A typical economist will tell you that if the price is sorted out, the rest will follow. But while prices matter, economists tend to overestimate the effectiveness of price as a lever, and to underestimate the role of values, sense of reciprocity, networks, and heuristics. We have to decide how to value the goods in question — health, education, family life, nature, art, civic duties, and so on. These are moral and political questions, not merely economic ones.
We often associate corruption with illicit payoffs to public officials. But corruption also has a broader meaning: we corrupt a good, an activity, or a social practice whenever we treat it according to a lower norm than is appropriate to it. The last few decades have witnessed the remaking of social relations in the image of market relations. One measure of this transformation is the growing use of monetary incentives to solve social problems.
That is especially true when it comes to relationships that we have traditionally managed with our morals by encouraging qualities like trustworthiness, honour, and concern for others’ welfare. Emphasizing material incentives, it turns out, does more than just change incentives. At a very deep level, it changes people. Relying too much on selfishness can become a self-fulfilling prophecy. By treating people as if they should care only about their own material rewards, we ensure that they do.
Evidence from a wide range of policy initiatives raises a warning signal around introducing cash incentives in social spaces. When it comes to creating deep and lasting social and ecological behaviour change, the most effective approach is to connect with people’s values and identity, not with their pocket and budget. Richard Titmuss first raised this concern in his 1970 book, The Gift Relationship, which contrasted the blood donor service in the US, where people were paid for their contributions, with the far more successful service in the UK, where volunteers gave more and healthier blood for free.
Merely mentioning market roles can crowd out our intrinsic motivation. One online survey asked participants to imagine themselves as one among four households facing a water shortage due to a drought affecting their shared well. The survey described the whole scenario in terms of ‘consumers’ to one half of the participants, and in terms of ‘individuals’ to the other half. Those labelled ‘consumers’ reported feeling less personal responsibility to take action and less trust in others to do the same than did those referred to as ‘individuals’. Simply thinking like a consumer, it seems, triggers self-regarding behaviour, and divides rather than unites groups who are facing a common scarcity.
Another experimental survey found that university students who were invited to take part in a ‘Consumer Reaction Study’ identified more strongly with notions of wealth, status and success than did their fellow students who were merely told instead that they were participating in a ‘Citizen Reaction Study’. Markets don’t only allocate goods; they also express and promote certain attitudes toward the goods being exchanged. When we decide that certain goods may be bought and sold, we decide, at least implicitly, that it is appropriate to treat them as commodities, as instruments of profit and use. But not all goods are properly valued in this way.
Another example comes in the area of managing nuclear waste. For years, Switzerland had been trying to find a place to store radioactive nuclear waste. Few communities wanted nuclear waste to reside in their midst. In one location designated as a potential nuclear waste site, some economists surveyed the residents of the village, asking whether they would vote to accept a nuclear waste repository in their community, if the Swiss parliament decided to build it there. Although the facility was widely viewed as an undesirable addition to the neighbourhood, a slim majority (51 percent) of residents said they would accept it.
Apparently their sense of civic duty outweighed their concern about the risks. Then the economists added a sweetener: suppose parliament proposed building the nuclear waste facility in your community and offered to compensate each resident with an annual monetary payment. Then would you favour it? The result: support went down, not up. Adding the financial inducement cut the rate of acceptance in half, from 51 to 25 percent. The offer of money actually reduced people’s willingness to host the nuclear waste site.
For many villagers, willingness to accept the nuclear waste site reflected public spirit — a recognition that the country as a whole depended on nuclear energy and that the nuclear waste had to be stored somewhere. If their community was found to be the safest storage site, they were willing to bear the burden. But, the offer of cash to residents of the village felt like a bribe, an effort to buy their vote. In fact, 83 percent of those who rejected the monetary proposal explained their opposition by saying they could not be bribed.
When the economists increased the monetary offer, even in excess of the median monthly income the result was unchanged. You might think that adding a financial incentive would simply reinforce whatever public-spirited sentiment already exists, thus increasing support for the nuclear waste site. After all, aren’t two incentives — one financial, the other civic— more powerful than one? Not necessarily. It is a mistake to assume that incentives are additive. The price effect is sometimes changed by moral considerations, including a commitment to the common good.
We should ask if it is always necessary to maximize social utility regardless of the moral worth of the preferences. Economists say that they don't 'traffic in morality' but their belief in maximising utility is itself a value judgement. You can say that it is just a question of semantics but this reflects a mindset that is increasingly prevalent. Excess of market thinking leads people to view employees as nothing more than statistics to be manipulated in order to beautify the balance sheet.
I saw a strange statement by Larry Summers quoted in What Money Can't Buy, ‘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 many social problems in this world that markets cannot solve.’ Altruism is a 'rare good'? I have been surviving on altruism for over 24 years and have never felt that it was so rare.
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