socially intermediated as you've said again and again so the college admissions process is a fascinating one as formerly co-chair of the first campaign fundraising for cambridge university since henry the eighth knocked off the monasteries the number of americans who asked me what's the number what's the number to get a place at cambridge and i explained to them there is no number there is no number but the reason the backup reason was because admissions at cambridge and oxford is conducted by the people who are going to take responsibility for the education of the kids there is no admissions office there is no intermediary that deals with donors and sports coaches so the question is how important do you read the persistence and emergence of these kinds of social institutions such as cambridge and oxford fellows taking a month of their lives to interview every kid who's applying for admission to their faculty in their college to take that and protect it from the acid that corrodes that institution and turns it into a market commodity it's pretty clear which system bill thinks is the better way i think there's a lot to be said for it and when i was finishing my dissertation at oxford i had a part i had a fill-in teaching job for one year and i had to be a part of interviewing the the applicants and it is it's very time-consuming and it would be very hard to get faculties in the u.s. to engage in that at the same time i think if there's a change is going to happen in the opposite direction from the one you have in mind bill because what oxford and cambridge are now just beginning to do as you well know is to engage in private fundraising in ways that they they have not done before they are learning from the american system and in many ways this is a good and necessary thing to raise private funding to make up for the fact that they can't subsist on the government support and their endowments now as they develop new techniques of fundraising they will i hope and expect preserve the integrity of the emissions process but the structure of it and the way it's conducted may gradually evolve in an american direction just as they are developing are creating development offices like american universities so maybe uh they will be developing admissions offices but you will you will lean against that tendency i i suppose if you if you see it happening so bill says there's no number at cambridge is there a number at harvard i don't i don't think so i mean not that i know of but on uh but there are legacy admits which means giving an advantage to children of alumni and the wall street journal reported some years ago of the practice at some ivy league universities of development admits which were students who were admitted on the basis of the prospect of a major gift from the parents so it's on the public record um that some um american top universities do have so-called development admits that's a nice term for it um okay uh phoenix saman has a question thank you um i'd like to ask how your talk which is very interesting maps onto um politics the economist if i'm not being too rude to give this away in 2003 the harvard economist who's heard the altremus of rare and special good which needs to be conserved was in fact kenneth harrow's nephew who went on to become a you know key advisor to the current president along with people like cast sunstein and i wonder if you look at the morality of this presidency versus republican presidencies um how how would you compare them and do you see uh sort of corrosive influence of this kind of thinking more on one side than the other i think that democrats and republicans in the united states um have partaken of the market faith i've described in its clearest and most explicit version the faith in markets as the primary instrument of the public could came in with uh margaret thatcher and ronald reagan they made it explicit that argument what striking is that even after they passed from the political scene and were replaced by center left successor governments this underlying assumption was never frontally challenged by their successors bill clinton tony blair gairhard schroeder in different ways moderated but consolidated the faith that markets and market mechanisms are the primary instruments for achieving the public good now do i agree with their policies more than i agree with the policies of reagan and thatcher yes of course but i do think that to speak of the u.s the democratic party in the years since the 1980s has yet to offer a serious challenge to that underlying faith and instead what they've done is to try to make it its workings more humane and to help those at the bottom but i think the great missing debate in not only american politics but i think in the politics of democratic societies around the world is the one that we really haven't had since the thatcher and reagan years and that is the question of what should be the role of money in markets in a good society neither democrats nor republicans have uh have offered or articulated a serious version of that question in public life and so to that extent i think across the political spectrum there is a shared responsibility for that emptiness in our public life do you think people like bill de blasio and elizabeth waran are raising those questions or continuing in the muting the consequences tradition no i think they are raising those questions maria matzucato has a question she's right there do we have a mic right here maria stand up so they can see you other gentlemen are pretending to be maria but we can tell the difference right so um as much as i loved everything you had to say um i feel like there's something inert ish about how you're talking about markets because i feel like what's missing is organizations so if markets are actually the outcomes of different types of organizations which are business organizations household organizations and government organizations you can imagine households which actually do or do not give unconditional love businesses which are or are not run by stakeholder versus shareholder type capitalism governments that are driven by big thinking the kind of mission oriented stuff that both bill and i talk about versus small government worried about just you know debt and austerity those kinds of outcomes from those different types of organizations market outcomes are very very different and i don't kind of hear that subtlety in how you talk about markets well it is true i would have to plead guilty i don't have a worked out view about alternative market or market like institutions that could address some of these difficulties what i'm trying to do is to identify certain features of the public philosophy that animates that animates the way we talk about politics and debate political alternatives and i'm trying to suggest that there is something missing and i'm trying to describe what's missing and what a reinvigorated public debate a more morally engaged public debate about markets might look like but i would readily admit and affirm that were we to have such a debate we would need to take up questions of institutions and organizations and social practices and the role of civil society in embedding markets all of that's hugely important i agree