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Why Abolish the Use of Money?

[This is adapted from a section of Thinking About Revolution]


[To see a video about this click here]

["The Myth of the Barter Economy" is about what people did before money: they didn't barter, they shared, as is proposed here]

["Barter vs. Money"]

[Please read "What Is an Egalitarian Economy? It's Not Based on Money"]

[Please read here why it's not sufficient to let some be only a little richer than others]



"Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal—that there is no human relation between master and slave.”—Leo Tolstoy, Russian writer


“It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”—Henry Ford, founder, Ford Motor Company


“We may have democracy in this country, or we may have wealth concentrated in the hands of a few, but we cannot have both.”--US Supreme Court Justice Louis Brandeis


Perhaps the most surprising feature of an egalitarian society is that money (of all kinds, from cash to checks to credit cards) is abolished. Why is this necessary and how does it make sense?


The economy of egalitarianism is based on the principle of “From each according to ability, to each according to need.” It is a “Contribute what you can and take what you need” economy (sometimes called a "gift economy" or a "sharing economy") not a ‘If you give me this I will give you that, of equal value” economy (sometimes called an "exchange economy.") This means people provide products or services for free according to their reasonable ability and in turn take what they need or reasonably desire for free. Money, which is indeed a means of exchanging things (equal value for equal value) more conveniently than barter, is therefore not necessary or even useful in an egalitarian society because an egalitarian economy is not an "exchange economy."


Furthermore, buying and selling is not an equitable way for the wealth of society to be distributed. Goods ought to be shared on the basis of need. If someone who contributes to society is in need of food or shelter, he should receive them, whether he has money or not. (Most homeless adults in the U.S. have at least part time work and are looking for steady full time work; but many full-time workers have jobs that pay too little to afford them a home.) If somebody is sick and needs care, it is immoral that she should only receive as much health care as she can buy. The Golden Rule is to share, not buy and sell.


Money may not be necessary in a good society but it is extremely important for a society based on inequality. In a society based on money a single individual can accumulate a great deal of money and use it to buy many things and pay many people, and thus control the use of things and the behavior of people on a vastly greater scale than would other-wise be possible.


Money thus makes inequality easy to impose because it makes it easy to concentrate power (in a society based on money, money is power) in the hands of a few*, even in a society like ours today that purports to be a democracy. Money enables wealthy people to buy the votes of politicians, make laws to benefit themselves at the cost of society and sway public opinion through their corporate media. A society based on money is incompatible with genuine democracy and equality. As long as a society is based on money and buying and selling things to make a profit instead of sharing them according to need among those who contribute according to ability, that society will eventually become unequal like ours today. This is discussed further here and here and here.


Without Money, How Can New Enterprises Get Start-up Capital?


On the surface it might seem that without money there would be no way to accumulate capital for investing in new enterprises. But if we look closely at what “capital” is, we see that capital accumulation for new enterprises does not require money in a society based on sharing.


Today, when a businessman wants to start a new enterprise, he needs money to buy or rent the necessary equipment and to pay wages for the necessary labor. In the new society, when people decide to start a new enterprise and the larger society democratically approves of it, then the people who carry out the enterprise may freely use the required land and natural resources and machinery, and the workers may freely take what they need to live on. The point is that in a money-based society, money is indeed important, but in a moneyless society it is not.


There remain two additional major reasons for not using money: money is an instrument of elite social control, and money poisons social relationships.


Money Is an Instrument of Elite Social Control


In an earlier time in America, the rich landowner or bank would extend credit to the tenant or farmer for seeds and fertilizer and food to sustain his family till harvest. At harvest the farmer would often find that his debt combined with the interest owed exceeded the value of his crop; with each passing year he would sink further into debt peonage. In current times in the United States, a young person graduates from college saddled with gigantic loans, which by law he can never escape, not even through personal bankruptcy. He is in debt peonage to the bank. He is forced by his debt to seek out the highest paying job he can find, no matter what career he would prefer. Economic pressures make him work at an unfulfilling job for a boss he may despise. The more successful he is at finding that high-paying job, the more pressure he is under to conform to capitalist values and keep his mouth shut.


