The Moral Limits of Markets: Efficiency, Commodification, and the American Psyche

This podcast episode features a discussion between Michael and Richard Posner, a pioneer in applying economic reasoning to law, exploring the contentious question of whether there are goods or services that money should not be able to buy. Posner, while acknowledging certain extreme limits like slavery, generally defends market mechanisms on grounds of efficiency, even for controversial areas like sexual services. The conversation delves into the complexities of life insurance, from companies like Walmart taking out policies on janitors (which Posner deems acceptable with consent due to lack of harm to the insured) to the burgeoning secondary market for life insurance policies and the creation of "death bonds," where investors acquire an interest in someone's early demise. Posner admits these practices can be "distasteful" or "creepy" but largely dismisses the idea of societal corruption, framing them as efficient, value-maximizing contractual arrangements.

Michael pushes back, arguing that beyond mere efficiency, certain intrinsic, moral, or civic goods (such as babies, votes, or civic life itself) are corrupted or degraded when subjected to market forces. He highlights the distinction between a "market economy" and a "market society," where market values and thinking begin to dominate every aspect of life, leading to corrosive effects. Posner, while admitting to being a "less orthodox defender of markets" than in the past, maintains that the American psyche, characterized by individualism and an emphasis on "getting ahead," is inherently resistant to imposing moral limits on markets, even when they involve exploiting psychological weaknesses or engaging in "trickiness," as seen in the advertising industry.

Posner suggests that Americans' individualistic tradition, while leading to a neglect of moral concerns in market activities, also fosters a unique kind of freedom and a less xenophobic society. He contrasts the idea of morally constrained markets with the "communist" ideal of divorcing work from receipts, deeming such an imposition impossible in the United States. The discussion underscores a fundamental philosophical divide: Posner's pragmatic, efficiency-focused view versus Michael's concern for the broader moral and societal implications of unchecked market expansion.

The episode concludes with Michael emphasizing the critical debate about where markets belong and where they become corrosive, while Posner expresses skepticism about the public's willingness or ability to recognize these problems and support significant change. The conversation leaves listeners to ponder the delicate balance between economic utility and the preservation of non-market values in an increasingly commodified world, highlighting the tension between individual liberty and collective moral well-being.

Do you think there are any goods or services that money should not be able to buy?

You cannot take out life insurance on a person without the person's consent.

If you do that, you have an interest in the person's death, right?

Now, that investor has an interest in your dying sooner.

I would say less that it's sinister as that it is distasteful because, of course, as an investor, you will wanna try to find out as much as possible about the health of the person.

Not really. So now you see an opportunity to sell your beneficial interests to an investor who maybe wants to package it with similar beneficial interests, and have a security. This is probably efficient in the sense that the investor who buys the policy from you values it more than you do.

I don't think it fits the American psyche. I think Americans are too individual, and there's too much emphasis, I don't mean too much in a bad sense, too much for your approach. There's too much emphasis, getting ahead.

I think we have drifted from having a market economy to becoming a market society, and by a market society I mean a way of life in which market values and market thinking begin to dominate every aspect of life, not just the buying and selling of material goods, but family life, health, education, civic life, law, journalism, and so on, and I think that's what's damaging.

I think people sense that markets can be corrosive if they reach into spheres of life where they don't belong, and so that's the debate that I think we should encourage.

I terms of getting the public to recognize these problems and support change, I just think it's impossible.