Markets and Morals: What Money Can't Buy

THE ASPEN INSTITUTE

ASPEN IDEAS FESTIVAL 2012

WHAT MONEY CAN'T BUY: THE MORAL LIMITS OF MARKETS

Doerr-Hosier, McNulty Room

Aspen, Colorado

Saturday, June 30, 2012

LIST OF PARTICIPANTS

MICHAEL J. SANDEL

Anne T. and Robert M. Bass Professor of Government 

at Harvard University, author of What Money Can't 

Buy: The Moral Limits of Markets.

*  *  *  *  *

P R O C E E D I N G S

(12:00 p.m.)

MR. GERSON:  I am Elliot Gerson from the Aspen Institute.  I am delighted to welcome all of you to what sadly will be the last luncheon for those of you in the first session and I hope you've enjoyed the festival up until now and we'll enjoy an afternoon in the Tent.

Michael Sandel really needs little introduction here, frankly anywhere on the planet.  He teaches political philosophy at Harvard.  Of course he's been described in the media as perhaps the most prominent college professor in America in any field, the most relevant living philosopher, a rock star moralist, and even the most famous teacher of philosophy in the world.

His writings have been translated into 21 languages and I'm sure still counting.  His legendary course justice has seen more students than any course in the history of Harvard probably by tens of thousands and is now the first Harvard course that's made freely available online and on television.  It's been viewed literally by millions of people around the world including China where it's actually almost impossible to exaggerate the fame that Michael has achieved.

As a matter of fact the China Newsweek called him the most influential foreign figure of the year.  And when I was in China in November actually with some of the extraordinary Chinese artists you've all been getting to know over the last few days, a number of occasions when people realized I had an association with Aspen, I think probably because of some YouTube or other videos that have Michael speaking here, they'd asked me if I happen to know Professor Sandel and when I mentioned that I not only know him but I was actually in graduate school with him about 40 years ago, they actually perk up and think that I might have something important to say, but they've usually been disappointed after that.

His new book, What Money Can't Buy: the Moral Limits of Markets is going to be a blockbuster just as Justice and his other books have been.  By the way we will have some copies outside here for -- I think they'll probably go very quickly, Michael.  The stack wasn't quite high enough I think, but he will be signing those for you.  It's been called a brilliant indispensable book on the relationship between morality and economics and one of the most important exercises in public philosophy in many years and then again those of you who become fans of Michael in his many appearances here at Aspen won't be surprised with some of the themes of that book because on this stage and others here, he has presented a powerful critique to what he has called market fundamentalism.

So you're going to be in for I think a wonderful experience over the next -- over the rest of this hour.  This book has generated the kind of rock star reaction around the world as his previous ones have.  In London there were actually 2,000 people in St. Paul's Cathedral who listened as he was on his book tour.  It's hard to imagine such a thing, but frankly it's nothing compared to the reaction he got in Seoul, Korea where 14,000 people packed an outdoors stadium to hear him speak.

Now, fortunately he loves Aspen because there are probably only 250 of you here.  So usually he doesn't speak to such a small group, but he knows it's a very special group.  And just one last note, I think it really offers tremendous hope to me and I'm sure to many others that Michael and what he writes so passionately about liberty, about freedom, about political equality has become such a seminal figure in China and I think we'll see the results of that in the future, at least I hope we do.  With no further ado, welcome Michael Sandel.

MR. SANDEL:  Well, thank you Elliot for that introduction which I can't now possibly live up to.  So I'll just begin by saying a little bit about the question at the heart of the new book that Elliot described.  The question is this, what should be the role of money in markets in our society?  Today there are fewer and fewer things that money can't buy.

If you are ever in -- find yourself in Santa Barbara, California sentenced to a jail term, just in case that happens to you and you don't like the standard accommodations, you can now buy -- if you have the money, you can buy a prison cell upgrade.  You didn't know that?

(Laughter)

MR. SANDEL:  For how much do you suppose?  What would you guess?  Per night, it's on a nightly basis, $82 a night.  Take another example, suppose you want to contribute to alleviating a tragic social ill, the birth every year of thousands of babies to drug-addicted women, there is a charity you can contribute to that tries to solve this problem by offering any drug-addicted woman $300 to be sterilized, a cash incentive, the use of a market mechanism; or suppose you have a new drug that you would like to market you can now market directly to consumers, this is a relatively new development that we now take it for granted.