At the same time his parents may carry a mortgage on a home worth perhaps half of what they paid for it. They are in debt peonage to the bank. Someone with a car loan or needing health insurance is under similar pressure to find and keep a job and make the daily compromises necessary to stay employed in a corporate dictatorship. Young people under economic stress join the military and are trained to kill their class brothers and sisters on command. As the rulers crank up the economic pressure on families, more parents are forced to work two or three jobs and barely have time to share with their children. Money reduces life to a rat race.


The banks gain and exercise their power in society through the power of money. The power of the banks looms over all our life choices. They hold our lives in their hands. A society based on money enables the few who are wealthy to control the many who are not.


Money Poisons Social Relationships


In a society based on money, many human interactions are mediated by money, with one person using money to exert power over another. The more money plays a role in society, the less of a role is played by the Golden Rule: moral persuasion, mutual agreement, or reciprocity of good deeds among equals. (Read an excerpt below from the book What Money Can't Buy, by Michael J. Sandel, that illustrates this moral corrupting effect of money with concrete examples.**) Money suppresses the role of positive human values and replaces it with greed and domination. In a money society, money confers on its possessor an almost magical power. If the owners of a corporation want a manager to fire long time employees in order to increase profits, they just pay the manager to do the nasty deed. No need to persuade the manager that it is a morally good thing to do. The owners of the corporation have a perverse power over the manager.


In the absence of money, social power comes from one’s ability to persuade others that doing this or that is morally right or at least that it benefits them. It also comes from having relationships of mutual support: because one has helped others in the past, they want to return the favor. In the absence of money, social power is not power over people but power to act with people to accomplish goals that are shared.


It has long been said that the love of money is the root of all evil. How many persons throughout history, for example, have been fatally poisoned or caused to suffer a fatal "accident" by their spouse or child in order for the murderer to gain a pile of money?

Only in the absence of the power of money will people’s moral feelings and their best values truly shape society. Click here to read more about this most important reason for abolishing the use of money and the class inequality it makes possible.

Have People Ever Lived Before Without Using Some Kind of Money?

According to the anthropologist, David Graeber, yes. In his book, Debt, the First 5000 Years, Graeber shows that for a very long time people lived without money. What people had were relationships of mutually acknowledged debts that were not quantitative but qualitative. It is money, not the absence of money, that is the source of harm in human society. Money was introduced by kings as a better (for the king) way of forcing peasants to provide food to soldiers. It worked like this.

The king created some kind of money (coins typically) and paid the soldiers with this money. Then the king declared that the peasants had to pay him a tax, payable only with money. The only way peasants could get the money they needed to pay the tax was by selling food to the soldiers.


“Find out something that hath the use and value of money amongst his neighbours, you shall see the same man will begin presently to enlarge his possessions. §. 50. But since gold and silver, being little useful to the life of man in proportion to food, raiment, and carriage, has its value only from the consent of men, whereof labour yet makes, in great part, the measure, it is plain, that men have agreed to a disproportionate and unequal possession of the earth, they having, by a tacit and voluntary consent, found out a way how a man may fairly possess more land than he himself can use the product of, by receiving in exchange for the overplus gold and silver, which may be hoarded up without injury to any one; these metals not spoiling or decaying in the hands of the possessor. This partage of things in an inequality of private possessions, men have made practicable out of the bounds of society, and without compact, only by putting a value on gold and silver, and tacitly agreeing in the use of money: for in governments, the laws regulate the right of property, and the possession of land is determined by positive constitutions.”


— Delphi Complete Works of John Locke (Illustrated) by John Locke

** What follows is an excerpt from What Money Can't Buy, by Michael J. Sandel, pg 113 - 130:

Even in a society without unjust differences of power and wealth, there would still be things that money should not buy. This is because markets are not mere mechanisms; they embody certain values. And sometimes, market values crowd out nonmarket norms worth caring about.




How exactly does this crowding out take place? How do market values corrupt, dissolve, or displace nonmarket norms? Standard economic reasoning assumes that commodifying a good—putting it up for sale—does not alter its character. Market exchanges increase economic efficiency without changing the goods themselves. That is why economists are generally sympathetic to using financial incentives to elicit desirable behavior; scalping tickets for highly prized concerts, sporting events, even papal masses; employing tradable quotas to allocate pollution, refugees, and procreation; giving cash gifts rather than presents; using markets to ease the gap between supply and demand for all manner of goods, even kidneys. Market exchanges make both parties better off without making anyone else worse off—if you assume that market relations and the attitudes they foster don’t diminish the value of the goods being exchanged.


