Satz on markets

by Russ Roberts on August 8, 2011

in Markets in Everything, Podcast

This week’s EconTalk is Stanford professor of philosophy Debra Satz talking about why she finds some markets noxious and what ought to be done about it. I take a different approach. It’s a civilized conversation between two people who look at the world very differently.

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{ 68 comments }

Daniel Kuehn August 8, 2011 at 5:14 pm

I was shocked to agree with you and her completely on efficiency and externalities (at the 15 min. mark at least – perhaps you say other things later).

Tom August 8, 2011 at 5:41 pm

She makes the comment that externality is too broad a term and one needs to focus on defining “harm”. Her example is child labor and the harm is the decline in income for those families that choose not to have their children work via the change in the price of adult labor (~26 min in). The same can be said of allowing women to enter the labor market. What about those families that want to have a full-time parent at home raising their children? What about the well documented decline in male labor force attachment as females have entered the labor force?

I think there is something much more odious about child labor laws than the change in relative labor supply. Using her externality argument to force women to stay at home would be indefensible. I’m surprised you didn’t call her on that, so perhaps I grossly misinterpreted her comment.

Anotherphil August 10, 2011 at 8:37 am

Its interesting. We have laws to prevent children from being sent to work by the their parents because its “noxious” but its an idée fixe among the same left that its ok for parents (ok, the female one) to summarily execute the kid.

Miles Stevenson August 8, 2011 at 5:42 pm

I really enjoyed this one. I think my primary complaint about the majority of her arguments, is her idea that we should keep trying “other” solutions instead of markets. Basically, just because the current government solution to a problem isn’t ideal, we don’t want to resort to nasty markets, so we need to keep “evaluating” other solutions until we find the one that works better, without having to resort to markets. She talks about this when giving the example of selling human body parts, insisting that while our current system isn’t perfect, the best bet is to find that “better option” instead of relying on markets.

But there aren’t a finite number of possible solutions to a problem. There are “n” possible solutions. All of which reside at the boundary of human innovation and ingenuity. How are we to know when we have tried all the possible solutions there could be? How are we to know that there isn’t *always* a “better” solution than one we are currently relying on? And isn’t it markets that gives us this innovation in the first place? She keeps saying we need to find a “better way”, but that is precisely what markets are good for, not top-down government control.

Miles Stevenson August 8, 2011 at 5:43 pm

Human body parts = organs. I made that sound WAY more morbid than necessary.

Anotherphil August 10, 2011 at 8:38 am

A rose by any other name….

Justin P August 9, 2011 at 11:36 am

I had the very same complaint. To her it seems like markets are the absolute last resort. Which essentially means that freedom of choice is the last resort as well. I’m sure she wouldn’t want it said like that, but that’s what it is.
Markets = freedom; State = coercion, plain and simple

Craig S August 9, 2011 at 4:20 pm

I find the idea of opting people in to be noxious. There would clearly be a level of social pressure to not opt out, even if you wanted to. I’m sure that’s what the Cass Sustien’s of the world are counting on.

Fearsome Tycoon August 9, 2011 at 9:22 pm

That’s what it boils down to. She finds the very idea of choice odious, because then the differences in people become apparent. Only if we all live under a regime of coercion can we be homgenized.

Ken August 9, 2011 at 9:42 pm

How much do you want for one of your kidneys? I plan on making pie with it and feeding it to my Irish Wolfhound. Steak and Kidney pie makes him extra horny in case you were wondering. You don’t want to be around him when he is in that randy state. You can have a taste of your own kidney if you like. I’m not selfish.

http://en.wikipedia.org/wiki/Steak_and_kidney_pie

Justin P August 10, 2011 at 9:30 am

What the hell are you talking about?

Keith August 10, 2011 at 10:18 am

Like most people that dislike market-based solutions to problems, he’s trying to paint the worst, most insane case scenario in order to discredit the concept of an organ market.

The problem with this is: it’s not likely to happen; and even if it was, people involved in the market would take action to minimize and eliminate issues like this.

Ken August 10, 2011 at 11:43 pm

Sorry, there is nothing “plain and simple” about it. Grow up!

Gigantopithecus Erectus August 11, 2011 at 9:35 pm

Ken, no it is plain and simple.