If -- anyone who has watched the nightly evening news or a sporting event knows what I'm talking about.  If you watch those programs, you could be forgiven for thinking that the greatest health crisis in the world is not malaria or river blindness or sleeping sickness, but a rampant epidemic of erectile dysfunction, the use of markets.

Over the past three decades, we have witnessed a quiet revolution, almost without noticing.  We have drifted from having a market economy to becoming a market society.  The difference is this.  A market economy is a tool, a valuable and effective tool for organizing productive activity and has brought prosperity and affluence to countries around the world.  But a market society is different.  It's a place where almost everything is up for sale.  It's a way of life where market values begin to seep into almost every sphere of life.

Take books, books have always been commodities in essence.  You can't walk out of the book store with a book without paying for it.  It's a market good up to a point, but recently that's been changing.  Consider the practice of product placement.  It's familiar in movies and in television, but not in books, at least not until recently.

A few years ago there was a British novelist Fay Weldon, have you heard of her?  She was commissioned by a jewelry company, Bulgari Jewelry to write a novel with at least a dozen mentions of Bulgari Jewelry.  She exceeded the required number of product mentions and referred in the book to Bulgari jewelry 34 times.

Some critics complained about the clunkiness of the product-laden prose that resulted.  I'll give you an example from the book.  "A Bulgari necklace in the hand is worth two in the bush, said Doris."

(Laughter)

MR. SANDEL:  Or here is another one, "They snuggled together happily for a bit, all passion spent, and she met him at Bulgari that lunchtime."  Luckily product placement doesn't seem -- doesn't seem to have caught on in books, but I suspect that the growth of digital publishing and electronic books will draw the activity of reading into closer proximity to commercial advertising and marketing.  Just last year Amazon began issuing -- offering two different versions of the kindle.  One of them is the standard version, but for $40 less you could get the same kindle that differed only in the following respect, on the screensaver and on the home page you would be bombarded by ads; $40 less though you could save.

Now, sometimes introducing money and market values, buying and selling, can change the character of the good being bought and sold and I'd like to put to you one example of a controversial use of a market mechanism, a cash incentives -- cash incentive and see what people think.  We have runners with microphones to get your views.  In -- the use of cash incentives over the last three decades has become a familiar recourse by those trying to influence social policy for the better.  Here's one example.

In cities across the country, in major school districts, they are trying to motivate students to learn, to work hard, to achieve academically through the use of cash incentives.  They're offering money for good grades, high scores on standardized tests.  They've tried this in New York City, $50 for an A, $40 for a B.  In Washington D.C., in Chicago, in Dallas they offer third graders $2 for each book they read.  The goal is clear, to try to motivate kids especially from disadvantaged backgrounds to learn, to read, to work hard in school.  Others are worried about it.

So let me put this question to the group here and see what people think.  Let's start with a quick poll.  How many of you imagine yourself as the superintendent of a school system that had a group of low-achieving kids, how many think it might be worth a trial, the cash incentives for grades or reading books, and how many would object?  How many would reject that idea out of hand?

Let's see first those who think it might be worth a try, raise your hand.  And how many would object?  That's a pretty good division of the room.  Maybe a slight majority object; let's start with those who object and then we'll hear from those who might favor the policy.  On what grounds would you reject this idea?  Why do you oppose it?  Yes.  Stand up and we'll get you a microphone.

MS. ANTICK:  I actually do this in a school I was in and there's no trophy value in cash.

MR. SANDEL:  No trophy value?

MS. ANTICK:  No trophy value.

MR. SANDEL:  What does that mean exactly, trophy value?

MS. ANTICK:  I did it in a school where children were learning -- not children, actually older, were learning hairdressing and if they did certain things a certain time or did a paper on a certain thing, they want something.  We did it -- called it the glass-bead game.  And they got to wear a glass bead.  And kids wanted to pile them up, kids, 18-year-olds, they wanted to pile them up.  $2 is gone.  It's a bag of potato chips.  When it's done, none of your friends know you got it.  If you're wearing that, everybody knows you got it, it's like stripes in the Army.