But this assumption is open to doubt. We’ve already considered a raft of examples that call it into question. As markets reach into spheres of life traditionally governed by nonmarket norms, the notion that markets don’t touch or taint the goods they exchange becomes increasingly implausible. A growing body of research confirms what common sense suggests: financial incentives and other market mechanisms can backfire by crowding out nonmarket norms. Sometimes, offering payment for a certain behavior gets you less of it, not more.




For years, Switzerland had been trying to find a place to store radioactive nuclear waste. Although the country relies heavily on nuclear energy, few communities wanted nuclear waste to reside in their midst. One location designated as a potential nuclear waste site was the small mountain village of Wolfenschiessen (pop. 2,100), in central Switzerland. In 1993, shortly before a referendum on the issue, 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 neighborhood, 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 favor it? 24


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. What’s more, upping the ante didn’t help. When the economists increased the monetary offer, the result was unchanged. The residents stood firm even when offered yearly cash payments as high as $ 8,700 per person, well in excess of the median monthly income. Similar if less dramatic reactions to monetary offers have been found in other places where local communities have resisted radioactive waste repositories. 25


So what was going on in the Swiss village? Why would more people accept nuclear waste for free than for pay?


Standard economic analysis suggests that offering people money to accept a burden would increase, not decrease their willingness to do so. But Bruno S. Frey and Felix Oberholzer-Gee, the economists who led the study, point out that the price effect is sometimes confounded by moral considerations, including a commitment to the common good. 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. Against the background of this civic commitment, 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. 26


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. To the contrary, for the good citizens of Switzerland, the prospect of a private payoff transformed a civic question into a pecuniary one. The intrusion of market norms crowded out their sense of civic duty.


“Where public spirit prevails,” the authors of the study conclude, “using price incentives to muster support for the construction of a socially desirable, but locally unwanted, facility comes at a higher price than suggested by standard economic theory because these incentives tend to crowd out civic duty.” 27


This does not mean that government agencies should simply impose siting decisions on local communities. High-handed regulation can be even more corrosive of public spirit than monetary incentives. Enabling local residents to assess the risks for themselves, allowing citizens to participate in deciding what sites best serve the public interest, giving host communities the right to close dangerous facilities if necessary—these are surer ways of generating public support than simply trying to buy it. 28


Although cash payoffs are generally resented, compensation in kind is often welcomed. Communities often accept compensation for the siting of undesirable public projects—an airport, a landfill site, a recycling station—in their own backyards. But studies have found that people are more likely to accept such compensation if it takes the form of public goods rather than cash. Public parks, libraries, school improvements, community centers, even jogging and bicycle trails are more readily accepted as compensation than are monetary payments. 29


From the standpoint of economic efficiency, this is puzzling, even irrational. Cash is always better, supposedly, than in-kind public goods, for reasons we explored in connection with gift giving. Money is fungible, the universal gift card: if residents are compensated in cash, they can always decide to pool their windfall to pay for public parks, libraries, and playgrounds, if that is what will maximize their utility. Or they can choose to spend the money on private consumption.


But this logic misses the meaning of civic sacrifice. Public goods are more fitting than private cash as compensation for public harms and inconveniences, because such goods acknowledge the civic burdens and shared sacrifice that siting decisions impose. A monetary payment to residents for accepting a new runway or landfill in their town can be seen as a bribe to acquiesce in the degradation of the community. But a new library, playground, or school repays the civic sacrifice in the same coin, so to speak, by strengthening the community and honoring its public spirit.




Financial incentives have also been found to crowd out public spirit in settings less fateful than those involving nuclear waste. Each year, on a designated “donation day,” Israeli high school students go door-to-door to solicit donations for worthy causes—cancer research, aid to disabled children, and so on. Two economists did an experiment to determine the effect of financial incentives on the students’ motivations.