Are you aware of any single government program or operation that isn’t funded or enforced by coercion?

If you can name one, I’m all ears.

MWG August 8, 2011 at 6:01 pm

Looking forward to this one.

rawr August 8, 2011 at 6:06 pm

I find the notions of banning child labor and organ markets noxious. What weight have my aesthetic preferences?

Ken August 9, 2011 at 9:57 pm

Kids should be in a school setting, so they can get an education. They can do errands for their hardworking parents such as doing the laundry, and helping out generally. I don’t see kids with paper routes any more; a truck drives by early in the morning and flings the paper out like a fast ball. Someone could get hurt.

Invisible Backhand August 8, 2011 at 6:14 pm

Am I the only one noticing the biggest economic story since September 2008 is going on right now and Russ and Don are missing it?

I’m following Krugman’s blog, getting two or three important updates a day.

http://krugman.blogs.nytimes.com/

Is anyone aware of a blog where I can get updates on the freshwater analysis in something like real time?

Against the grain August 8, 2011 at 8:49 pm

Scott Sumner at the Money Illusion had an one update. He is on vacation this week but would guess he will have more. See the cafe hayek blogroll for link.

Invisible Backhand August 8, 2011 at 9:31 pm

Thanks. Mankiw ain’t cutting it.

michael August 9, 2011 at 10:02 am

Seriously. I read Krugman often because he blogs often, and in depth. All Mankiw does is send out a link every week or so.

Doc Merlin August 11, 2011 at 1:53 pm

Mankiw isn’t freshwater, he’s a neo-Keynesian. Also, zero hedge, and others have been on this before Krugman even noticed something might happen. Heck even Russ (who tends to be less news-y and more in depth) talked about the likelihood of a double dip months ago.

John Papola August 8, 2011 at 9:07 pm

Which story?

The story about fake budget “cuts” that aren’t cuts at all yet Paul Krugman acts as if they are (because he’s a hack)? Or is it the story that the US Treasury has been downgraded at last because, as is obvious to a child, there’s no way Uncle Sam can pay all his bills and has no interest in shaping up?

Meh.

Invisible Backhand August 8, 2011 at 9:33 pm

I’m thinking stock market crash actually. You’ll have to give a cite for your Krugman assertion. Uncle Sam can pay all his bill by raising taxes. I do agree on the no interest in shaping up part.

vikingvista August 8, 2011 at 11:58 pm

“Uncle Sam can pay all his bill by raising taxes.”

Even if that were true, and at current economic performance and debt levels it is not at all certain, do you really think it wise to give Uncle Sam even more incentive to increase his bills?

Invisible Backhand August 9, 2011 at 10:55 am

You sound like a ‘starve the beaster’.

vikingvista August 10, 2011 at 1:27 am

I’ll give you the benefit of the doubt and take that as a “no”.

LowcountryJoe August 9, 2011 at 1:29 pm

Start sending in YOUR money, then.

Ken August 11, 2011 at 10:28 am

Lowbrow,

We want the rich to pay more; you want the average Joe to suffer more and more. That makes you a disgusting stooge for the wealthy. The rich are the problem and the solution. You probably can pitch in a few more dollars without it affecting your pompous, arrogant lifestyle too much. You sit in front of your computer wasting time when you could be doing more to contribute the country’s GDP. Your money is like dog shit; it attracts flies. There is something seriously wrong with you and your lazy, pro-rich philosophy. Take a good look at yourself in the mirror. Cracks will promptly form from your callousness, lack of insight, and overall hideousness.

Regard,

Ken

John Papola August 9, 2011 at 3:10 pm

The IRS expects the rest of us to account for the current value of future obligations and use accrual accounting when appropriate. Based on a notion of the “rule of law” which considers law to be that which applies to all of us equally, Uncle Sam clearly can’t pay his bills.

As for Krugman, which instance of him decrying the evils of these fake so-called “spending cuts” do you want me to quote? All of them are lies since, um, there are no spending cuts. 2012 spending will be higher than 2011. No cuts.

John Papola August 9, 2011 at 3:15 pm
indianajim August 11, 2011 at 2:42 pm

Krugmania = Keynesiac

Doc Merlin August 11, 2011 at 1:55 pm

No, Uncle Sam can’t. Elasticities at this point are so high that raising taxes wouldn’t really bring in much more revenue at all. Look at what’s happened to the various states who have raised taxes recently.

