I’ve previously introduced Michael Sandel’s lectures on Justice in Harvard. I haven’t finished the series despite great interest in it but I recently watched another of his lectures, one at Chautauqua where he talks about the Morality of Markets. In some sense, I was particularly interested in this issue and believe that all those trained in Economics should be made to study it. After all, Adam Smith was a Moral Philosopher. The philosophical element of Economics is becoming lost in our study of it today.
That is what makes this particular Michael Sandel lecture extremely insightful. He starts with the idea that we’re now plagued by market triumphalism and he tries to question what is wrong with that. As often in his lectures, he poses a scenario either hypothetical or based on actual proposals in the real world and then solicits opinions from the audience. He eventually surfaces his points and ideas from the responses of the audience and does a brilliant summary of the issue.
He gives a good and important point in his conclusion of this lecture that explains why we should not allow markets to expand indefinitely in our lives. In other words, there are areas where markets can, indeed serve the best interests of the societies especially when we all can agree that the market system gives an accurate and fair valuation of the good or service involved. Unfortunately there are values out of the consideration of the market that we might cherish and therefore we should not allow particular goods or services to become commodities to be traded and transacted. The danger of the markets is that it leaves its mark on the commodities that are traded; the values that we cherish becomes diluted, corrupted by the market system.
The example of paying a child to read is important in illustrating this. We should cherish reading not because of the monetary gains but the intrinsic value derived from joy of reading and learning. Therefore when we start paying children to read, it sends out the wrong messages and distorts the valuation of reading. The trick then, perhaps is a solution around this limitation of the market, to be able to remove that mark that market leaves on the thing traded. Unfortunately there’s no easy solution and possibly none. This is a strong argument against markets and while it is applied to a small group of tricky issues, they are worth pondering over.
Michael Sandel makes Political Philosophy and Moral Philosophy not only accessible to the public and ordinary, non-philosophy students but also makes extremely relevant connections between traditional Western Philosophy and the issues plaguing us in the modern world. It’s really fortunate that we are able to access his lectures even though we are not studying in Harvard or in America. There are other videos of his public lectures available on FORA.tv.
A couple of months back I stumbled upon this book by Michael Heller (a lawyer), Gridlock Economy. It raised a very interesting question in the introduction and convinced me to borrow the book. The book went on to look into different parts of the modern economy where hurdles to economic activities are created because of structures built within the modern economy used to spur economic activities in the first place. It’s an irony we can’t ignore. The author framed them as a ‘Tragedy of the anticommons‘; this idea is from Michael Heller himself so the book is more or less a vehicle to get greater audience exposed to it.
Anyways, it started this way;
A few years ago, a drug company executive presented me with an unsettling puzzle. His scientists had found a treatment for Alzheimer’s disease, but they couldn’t bring it to the market unless the company bought access to a dozen patents. Any single patent owner could demand a huge payoff; some blocked the whole deal. This story does not have a happy ending. The drug sits on the shelf though it might have saved millions of lives and earned billions of dollars.
I thought this is exactly the sort of problem that is going to plague the field of microeconomics in the modern world. The world’s complexity naturally mean that the mesh of technological advancement, legislative hurdles and logistical difficulties in the market would introduce new problems for us to solve. I didn’t quite manage to read much of the book but I’ll try to spend some time researching stuff in this area soon. Meanwhile, USA still probably going to continue being the hot bed for patent disputes.
A couple of weeks back, I stumbled upon the concept of Goodhart’s Law and I can’t help wondering if the same is true of corporate performance indicators. Perhaps the case is weaker for corporate performance indicators but the idea may still hold some truth.
The Law based on Goodhart’s formulation in 1975 is “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes“
It is initially more or less based on the conduct of monetary policy and has much to do with statistics. But in the corporate setting, tying CEO’s financial rewards to share prices has somewhat the same sort of effect. Without the coupling of the 2 variables – share prices and CEO financial compensation, the share prices would ordinarily reflect the performance of the company, which is a proxy for the outcome of the management of the firm under the CEO (although people might argue that it is inaccurate, but in business, outcome is still the most important). When they are linked, CEOs might become obsessed with raising share prices of the firm and neglecting the core management of the firm.
The same applies for lower level sort of work. For example, if the waiting time at the government clinic is used as a measure for performance then doctors and nurses might quickly try to go through the patients and speed up consultation to hit their performance target rather than provide quality care and service. Likewise, if too much emphasis is on delivering good food at a local restaurant, service might be compromised, which explains why the boss of the pizzeria down the street has real bad attitude. Perhaps this is just part of human nature, the narrow focus of our minds.