They divided the students into three groups. One group was given a brief motivational speech about the importance of the cause and sent on its way. The second and third groups were given the same speech but also offered a monetary reward based on the amount they collected—1 percent and 10 percent, respectively. The rewards would not be deducted from the charitable donations; they would come from a separate source. 30


Which group of students do you think raised the most money? If you guessed the unpaid group, you are right. The unpaid students collected 55 percent more in donations than those who were offered a 1 percent commission. Those who were offered 10 percent did considerably better than the 1 percent group, but less well than the students who were not paid at all. (The unpaid volunteers collected 9 percent more than those on the high commission.) 31


What’s the moral of the story? The authors of the study conclude that, if you’re going to use financial incentives to motivate people, you should either “pay enough or don’t pay at all.” 32 While it may be true that paying enough will get you what you want, that’s not all this story tells us. There is also a lesson here about how money crowds out norms.


To a degree, the experiment confirms the familiar assumption that monetary incentives work. After all, the 10 percent group collected more in contributions than those who were offered only 1 percent. But the interesting question is why both paid groups lagged behind those doing it for free. Most likely, it was because paying students to do a good deed changed the character of the activity. Going door-to-door collecting funds for charity was now less about performing a civic duty and more about earning a commission. The financial incentive transformed a public-spirited activity into a job for pay. As with the Swiss villagers, so with the Israeli students: the introduction of market norms displaced, or at least dampened, their moral and civic commitment.


A similar lesson emerges from another notable experiment conducted by the same researchers—the one involving the Israeli day-care centers. As we’ve already seen, introducing a fine for parents who came late to pick up their children did not reduce the number of late-arriving parents, but increased it. In fact, the incidence of late pickups nearly doubled. The parents treated the fine as a fee they were willing to pay. Not only that: When, after about twelve weeks, the day-care centers eliminated the fine, the new, elevated rate of late arrivals persisted. Once the monetary payment had eroded the moral obligation to show up on time, the old sense of responsibility proved difficult to revive. 33


These three cases—of nuclear waste siting, charitable fund-raising, and late day-care pickups—illustrate the way introducing money into a nonmarket setting can change people’s attitudes and crowd out moral and civic commitments. The corrosive effect of market relations is sometimes strong enough to override the price effect: offering a financial incentive to accept a hazardous facility, or go door-to-door collecting charity, or show up on time reduced rather than increased people’s willingness to do so.


Why worry about the tendency of markets to crowd out nonmarket norms? For two reasons: one fiscal, the other ethical. From an economic point of view, social norms such as civic virtue and public-spiritedness are great bargains. They motivate socially useful behavior that would otherwise cost a lot to buy. If you had to rely on financial incentives to get communities to accept nuclear waste, you’d have to pay a lot more than if you could rely instead on the residents’ sense of civic obligation. If you had to hire schoolchildren to collect charitable donations, you’d have to pay more than a 10 percent commission to get the same result that public spirit produces for free.


But to view moral and civic norms simply as cost-effective ways of motivating people ignores the intrinsic value of the norms. (It’s like treating the stigma against cash gifts as a social fact that stands in the way of economic efficiency but that can’t be assessed in moral terms.) Relying solely on cash payments to induce residents to accept a nuclear waste facility is not only expensive; it is also corrupting. It bypasses persuasion and the kind of consent that arises from deliberating about the risks the facility poses and the larger community’s need for it. In a similar way, paying students to collect contributions on donation day not only adds to the cost of fund-raising; it also dishonors their public spirit and disfigures their moral and civic education.




Many economists now recognize that markets change the character of the goods and social practices they govern. In recent years, one of the first to emphasize the corrosive effect of markets on nonmarket norms was Fred Hirsch, a British economist who served as a senior adviser to the International Monetary Fund. In a book published in 1976—the same year that Gary Becker’s influential An Economic Approach to Human Behavior appeared and three years before Margaret Thatcher was elected prime minister—Hirsch challenged the assumption that the value of a good is the same whether provided through the market or in some other way.