Chucklehead August 9, 2011 at 1:12 am

Perhaps it is because this is not news to the Austrian Perspective. It is inevitable, and the only surprise is what took so long.
I can save you some time from going to Krugman’s blog.It will say the solution is for government to tax and spend more. Only government directed spending will save the economy and savers are evil hoarders.
Here, the advice is you can’t solve a debt crisis with more debt, you need to save so you can invest, and sound money and free markets are the road to prosperity. I am just a chucklehead and even I have figured that muchout

Fearsome Tycoon August 10, 2011 at 11:25 am

http://www.zerohedge.com

Of course, if you read ZH, you knew this downgrade was coming over a year ago.

Doc Merlin August 11, 2011 at 1:39 pm

As always, ZH seems to be ahead of the curve.

Gary August 8, 2011 at 7:05 pm

Child labor laws are not a moral issue…it is a luxury of an advanced society, similar to flat-screen TVs. The US school system still takes summers off, which is an artifact of a recent time when child labor was the norm. We should not discourage child labor in developing countries.

Ken August 10, 2011 at 12:16 am

Kids should be in a school setting, so they can get an education. They can do errands for their hardworking parents such as doing the laundry, and helping out generally. I don’t see kids with paper routes anymore; a truck drives by early in the morning and flings the paper out like a fast ball. Someone could get hurt.

Anotherphil August 10, 2011 at 8:42 am

“Kids should be in a school setting, so they can get an education.”

Are you advocating the abolition of the goverment warehouses that do little to educate children?

Matthew August 8, 2011 at 7:27 pm

Very interesting conversation.

Russ, have you thought much about how doing these interviews over time, especially with people that may challenge your views, has impacted your worldview?

Russ Roberts August 8, 2011 at 7:43 pm

I mainly think about how much I’ve learned from my guests and how healthy the process is for my brain.

Chucklehead August 9, 2011 at 2:12 am

What about the blood pressure?

J Cortez August 10, 2011 at 10:22 am

Although I disagree a lot with your guest, she was a great interview. Good show this week.

Thanks.

ccc August 8, 2011 at 8:09 pm

You had me at “professor of philosophy”

BZ August 8, 2011 at 9:09 pm

I dunno. Some of it was hard to take. When the processor said outright that I don’t own my own vote, that my conscience and my opinion are somehow public property, I just fell out of my chair.

The professors point about the dignity of anonymity was an interesting one, though I suspect there’s some middle ground between a Lutheran Home for Children and the cold tired face of the bureaucrat (who, it was suggested, constitutes anonymity?). I don’t suspect that middle ground is going to be found from the top-down.

Dr. Roberts was his usual congenial self, and their points of agreement were interesting, although I think they would have proven more incidental than substantive had he the time to probe them more deeply.

As for me, I was unpersuaded but amused, and a bit surprised that a professor of ethics didn’t mention an moral statute with which I could relate.

rpl August 9, 2011 at 8:08 am

I, too, was taken aback by the claim that an individual’s vote is public property. I got to work before that part of the discussion finished, so I won’t know how it comes out until this afternoon, but what I’ve heard so far sounds a lot like motivated reasoning. I think that both Russ and Statz started with the conclusion that selling votes should be considered wrong, and they tried to work backward to find an argument that supported their chosen conclusion. A better approach would have been to ask whether allowing a market in votes is really so bad and to work forward to whatever conclusion emerges.

Slocum August 9, 2011 at 1:22 pm

I didn’t listen long enough to hear the discussion about vote buying, but can I assume that both of them came out against expanded, no-excuses absentee ballots (which, of course, would be a key enabling technology for effective buying and selling of votes)?

rpl August 9, 2011 at 2:56 pm

I won’t get to the end of it until this evening, but I expect that they never got that concrete. As of the point where I had to turn it off, they were firmly in the abstract realm of whether or not it should be allowed. How you would enable or prevent it seems outside the scope of their discussion.

Ken August 10, 2011 at 1:26 am

You would have to bend over for me to give you what your vote is worth to me.