MR. SANDEL:  So you would use rewards, but the rewards would involve recognition and honor rather than money?  And -- all right, and tell us your name.

SPEAKER:  Ronnie Antick (phonetic).

MR. SANDEL:  Ronnie?  Okay.  Let's see is there anyone else who like Ronnie disagrees with cash incentives for good grades or reading books, and who has another reason, a different reason for objecting?  Who else?

SPEAKER:  Go ahead.

MS. ROUARCK:  I would object to it because I think that it communicates that the only things that are worth doing are those that earn money.

MR. SANDEL:  And why -- but suppose it works?

MS. ROUARCK:  There must be some things that money can't buy.  And so -- 

(Laughter)

MR. SANDEL:  That's what we're trying to figure out here.

MS. ROUARCK:  And so -- so to the extent that you devalue them, maybe eventually it would create problems if nobody wanted to do them.  That's not every articulate, but -- 

MR. SANDEL:  But why -- no, no, but -- no, I hear what you're saying.  And what's your name?

MS. ROUARCK:  Jenny Rouarck (phonetic).

MR. SANDEL:  Jenny, and why would paying kids for good grades or to read books devalue the activity?

MS. ROUARCK:  Because there's something that you gain from reading a book that is maybe not measurable.  Maybe reading one book is worth -- if you wanted to put it in monetary terms $50,000, reading another book is worth $2, reading another book, actually you ought to pay to have read it, so.

(Laughter)

MR. SANDEL:  You think they should pay extra for Tolstoy for example?

(Laughter)

MR. SANDEL:  All right, let's hear from -- let's hear from someone who thinks it might be worth trying, someone who would defend the practice.  On what grounds would you defend it?  What would be your argument and how would you reply to the arguments that you've heard.  Yes.

MR. FAULK:  My name is Jean Faulk (phonetic).  I would defend the practice because I feel that it might provide an incentive for somebody who has never read a book.

MR. SANDEL:  Yeah.

MR. FAULK:  -- get them involved and then hopefully they wouldn't have to get paid for reading more.

MR. SANDEL:  So you would kind of kick-start the habit?

MR. FAULK:  Correct.

MR. SANDEL:  You'd pay $2 for the first book, the second book also?

MR. FAULK:  Well, I was thinking of $30.

MR. SANDEL:  You'd go up to $30?

MR. FAULK:  Yeah, to get them really motivated -- 

MR. SANDEL:  At $2 a piece?

MR. FAULK:  $30.

MR. SANDEL:  Oh, $30 per book.

MR. FAULK:  Right.

MR. SANDEL:  So you pay more.

MR. FAULK:  For the first book.

MR. SANDEL:  These are third graders, Jean.

(Laughter)

MR. FAULK:  Then they'll learn the value of money.

(Laughter)

MR. SANDEL:  They'll learn the value of money, but that's what Jenny was worried about.  Who else?  Go ahead.

MS. BOWDON:  Hi, my name is Jen Bowdon (phonetic) and I'm an alpha New York City mom of a 8-year-old in grade three.  And nothing that I could do could get him to take his 1 hour mandarin class, no amount of why this would be good for his future worked.

MR. SANDEL:  The mandarin class?

MS. BOWDON:  Yes, 1 hour of mandarin a day.

MR. SANDEL:  That ought to be more than $2.

(Laughter)

MS. BOWDON:  Well, I'm also a WASP -- I'm also a WASP, so I finally was able to convince him for $1 a day that he -- and that worked quite well.  So for $1 a day, he takes his mandarin quite happily.  And that is really the -- so the only problem with this philosophy is that every time I want him to do anything, for instance, honey, I really want to film this.  He is always going to say, well, mommy, for $3 I'll let you film me.

(Laughter)

MR. SANDEL:  Aha.

MS. BOWDON:  So now I have a constant -- a constant barrage of him learning how to be a very good negotiator.

MR. SANDEL:  I see.  So even if you want to take a photo of him for example, he charges?

MS. BOWDON:  Yes, exactly.

(Laughter)

MR. SANDEL:  Wow.  Yes.