Hirsch argues that mainstream economics has overlooked what he calls the “commercialization effect.” By this he means “the effect on the characteristics of a product or activity of supplying it exclusively or predominantly on commercial terms rather than on some other basis—such as informal exchange, mutual obligation, altruism or love, or feelings of service or obligation.” The “common assumption, almost always hidden, is that the commercialization process does not affect the product.” Hirsch observes that this mistaken assumption loomed large in the rising “economic imperialism” of the time, including attempts, by Becker and others, to extend economic analysis into neighboring realms of social and political life. 34


Hirsch died just two years later, at the age of forty-seven, and so did not have the chance to elaborate his critique of mainstream economics. In the ensuing decades, his book became a minor classic among those who rejected the growing commodification of social life and the economic reasoning that propelled it. The three empirical cases we’ve just considered support Hirsch’s insight—that the introduction of market incentives and mechanisms can change people’s attitudes and crowd out nonmarket values. Recently, other empirically minded economists have been finding further evidence of the commercialization effect.


For example, Dan Ariely, one of a growing number of behavioral economists, did a series of experiments demonstrating that paying people to do something may elicit less effort from them than asking them to do it for free, especially if it’s a good deed. He tells a real-life anecdote that illustrates his findings. The American Association of Retired Persons asked a group of lawyers if they would be willing to provide legal services to needy retirees at a discounted rate of $ 30 an hour. The lawyers refused. Then the AARP asked if they would provide legal advice to the needy retirees for free. The lawyers agreed. Once it was clear they were being asked to engage in a charitable activity rather than a market transaction, the lawyers responded charitably. 35


A growing body of work in social psychology offers a possible explanation for this commercialization effect. These studies highlight the difference between intrinsic motivations (such as moral conviction or interest in the task at hand) and external ones (such as money or other tangible rewards). When people are engaged in an activity they consider intrinsically worthwhile, offering them money may weaken their motivation by depreciating or “crowding out” their intrinsic interest or commitment. 36 Standard economic theory construes all motivations, whatever their character or source, as preferences and assumes they are additive. But this misses the corrosive effect of money.


The crowding-out phenomenon has big implications for economics. It calls into question the use of market mechanisms and market reasoning in many aspects of social life, including financial incentives to motivate performance in education, health care, the workplace, voluntary associations, civic life, and other settings in which intrinsic motivations or moral commitments matter. Bruno Frey (an author of the Swiss nuclear waste siting study) and the economist Reto Jegen summarize the implications as follows: “Arguably, the ‘crowding-out effect’ is one of the most important anomalies in economics, as it suggests the opposite of the most fundamental economic ‘law,’ that raising monetary incentives increases supply. If the crowding-out effect holds, raising monetary incentives reduces, rather than increases, supply.” 37




Perhaps the best-known illustration of markets crowding out nonmarket norms is a classic study of blood donation by the British sociologist Richard Titmuss. In his 1970 book The Gift Relationship, Titmuss compared the system of blood collection used in the United Kingdom, where all blood for transfusion is given by unpaid, voluntary donors, and the system in the United States, where some blood is donated and some bought by commercial blood banks from people, typically the poor, who are willing to sell their blood as a way of making money. Titmuss argued in favor of the U.K. system and against treating human blood as a commodity to be bought and sold on the market.


Titmuss presented a wealth of data showing that, in economic and practical terms alone, the British blood collection system works better than the American one. Despite the supposed efficiency of markets, he argued, the American system leads to chronic shortages, wasted blood, higher costs, and a greater risk of contaminated blood. 38 But Titmuss also leveled an ethical argument against the buying and selling of blood.


Titmuss’s ethical argument against the commodification of blood offers a good illustration of the two objections to markets identified earlier—fairness and corruption. Part of his argument is that a market in blood exploits the poor (the fairness objection). He observed that for-profit blood banks in the United States recruit much of their supply from Skid Row residents desperate for quick cash. The commercialization of blood leads to more blood “being supplied by the poor, the unskilled, the unemployed, Negroes and other low income groups.” A “new class is emerging of an exploited human population of high blood yielders,” he wrote. The redistribution of blood “from the poor to the rich appears to be one of the dominant effects of the American blood banking systems.” 39


But Titmuss had a further objection: turning blood into a market commodity erodes people’s sense of obligation to donate blood, diminishes the spirit of altruism, and undermines the “gift relationship” as an active feature of social life (the corruption objection). Looking at the United States, he lamented the “decline in recent years in the voluntary giving of blood,” and attributed this to the rise of commercial blood banks. “Commercialization and profit in blood has been driving out the voluntary donor.” Once people begin to view blood as a commodity that is routinely bought and sold, Titmuss suggested, they are less likely to feel a moral responsibility to donate it. Here he was pointing to the crowding-out effect of market relations on nonmarket norms, though he didn’t use this phrase. The widespread buying and selling of blood demoralizes the practice of giving blood for free. 40