Doc Merlin August 11, 2011 at 1:41 pm

Philosophers are pretty good about trying to avoid cognitive dissonance. So their premises actually lead them to a logical conclusion. She starts with left wing premises and ends up with something most of us would consider fascist, because well… she’s extremely honest.

kyle8 August 9, 2011 at 1:06 am

I won’t get into the whole organ thing, but as for emergency goods in a disaster? I totally come down on the side that markets should decide. If prices are kept too low then supplies will run out, simple as that.

People who already have enough candles and flashlights and bottled water who happen to get there first will buy more than they need because the price is left artificially low.

I witnessed this myself when I used to run a convenience store in the hurricane infested gulf coast.

Justin P August 9, 2011 at 11:43 am

It really comes down to what the person thinks is a “fair price.” I think this stems from the total misunderstanding of how prices come about.
Typically, in past conversations, people that think prices are “set” come to the conclusion that there should be a “fair price.” People who think prices emerge usually know the concept of a “fair price” is a load of hogwash.

Fearsome Tycoon August 10, 2011 at 11:29 am

Bingo. Philosophers have no idea where prices come from, so they haven no idea what “fair” is. I’ve learned firsthand that philosphers know very little about most things, since the whole foundation of philosophy is the belief that you can learn the true nature of things by sitting and a room and thinking about them, with no meaningful experience whatsoever.

Ares Surrenders August 9, 2011 at 4:19 am
Doc Merlin August 9, 2011 at 6:22 am

Yes, there is. Criminal organizations pay bounties for murder, so obviously there is a market for it.

Pingry August 9, 2011 at 11:00 am

Russ,

While many people like Professor Satz are repulsed by markets for organs, I would be interested in a podcast about organ cloning in a lab, including the economics of it. Surely most of us, including perhaps even Professor Satz, would be in favor of these biotechnological advances.

As you may know, scientists are doing all kinds of fabulous work making organs in labs, and Wake Forest University is even using modified ink-jet printing to make organs.

The science, technology and economics of this would make for a great EconTalk.

—Pingry

Dave P August 9, 2011 at 11:36 am

Very interesting. I’m always glad that you are intellectually honest enough to bring on people you disagree with and be gracious to them.

However, it seems like her approach to problem solving is:
1. Judge actions as moral or immoral on their own
2. Try to come up with solutions to the problem, but with excluding actions deemed immoral

I feel like that’s counterproductive as it rules out consequences to actions as an input in the morality calculation.

Justin P August 9, 2011 at 11:45 am

“Very interesting. I’m always glad that you are intellectually honest enough to bring on people you disagree with and be gracious to them.”

Correct me if I’m wrong Dr Roberts, but isn’t true that the ones that disagree with you are the ones that usually decline to come on the show?

LowcountryJoe August 9, 2011 at 1:34 pm

Satz believes that there’s a problem when recipients of charity feel lesser than those they received the charity from. I’m not sure how often this is a problem much less if this supposed problem doesn’t have unseen signaling benefits that she, herself admittedly, hasn’t explored well enough.

Ocaine August 9, 2011 at 2:37 pm

That didn’t sit well with me, either. She completely disregards the fact that if there is a degree of humility involved with taking a handout, it can go a long ways toward discouraging abuse.

Anotherphil August 10, 2011 at 8:50 am

She completely disregards the fact that if there is a degree of humility involved with taking a handout, it can go a long ways toward discouraging abuse.

Well said. Shame is virtually absent from people that order their lives in such a way as to be nearly guaranteed lack self-sufficiency. Think of the teenager who becomes pregnant, intentionally and considers that faceless public support (food, housing, medicine, daycare, etc) a right.

Ocaine August 9, 2011 at 2:16 pm

Just something that I didn’t hear mentioned on the podcast, but maybe I missed it. Or maybe this is just from my point of view. As someone above said, these issues derive from moralistic standpoints. And those standpoints are highly relativistic. However, when we decide that our moral high ground is superior to another’s and then force our standards upon them, the result is often to take opportunities away from them. Many of these opportunities may be the only real chance at upward social or financial mobility available to them.

Using child labor laws as an example, we know there are societies with a majority of very poor individuals who have little to no opportunity available to them except menial labor for minuscule wages. Getting the entire family involved in the bread winning process may help a family get ahead a little bit. It may bother our sensibilities, but it is that family’s inalienable right to make such choices. And if we force to accept our moral position on child labor, we could be taking away their only opportunity to have a little better life.