okay even rob who has an endless appetite for these conversations is signaling me to speed up so i'm going to take two more quick questions one right here next to rob hi so professor sandali you talk about how trade corrupts emotional goods and i wanted to raise the issue of the deepest social inequality and civilization which i think if you look around you might see which is gender inequality and feminist economists have asked for a long time how do we manage to increase the equality of the formal labor market in workplaces from central banks to universities and it seems the answer to that at least partly must be to increase the value of the informal labor market the labor done in the home in the home social reproduction emotional care emotional labor but it sounds like from what you're saying that that cannot be done through a market mechanism and if that is the case is are we fundamentally stuck then at the levels of gender inequality we have today a great question a great question i hope not i hope we're not stuck with the gender inequality that we have today the question you raise is excruciatingly difficult for just the reason you suggest because living in a society where rewards are so closely tied to money and pay gives a powerful um reason to consider according greater honor and respect to currently unpaid labor that goes on in the home no question about it because in many respects for better and for worse money is the coin of respect and recognition in our society but it's a dilemma for the other reason that you mentioned which is do we really want to solve the problem of respect and recognition for the unpaid labor that goes on in raising children and looking after households by extending the reach of commodification into family life yet further so it's a dilemma i don't have an easy answer to it but i think that being alive to that dilemma can enable us to work at it from both ends by which i mean trying to loosen the connection that we currently have between honor respect and recognition and money we should loosen that connection as a way of according greater respect in honor to unpaid contributions to family life in the social common good while at the same time trying to deal with the inequality of women that is tied to inequalities of income and of pay so it's not an easy resolution to the dilemma but it's to recognize that that is should be one of the central questions we are debating and trying to sort out i would say ideally from both directions isn't there actually a really easy solution make your husbands and your sons do their fair share well yeah but that's i mean it's hard to enforce but it's not intellectually right but that's part but but that's part and maybe that's one step toward the first strategy if the first strategy is to loosen the the overly tight fit now between respect on the one hand and what gets money what what earns money on the other that's the way of doing it that is essentially that no yeah yeah um okay i'm gonna give a dare turner the last question please lord turner my question is essentially do you think this is an argument that you and we are going to win because i entirely agree with your categorization of what's happened for instance in europe with with blair with schroeder etc although they've moderated this tendency to marketization they fundamentally embedded it in the uk for instance if you look at our approach to health care we are seeing a creep creeping marketization of health care and we're doing that seeing that despite the fact that it's quite clear that socialized health care is massively more efficient than private market health care even if we did stick to the most narrow definitions of economic success and we are seeing in the uk i think precisely this process whereby when you contractize a relationship you squeeze out intrinsic relationships so we have demanded of our doctors that they provide weekend cover and now those who used to provide it for free no longer provide it because they've learned that there's contract now that came from tony blair and so my question is are we just stuck on something which is you know unstoppable i there is there is a there is an inertia effect there is a self-reinforcing effect or there are there times when you think you're confident you're going to win this debate and we're going to turn it around in the other direction well i would i would distinguish between optimism and hope and hope needs that distinction i think to persist and prevail it's hard to be optimistic with given the momentum of things especially over the past 35 40 years for the reasons we've been discussing tonight and for the reasons that you've just mentioned drawing on the experience in britain and europe and one reason i think it's so difficult is not only because there is such power in wealth and in corporations in the banking industry and in wall street in the financial industry not just that not even mainly that the hold of markets and market thinking is not just the result of power relations it's that markets seem to spare us the need to engage in morally contentious public deliberation and debate and in pluralist societies we want it's almost as if we want with every five of our being to avoid those debates and taking on these questions does require a willingness and an ability to reason together in public in public about ultimately competing conceptions of the good life and everything in our public philosophy not just the power of big business and finance everything in our public life pulls us away from those debates so my hope that's why i'm not optimistic between the power and the reticence if we can call it those two forces but the hope is that people know there's something missing people in almost every democracy in the world there is frustration and dissatisfaction with political parties with the alternatives they're offering with politicians and with the existing emptiness of public discourse with the inability to debate big questions and big questions to do with values and i see this everywhere i go in the world especially with young people but not only young people a hunger and a yearning for a public life of larger meaning that engages with a morally more robust kind of public discourse than the kind to which we become accustomed so in that yearning and that hunger and that dissatisfaction with what we've got i think there is a lot of hope and that's what we can build on okay and i'm going to offer one final spin on that final thought when you said it's really hard to have this moral discourse in a pluralist society i thought that you might say in a pluralist and diverse society culturally ethnically religiously diverse 50 of the people in toronto aren't born in canada so this is a very diverse society and my not only hopeful but also optimistic concluding thought to professor sandel is surely having that moral debate about what it means to be not just a consumer but also a citizen is the way that you make a diverse society work and that actually shying away from it isn't how you have a functioning diverse society but actually engaging in it and saying we are citizens together whose citizenship involves moral choices that's how you make diversity work i agree i agree thank you