Titmuss was concerned not only with the declining willingness to give blood but also with the broader moral implications. Beyond its harmful effect on the quantity and quality of blood, the declining spirit of giving made for an impoverished moral and social life. “It is likely that a decline in the spirit of altruism in one sphere of human activities will be accompanied by similar changes in attitudes, motives and relationships in other spheres.” 41


While a market-based system does not prevent anyone from donating blood if he or she wants to, the market values that suffuse the system exert a corrosive effect on the norm of giving. “The ways in which society organizes and structures its social institutions—and particularly its health and welfare systems—can encourage or discourage the altruistic in man; such systems can foster integration or alienation; they can allow the ‘theme of the gift’—of generosity towards strangers—to spread among and between social groups and generations.” At some point, Titmuss worried, market-driven societies might become so inhospitable to altruism that they could be said to impair the freedom of persons to give. The “commercialization of blood and donor relationships represses the expression of altruism,” he concluded, and “erodes the sense of community.” 42


Titmuss’s book prompted much debate. Among his critics was Kenneth Arrow, one of the most distinguished American economists of his time. Arrow was no Milton Friedman–like proponent of unfettered markets. His earlier work had analyzed imperfections in markets for health care. But he took strong exception to Titmuss’s critique of economics and market thinking. 43 In doing so, Arrow invoked two key tenets of the market faith—two assumptions about human nature and moral life that economists often assert but rarely defend.




The first is that commercializing an activity doesn’t change it. On this assumption, money never corrupts, and market relations never crowd out nonmarket norms. If this is true, then the case for extending markets into every aspect of life is hard to resist. If a previously untraded good is made tradable, no harm is done. Those who wish to buy and sell it can do so, thereby increasing their utility, while those who regard the good as priceless are free to desist from trafficking in it. According to this logic, allowing market transactions makes some people better off without making anyone else worse off—even if the good being bought and sold is human blood. As Arrow explains: “Economists typically take for granted that since the creation of a market increases the individual’s area of choice it therefore leads to higher benefits. Thus, if to a voluntary blood donor system we add the possibility of selling blood, we have only expanded the individual’s range of alternatives. If he derives satisfaction from giving, it is argued, he can still give, and nothing has been done to impair that right.” 44


This line of reasoning leans heavily on the notion that creating a market in blood does not change its value or meaning. Blood is blood, and it will serve its life-sustaining purpose whether gifted or sold. Of course, the good at stake here is not only blood but also the act of donating blood out of altruism. Titmuss attaches independent moral value to the generosity that motivates the gift. But Arrow doubts that even this practice could be damaged by the introduction of a market: “Why should it be that the creation of a market for blood would decrease the altruism embodied in giving blood?” 45


The answer is that commercializing blood changes the meaning of donating it. For consider: In a world where blood is routinely bought and sold, is donating a pint of blood at your local Red Cross still an act of generosity? Or is it an unfair labor practice that deprives needy persons of gainful employment selling their blood? If you want to contribute to a blood drive, would it be better to donate blood yourself, or to donate $ 50 that can be used to buy an extra pint of blood from a homeless person who needs the income? A would-be altruist could be forgiven for being confused.


The second tenet of market faith that figures in Arrow’s critique is that ethical behavior is a commodity that needs to be economized. The idea is this: we should not 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, spare us from using up the limited supply of virtue. So, for example, if we rely on the generosity of the public for the supply of blood, there will be less generosity left over for other social or charitable purposes. If, however, we use the price system to generate the blood supply, people’s altruistic impulses will be available, undiminished, when we really need them. “Like many economists,” Arrow writes, “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.” 46


It is easy to see how this economistic conception of virtue, if true, provides yet further grounds for extending markets into every sphere of life, including those traditionally governed by nonmarket values. If the supply of altruism, generosity, and civic virtue is fixed, as if by nature, like the supply of fossil fuels, then we should try to conserve it. The more we use, the less we have. On this assumption, relying more on markets and less on morals is a way of preserving a scarce resource.