CHRIS:  I think that's the problem is that just of motivating kids just they think that the only reason why they're going to do this for the motivation for money as opposed to the joy.  And there must be another way to engage them whether it be with good teachers, good parenting or whatever where they -- you do the -- whatever you want them to do, the joy of learning or the joy of reading, but to do it just to get money is -- what's going to happen is exactly what she just described -- 

MR. SANDEL:  Right.

CHRIS:  -- that they will do nothing unless they get paid for it.

MR. SANDEL:  So you're worried -- and what's your name?

CHRIS:  I am worried -- Chris.  Chris.

MR. SANDEL:  Chris is worried that paying kids -- and this has come up in a few other comments.  Paying kids to read books or to take mandarin might teach them that these are -- that learning is something to be done for a pay, and that might crowd out the intrinsic love of learning or reading.  Yes, Chris.

CHRIS:  Yes.

MR. SANDEL:  Laurie.

MS. TESH:  (Off mic)

MR. SANDEL:  Use your microphone.

MS. TESH:  Hi, I'm Laurie Tesh (phonetic), New York.  I'm not sure if I'm going to pay for it or not, but haven't parents always done this and called it allowance?  I mean isn't it -- 

MR. SANDEL:  An allowance.

MS. TESH:  An allowance.  Is it radically different -- is an allowance to kind of support kids -- or not support, but reward them for doing something that you want them to do?  So I don't see it as -- I see it as different, but not radically different.

MR. SANDEL:  And so if you were the superintendent of the schools, underachieving kids you'd give it a try?

MS. TESH:  Possibly.  That's not a great answer, but possibly.

MR. SANDEL:  Actually, the practice of parents paying kids and it's come up with the mandarin and now paying for film -- to film them or photograph them, allowances.  It reminds of a friend of mine pays his young kids $1 for each thank you note they write.  I've received some of these thank you notes.

(Laughter)

MR. SANDEL:  And I can tell by reading them that they were written under a certain duress.  My wife and I look askance at this practice.  We wonder how these kids will turn out.  Now, it could be that by writing thank you notes for pay they get in the habit of writing thank you notes.  That was Jean's idea, so that when they grow up and no one's paying them they will have developed the habit and maybe gotten on to the real reason for writing thank you notes, namely gratitude, in which case all will be well.

Or it could turn out that they will learn the lesson that Chris and Jenny and others worry about that they will learn the lesson that thank you notes are chores, a form of piecework to be written for money and if that's what they learn when the money stops so will the thank you notes.  They may find it difficult to learn the virtue of gratitude and their moral education will have been corrupted.

It's hard to know, it's hard to know in advance, but before deciding where market mechanisms actually can promote the good that we're aiming at in this case learning or expressing gratitude, we have to think through whether precisely the issue that a number of you have raised whether the money, the financial transaction, the cash incentive may crowd out other attitudes, and values, and norms like the love of learning or gratitude as such rather than reinforce.  It arises in big questions in public policy.

In Switzerland, not long ago they were trying to decide where to locate nuclear waste sites; no community wants one in its backyard.  They had identified as a likely place a small town in the mountains of Switzerland.  But before the parliament could implement the policy the local community had to agree.  They did a survey of the residents of this small Swiss town and they asked them if the parliament identifies this place as the safest location for the nuclear waste site, will you vote to approve it?

Fifty-one percent said yes.  Then they asked a follow up question.  They sweetened the deal.  They said, suppose parliament chooses your town and offers to compensate every resident of the town, with a yearly payment up to EUR8,000 for incurring the risk, then would you approve?  Now, how many do you think were willing to accept?

Seventy-five, eighty?  Fewer?  The number dropped in half, from 51 percent to 25 percent when the money was offered.  Now, from the standpoint of standard economic reasoning this is a paradox.  Economic reasoning teaches that if you pay people to do something, if you offer a financial incentive you will get more people willing to do it, not fewer.  So what happened?  Who hasn't -- who can explain what do you think was going on there?  Go ahead.  Stand up and tell us.

SANDRA:  Hi, my name is Sandra, I'm from Romania.  I think what happened is that they realized first of all, the first time they were doing it for patriotic reasons and the second time they realized that there is a risk involved.  And the money exemplify the risks so therefore they said no to taking the risk because no amount of money can compensate especially not that amount --

MR. SANDEL:  Right.

