Thursday, 25 September 2014

The Morality of Markets

On the Freakonomics blog, they highlight a new podcast called "Fitness Apartheid", discussing a the decision by a building board in a partially rent-controlled New York City building not to let tenants paying below the market rate use the building's gym. The transcript, which I cannot seem to access in full, contains Professor Steve Levitt's two pence:
"LEVITT: I would call this disrespect. It’s intentionally showing through your actions that you have no respect for the old-guard people, and rubbing it in their face in a way that markets don’t really do. Markets are not moral or immoral, they’re amoral. Markets don’t care. In a market world, you say, ‘I don’t care if you live here or not. I don’t care who the identity of the person is. As long as you pay the right price and you don’t impose negative stuff on other people, it’s fine.’"
Since I lack access to the full transcript, I need to interpret what the original Freakonomist says here. I take it that he disagrees with the building board's decision and thinks of it as an anti-market one. The problem that Professor Levitt has with the decision is that it disrespects certain tenants, and the contrast he offers is with a market in which those who pay would use the gym.

I think the comparison does a good job of suggesting that the board's decision is perhaps not an optimal one since it allows no market for use of the gym. Personally, I would think that the board, as long as it is in legitimate control of the building, has the right to be disrespectful, but if I understand things correctly I can basically go along with calling their decision disrespectful. (Those referring to this as "fitness apartheid" take disrespect to a whole other level, however, since it is not really about keeping anyone unfit; those who live in rent-controlled flats should have more money to buy a gym card outside of the building.)

But what I really want to discuss here is Professor Levitt's argument that markets are amoral. What are markets? They cannot be touched and not really painted either, except perhaps if the motif is goods and/or money changing hands, or eyes looking as though they are inspecting a product. Markets are interactions between people. To say that interaction is morally superior to no interaction would be hard to justify, since not every interaction is desirable. For instance, I have absolutely no desire to buy beer or spend any time at all with millions of people. I don't drink and while I do not have any enemies as far as I know, there are certainly people who would not benefit from my company, nor I from theirs.

The way Professor Levitt seems to define amorality strikes me, however, as rather moral. As seen above when talking about what the market is all about he says ‘I don’t care if you live here or not. I don’t care who the identity of the person is. As long as you pay the right price and you don’t impose negative stuff on other people, it’s fine’. Compare this to the moral theory of negative rights and I don't think you'll find any difference. What Professor Levitt adds which markets do not necessarily do is the clause that one must not impose "negative stuff" on others. Take this away and markets would be (potentially) immoral by the negative rights point of view.

On the other hand, F. A. Hayek argued, notably in his important book The Constitution of Liberty, that (free) markets reward social use, since voluntary payments for products and services are larger the more important are the products and services in question. This sounds like a good case for the general morality of markets, but Hayek's defence of free markets rests on his argument that no man is smarter than the market and that no one individual can allocate resources more efficiently than can freely interacting individuals in the market. However, one could imagine a supercomputer or a genius coming up with a way to beat the market, and since its outcomes are not always morally blameless (e.g., externalities, again), markets would not look so generally moral anymore.

I am of course a great fan of the free market, but I believe Professor Levitt is basically right in calling markets amoral, though I suspect I may have somewhat different reasons. As interactions, I don't see how markets can have any moral value, positive or negative. It would be immoral of somebody to meddle in two individuals' voluntary interaction, but to suggest that the voluntary interaction in itself has moral value opens the possibility that there can be net gains in moral value from one person's being forced to facilitate interaction between others. This could potentially justify murder if sufficiently many interactions were thereby enabled.

So no, markets cannot violate moral rules, nor are they moral in themselves. Only individuals can be morally blame- or praiseworthy.

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