The classic statement of this idea was offered by Sir Dennis H. Robertson, a Cambridge University economist and former student of John Maynard Keynes, in an address at the bicentennial of Columbia University in 1954. The title of Robertson’s lecture was a question: “What does the economist economize?” He sought to show that, despite catering to “the aggressive and acquisitive instincts” of human beings, economists nonetheless serve a moral mission. 47


Robertson began by conceding that economics, concerned as it is with the desire for gain, does not deal with the noblest human motives. “It is for the preacher, lay or clerical,” to inculcate the higher virtues—altruism, benevolence, generosity, solidarity, and civic duty. “It is the humbler, and often the invidious, role of the economist to help, so far as he can, in reducing the preacher’s task to manageable dimensions.” 48


How does the economist help? By promoting policies that rely, whenever possible, on self-interest rather than altruism or moral considerations, the economist saves society from squandering its scarce supply of virtue. “If we economists do [our] business well,” Robertson concludes, “we can, I believe, contribute mightily to the economizing … of that scarce resource Love,” the “most precious thing in the world.” 49


To those not steeped in economics, this way of thinking about the generous virtues is strange, even far-fetched. 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 fare? Wouldn’t their love deepen rather than diminish the more they called upon it? Would they 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 to go shopping until their country needs to call upon them to sacrifice for the common good? Or do civic virtue and public spirit atrophy with disuse? Many moralists have taken the second view. Aristotle taught that virtue is something we cultivate with practice: “we become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts.” 50


Rousseau held a similar view. The more a country asks of its citizens, the greater their devotion to it. “In a well-ordered city every man flies to the assemblies.” Under a bad government, no one participates in public life “because no one is interested in what happens there” and “domestic cares are all-absorbing.” Civic virtue is built up, not spent down, by strenuous citizenship. Use it or lose it, Rousseau says, in effect. “As soon as public service ceases to be the chief business of the citizens, and they would rather serve with their money than with their persons, the state is not far from its fall.” 51


Robertson offers his observation in a lighthearted, speculative spirit. But the notion that love and generosity are scarce resources that are depleted with use continues to exert a powerful hold on the moral imagination of economists, 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 proved it empirically. It is more like an adage, a piece of folk wisdom, to which many economists still subscribe.


Almost half a century after Robertson’s lecture, the economist Lawrence Summers, then the president of Harvard University, was invited to offer the morning prayer in Harvard’s Memorial Church. He chose as his theme what “economics can contribute to thinking about moral questions.” Economics, he stated, “is too rarely appreciated for its moral as well as practical significance.” 52


Summers observed that economists place “great emphasis on respect for individuals—and the needs, tastes, choices and judgment they make for themselves.” He then offered a standard utilitarian account of the common good as the sum of people’s subjective preferences: “It is the basis of much economic analysis that the good is an aggregation of many individuals’ assessments of their own well-being, and not something that can be assessed” apart from these preferences on the basis of an independent moral theory.


He illustrated this approach by challenging students who had advocated a boycott of goods produced by sweatshop labor: “We all deplore the conditions in which so many on this planet work and the paltry compensation they receive. And yet there is surely some moral force to the concern that as long as the workers are voluntarily employed, they have chosen to work because they are working to their best alternative. Is narrowing an individual’s set of choices an act of respect, of charity, even of concern?”


He concluded with a reply to those who criticize markets for relying on selfishness and greed: “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.”


Here was Robertson’s adage reasserted. Notice that Summers’s version of it is even starker than Arrow’s: Reckless expenditures of altruism in social and economic life not only deplete the supply available for other public purposes. They even reduce the amount we have left for our families and friends.


This economistic view of virtue fuels the faith in markets and propels their reach into places they don’t belong. But the metaphor is misleading. Altruism, generosity, solidarity, and civic spirit are not like commodities that are depleted with use. They are more like muscles that develop and grow stronger with exercise. One of the defects of a market-driven society is that it lets these virtues languish. To renew our public life we need to exercise them more strenuously. [emphases added--J.S.]


— What Money Can't Buy: The Moral Limits of Markets by Michael J. Sandel


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