SANDRA: -- can compensate taking the risk.  So it's a -- it's still a market mechanism, but with reverse psychology I think.

MR. SANDEL:  Well, it is possible, it is possible and this is one good hypothesis that the offer of the money, conveyed a sense to the people that this must really be risky if they're willing to pay us every year it must be riskier than we thought.  That could explain, but they tested for this hypothesis and they found when they asked for the residents to estimate the risk, it was the same before the offer as after.  And so there must be some other explanation, something else at work.  Anybody?  What would you say?

SPEAKER:  That they calculated if they turned down they'd be offered more money the second time.

MR. SANDEL:  Oh, that they have -- if they turned it down they might get even more.

(Laughter)

MR. SANDEL:  So that's hyper economic rationality at work.  What do you say?

EVE:  I think without money they felt they were doing something for their society.  It added meaning to their life.  I think once they were paid it took that meaning away.

MR. SANDEL:  Right.  Yeah and that I think is what was going on.  What's your name?

EVE:  Eve.

MR. SANDEL:  Eve.  So in fact, they asked the people afterwards, those who changed their mind why now with the money did you change your mind?  Their answer, we didn't want to be bribed.  So before, as Eve suggests, the majority, 51 percent were willing to undertake this risk, make this sacrifice for the sake of the common good.  The country needed the energy, they had to put the waste somewhere, they were willing to take the risk for patriotic reasons or for -- out of civic virtue.

But once money was offered now it was a financial transaction and they said, we aren't going to be bought, we're not going to incur a risk for the sake of money.  And so what happened in this Swiss town was that the financial offer, marketizing the good crowded out the motive of civic virtue, of patriotism, of concern for the common good that had led the majority in the first case to be willing to do it.

Some of you may have heard of a similar story involving day care centers in Israel.  Like day care centers everywhere they had a problem with parents arriving late to pick up their children.  With the help of some economists they decide a market-based solution.  They establish a fine for late arriving parents.  What do you suppose happened?

SPEAKER:  More came late.

MR. SANDEL:  More parents came late.  Now here again -- here again standard economic reasoning.  For a standard economic reasoning this is a paradox.  You charge, you increase the price of something, people consume less of it, not more.  Here it was the opposite, why?  Well, for reasons inline with what we've been discussing.

Before when parents came late they felt guilty, they were imposing a burden on the teachers.  Now that they could make a financial payment they felt it was a fee for a service.  They were simply hiring, like hiring a babysitter, hiring someone to look after their kids.

So here's another example in which introducing a monetary incentive doesn't leave the practice intact.  It actually drives out or crowds out attitudes, values, and norms, in this case a sense of obligation to show up on time that had governed before.

An interesting postscript to this story is when they saw what had happened they removed the fine, tried to go back to the old way, but people still came late at the higher rate which suggests that once certain sense of obligation or a civic virtue is eroded, it's not so easy quickly to reinstate.  What these stories illustrate is that standard economic reasoning misses something important.

According to standard economic reasoning markets buying and selling are good.  Do not change the quality or the character of the good and this may be true enough with material goods, cars, toasters, flat screen televisions.  If you sell me a flat screen television or give me one as a gift, the good will be the same.  The flat screen television will work just as well either way, but the same may not be true when we're talking about nonmaterial goods such as teaching and learning, or writing thank you notes, or appealing to patriotism and civic virtue or a sense of obligation.

In those cases, introducing money buying and selling does not leave the good the same.  It may change its meaning which suggests that contrary to the standard economic assumptions markets are not inert.  Sometimes they touch and taint and change, even transform the character of the goods being bought and sold.  Now, if this is true then when we as a society are trying to decide where markets belong, where they serve the public good, and where they don't belong, we need to consider more than just economic efficiency alone.

We need to ask whether introducing market mechanisms may crowd out attitudes, values, and norms worth caring about and if so whether that represents a loss that should outweigh whatever value will get from the market mechanism.  And the answer may vary from case to case, good to good, it maybe one thing in education, another thing in health, another thing when it comes to military service.

But this suggests that to figure out the proper role of money in markets we have to debate as a society the meaning of the goods and social practices that we care about.  And we're not very good at having these debates because debates such as this involve big moral questions.  What is the proper way of valuing teaching and learning education, health, military service?