Economiser August 9, 2011 at 2:51 pm

Prohibiting child labor in poor countries would just drive child labor into the black market, which is almost certainly worse for everyone.

Ken August 10, 2011 at 12:18 am

Black market as in Africa?

Doc Merlin August 11, 2011 at 1:44 pm

Which is why you see an increase in child prostitution when child labor restrictions are imposed in third world countries.

Eric Hammer August 10, 2011 at 3:17 pm

I was quite troubled by two of the examples that came up that I don’t think anyone else mentioned, the tickets that don’t include a life boat spot on the Titanic and the bringing of wine at dinner. I was rather troubled by the lack of context in both, and the assumption that she knew better in the former.

In the Titanic example she said that we as a society shouldn’t allow people to have the sort of option where you get a ticket with no life boat, since the existence of the option might encourage people to take it. Now, I might have missed a finer point she made since I was working while listening, but it struck me that she was really saying “Not everyone is smart enough to make their own decisions, so those of us that are smart should decide what decisions people can make.” Of course her position does not consider whether going to America and possibly dying in the process is the best choice available to someone, say a wretchedly poor worker to whom the chance of a better life in America is worth the risk. I was a little disappointed this wasn’t probed a bit deeper, considering the theme of “Only those of us who are smart should be allowed to decide on which options are ok to choose,” seemed to be the basis for her entire world view.

The bit about the wine at dinner I thought should have been fleshed out some. I can imagine situations where offering some money instead of bringing some contribution to dinner would make a lot of sense and not be offensive, such as at a pot luck where each person is expected to bring food enough to cover their share. In such a case, offering some money to the host to use their wine instead of wine you were supposed to bring avoids undue contributions for them, and would be polite. Alternately, if the wine was just to be a gift, it would make sense that the host would decline based on the fact they do not consider the gift mandatory. However, I do not think the Professor really ever considered why we have certain intuitions about exchange and bringing money into social situations. I think that if she did not treat feelings as some irreducible primary merely to be accepted she might better understand why people accept money in some instances and not others more clearly. A study of different cultures would also go far, as some consider giving money as a gift between friends and relatives much differently than most Americans do.

As I said I might well have missed some important points, but by in large I considered her arguments very poorly thought out and not terribly insightful. I was much more interested in Russ’s opinions than hers.

Doc Merlin August 11, 2011 at 1:46 pm

Its even worse than what she says, because in her ideal technocratic society who would make these decisions? Well the technocrats naturally. These were the very same people who thought that the titanic wouldn’t need the life boats.

Just something to think about.

J. August 19, 2011 at 1:04 am

On people being twitchy about organ donation…

If you had asked me 5 years ago, I probably would have said sure and *maybe* signed up. In theory, sure, if I’m dead anyway, I don’t need organs anymore.

When I was in the hospital about 1 1/2 years ago after a brain injury (serious physical effects but no real cognitive issues), they wanted me to sign an organ donor card. I refused. It felt a bit too much like vultures circling. While I have no desire to linger as a human vegetable, I also lack the faith that the decision and timing would be done in my best interests rather than the financial interests of the hospital and/or surgeons. I suspect that this worry is somewhere in the thoughts of a lot of people who decline to sign up.

I’m sure that some people would now consider me a drain on society since I am currently taking Social Security funds. The (mostly) market solution (LTD) required me to apply for it. (I believe it is common practice to have that in the contracts). The market “solution” has failed me. I was, in theory, insured. The market solution is providing me with a legal “education” I never really desired. (Ain’t counter-party risk *fun*?) I consider both the Social Security and LTD (should I finally get it) to be insurance and not charity.

I find that I am the target of “charity” a lot more than I wish to partake. There are some people who legitimately try to be helpful. There are a lot who are trying to, I don’t know, maximize their ‘good person’ points with god or the people they’re with, or something. In any case, what they do isn’t necessarily helpful. Charitable acts as show. What is worse are those cases where I’m supposed to feel *grateful* to them for this. It’s hard not to be at least a little resentful in these cases.

(Pretty much what I tell friends – if you think I need help, offer. I may decline. I may need something completely different. In any case, respect my autonomy and my space.)

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