In Iraq and Afghanistan, there were more paid military contractors on the ground than there were U.S. military troops.  Now, this was not because we had a public debate about whether we wanted to outsource work to private companies.  It just happened.  And it happened in the absence of an explicit deliberate debate about the role of money and markets.

We shy away from those debates because we shrink from introducing into public discourse what we know will be controversial moral arguments.  But the result of that tendency to shrink from morally -- a morally-engaged public discourse is not to leave things neutral, it's to let markets decide these questions for us.  And that's what we've been doing for the past 3 decades.

Now, I've spoken about the risk of crowding out important values, attitudes, goods, about the danger that sometimes markets can corrupt, or degrade, or erode important goods and social practices.  One of the big social practices, one of the tools that the marketization of everything has taken on public life in the last three decades has to do with the commonality on which democracy depends.

Let me give a small example.  When I was a young kid, I grew up in Minneapolis, Minnesota and I was a fan, a baseball fan.  I followed the Minnesota Twins.  And in the mid '60s when I was young and would go to see the Twins play, the box seats were more expensive than the Bleacher seats that's always been true, but you know what the different was between them?  Anybody have a guess?

SPEAKER:  (Off mic)

MR. SANDEL:  Well, it was $350 for a box seat in those days and $1 for a Bleacher seat.  So it was $250.  The result was -- the effect was that when you went to a baseball game, it was a class-mixing experience.  It was a place where CEOs and male room clerks sat side by side.  Where everyone had to eat the same soggy hotdogs and drink the same stale beer, where everyone rooted for the home team, was in despair when they lost.  And when it rained everyone got wet.

And then -- this is in the mid-1960s.  Then beginning in the '80s, and through the '90s, and early 2000s all of that changed with the advent of skyboxes.  Where now going to football game or a baseball game or to a basketball arena is not quite the class-mixing experience it once was because those who can afford it or those who are there as corporate guests can sit in the air-conditioned comfort high above the field behind plexiglass and it's no longer true that everyone waits in the same long lines for the restroom and it's no longer true that everyone gets wet when it rains.

Now, there is nothing intrinsically morally objectionable about skyboxes.  I can't say that they're the most grievous moral challenge facing the republic.  I've watched some games from skyboxes and it's an enjoyable experience.  But it's a metaphor for something -- for a tendency that's been playing itself out in American life as a whole.  There are fewer and one of the effects of marketizing everything is that there are fewer and fewer occasions and places where people from different walks of life encounter one another.  We look up after roughly this 3-decade period and we find that we live, and work, and shop, and play in different places.  We send our children to different schools and when our country goes to war for many of us we fight those wars with other people's children.

This isn't good for democracy nor I think is it even a satisfying way to live for those of us who sometimes inhabit the skyboxes.  Democracy does not require perfect equality, but it does require that citizens share in a common life.

What matters is that men and women from different social backgrounds, from different walks of life encounter one another, bump up against one another in the ordinary course of life because this is how we learn to negotiate our differences.  And this is how we come to care for the common good.

And so the question of markets in the end is not mainly a question about economics, it's a question about how we want to live together?  Do we want a society where everything is up for sale?  Or are there certain moral and civic goods that markets do not honor and money cannot buy?  Thank you very much.

(Applause)

MR. SANDEL:  We have time for some questions.  Okay, so the floor is open on this or any other topic.  Yes.

SPEAKER:  Hi, my name is Charlene (phonetic).  I actually took your class in 1985 at London.  I have a question about the impact of the privatization of the media and the fact that we don't have a common experience on television -- the fact that we don't have a common media experience anymore, the lack of all watching one station -- 

MR. SANDEL:  Right.

SPEAKER:  Does that have an impact on us falling apart -- (off mic).

MR. SANDEL:  Yes, the fact that more and more people get their news when they get it at all, not from Walter Cronkite on the nightly Evening News, but from a news channel with an opinion that they already share or agree with.  That's a further force that insulates us from encountering challenging and disparate voices.  And so that I think is reinforcing this tendency.

And in fact, the demise of a widely viewed evening newscast has partly to do with technology, the proliferation of cable channels, but not only that, it also has to do with the transformation of network news.  News used to be an ornament for the networks, a prestige item, and not regarded as a profit center, but in the economics of the media today that's changed and they're very closely attuned to rating.  So yes, I think that is a factor.  Yes.

SPEAKER:  I was trying to apply what you've been saying to the health care debate in the long run that (off mic) the other day.  And it would seem to me that the -- making the individual mandates (off mic) a matter of penalty -- 

MR. SANDEL:  Right.

SPEAKER:  -- would be -- in fact it is ironically better than the conservatives as now declared the tax because -- 

MR. SANDEL:  Right.

SPEAKER:  -- do you see a tax change effect as sort of a moral good (off mic) with the lowering of an individual mandate?  Is -- (off mic)?

MR. SANDEL:  Well, it's -- for those who couldn't hear it, a very interesting question about how this applies to the whole debate about whether the mandate in the Health Care Act is a -- whether it's a penalty for breaking the law, not getting health insurance, or whether it's a tax.  And that issue is relevant to this general set of themes.  Sometimes we confuse fines and fees and -- take a simple example.

Suppose, there is a parking space, a designated space for the disabled.  There's a fine, a big fine if you park there and you don't -- you're just using it as a convenience.  Suppose there were a busy contractor who needed to park near his building site, and let's suppose he was willing to pay the $200 fine to park in the disabled parking place, he regarded it as a cost of doing business, an expensive parking fee.

How would we regard that?  Well, we would probably still consider that he'd done something wrong, wouldn't we?  Even if he was saying, no, I'm willing to pay the $200 today and tomorrow, I just -- as long as I need to park there.  And so he would be treating the $200 as a fee to park where in fact we would commonly regard that as a fine which carries moral opprobrium.  We want to say, no, that it's not right just to disregard the needs of the disabled and to park there even if you're willing to pay the fine.

So take that to the health care debate.  At the heart of the issue is the constitutional dispute over whether this can fairly be described as a tax, you know, for political reasons the administration didn't want to call it a tax.  It's a tax only if you think this is really meant to give people a neutral choice.  Do you want to buy your own health insurance or would you rather pay a certain amount and discharge your obligation that way?

Or is it a penalty?  Are we saying those of you who free-ride on the system by not buying health insurance are doing something that's at odds with the common good, as this law defines it.  That's the issue.  And it's the same issue that has arisen in these other cases.  If it's a penalty, then even if I'm willing to pay it, it carries a certain opprobrium, whereas if it's just a tax then it's a kind of a fee.  And so in the background of the debate, I think you're right to notice this very issue.  What is the moral meaning of the payment?  Yes.

MR. CUSACK:  Thanks.  Jay Cusack (phonetic).  I was wondering if you'd thought about sort of the implications of things describing for relations between nations.  And I was thinking of the example of Pakistan where we've promised 1.5 billion per year in aid and that sort of backfired, both in terms of how it's perceived by the people of Pakistan and in terms of getting the desired reactions from the government and a similar thing playing out right now in Egypt.  So any thoughts on money in our attempt to use it as a tool to influence the behavior of nations?

MR. SANDEL:  Well, as part of realpolitik money has always been used along with arms and military might to try to influence enemies, allies, and those who are somewhere in between.  But I do think it -- we have always to be alive to the possibility that just as the use of money and cash incentives in domestic politics and in social life can carry certain meanings and create certain habits, certain expectations and attitudes, the same can be true with foreign aid.

And some would argue that the examples you've given are illustrations of this.  So I think we do need to be alive to it.  It's to be alive to the expressive meaning of money which is the aspect of buying and selling and of cash incentives often overlooked by economists.  Yes.

MR. STRAUB:  I'm Richard Straub, Peter Drucker Society Europe.  Just one point on the question of markets.  I think that there's also a question about what is really a market because some of the examples I would at least have some doubts, if these are markets in the sense how they were defined originally transparent markets, the question of participation in these markets et cetera.

And from the European perspective, I would just like to make one point.  The danger is currently that markets are seen negatively.  There's a trend to say we need to get away from market forces.  We need to regulate more than we should probably regulate.  And we need to artificially distort markets in many areas.  And I just wonder how this discussion can be combined with your valid points, but not degrading the image of markets which are an essential part of our democracy.

MR. SANDEL:  Right.  My argument is not against markets as such, it's an argument for keeping markets in their place.  There's a big difference between the two.  Historically, market activity took place in a certain part of the city, in a certain part of the town.  In the marketplace, it was a physical place and market relations were located there.

And over centuries what's happened is the marketplace has become every place.  And that has -- that together with a redefinition of economics as being about human behavior in general, not just about stocks, and bonds, and foreign trade, and inflation, and unemployment, but a theory of human behavior in general.

This has also been in the last 30 years roughly, 30, 40 years, the marketplace has come to be every place.  So what I'm -- my argument is not against market mechanisms where they serve the public good, but that has to be the test.  It's -- what I'm worried about is our tendency to forget that markets are tools, tools to be used according to purposes that we ourselves in democratic societies have to deliberate and argue about.

And the alternative to markets is sometimes government regulation, but not always.  If you take some of the examples we've considered school districts have to choose whether or not to accept the cash incentive scheme.  Now, is that -- it's a market mechanism, the cash incentive, but it's a straightforward choice that the school district needs to make.  So what I'm suggesting is that we should make these choices with our eyes open, and our eyes open to the civic and moral consequences, the effects on attitudes and norms, not only with an eye to economic efficiency.  Yes.

SPEAKER:  Thank you.  Both sides -- I'm captivated by the scale of the audiences you had in -- was it China and Korea?  Could you kind of share a little bit about?  Is your message the same, were you talking about the same things?  Did you do any of the same thought experiments there in terms of what people were thinking and what did you learn?

MR. SANDEL:  Well, in the recent trips that Elliot was talking about, it was about this book and the themes we've been discussing here.  And I did notice that in Europe and in Asia there is a great eagerness to debate questions about the moral limits of markets.  Even in China which is a society that having adopted market reforms has enjoyed tremendous economic growth, even the government is keenly aware of the costs that they have paid for this very rapid growth, cost in rising inequality and also in the erosion of families and communities and the environment.  They're aware of this and they want to think about it, certainly students are keenly aware, but not only students.

So part of it is, I think there is -- I think if you back up and look at the terms of public discourse, not only in our society, but in many democratic societies people are frustrated with politics they see it as impoverished.  They don't think parties are addressing the questions that matter, and so part of the response I think is a hunger for a better kind of politics, one that addresses big questions including questions of values that often go unaddressed by the mainstream parties and this is true almost everywhere.  I think there's a -- so I think that's part of it.

The other is that in some of the Asian countries I think there's an excitement at the whole idea of engaging in these kinds of discussions about values, about philosophy, about justice as well as markets in public and arguing, but respectfully arguing with one another and a method of education that engages argument and dialogue rather than encourages students to sit and just write down whatever the professor says.  So I think that's also part of it.

In the Seoul event that Elliot was describing we actually did have audience participation even with the 14,000.  We had 20 microphones, a screen where the speakers could be seen and they replied to one another.  And we had -- like as we had here.

So I think it's both of those things.  If I could just and I know we're running out of time, if I could just say a final word bringing it back to the United States and our public discourse.  I think it's no accident that two things have been happening over the past 30 years.  One is what we've discussed today.

The tendency to rely more and more on market mechanisms without any public debate and something else that's been happening which is the hollowing out of our public discourse in general.  What passes for political discourse these days consists mainly of shouting matches on talk radio and cable television, and ideological food fights in Congress.  And people are frustrated by this.

I think one of the reasons for this is that we -- is our reluctance to engage in serious public debate about big and controversial moral questions.  But the result of that reluctance is that we have a public discourse that's either managerial and technocratic, which inspires no one, or when passion enters it's -- they're shouting matches.

And people want a better kind of politics.  People want to elevate the terms of our public discourse.  People want to address big things in public.  So I think that the hollowing out of our public discourse and the market triumphalist faith that has gone unexamined even after the financial crisis have a common solution.

It's not an easy solution, but it's a politics, a new politics of the common good that admits, that welcomes into public debate moral engagement on big tough controversial questions not because we will all agree.  We won't, but because it may teach us to listen and learn a little bit better.  And it will also lift our sights from the rancor that afflicts our politics to what I think is maybe a more strenuous kind of citizenship, but also a more satisfying democratic public life.  Thank you all very much.

(Applause)

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