Economics, Exploitation

Circumstances and the Ethics of Markets

I am so happy to see that Japa Pallikkathayil is blogging over at Political Philosop-her. I’ve always liked Japa’s work and I think her Philosopher’s Imprint essay about coercion is an especially wonderful discussion of a difficult topic. In her post, Japa addresses a topic that will be of interest to readers of the blog—the morality of markets.

Drawing on a Kantian framework, which says we must never treat others merely as means, Japa explains that we may be blind to the ends of others when we enter into market arrangements with them without treating them merely as means. This is because voluntary exchanges generally further the ends of both parties by enabling buyers and sellers (of labor or goods) to make decisions that reflect their own assessments of the value of a service or a product relative to the wage or price.

But Japa is concerned about exchanges that happen against unjust background conditions. She writes: “there are some contexts in which the use of the norms of marketplace is inappropriate because of the circumstances of the potential participants.” First, market norms are allegedly morally suspect when one participant in the exchange is a victim of injustice. So, for example, if you were only selling a product to me because your landlord is unjustly evicting you from your home it would be wrong for me to profit from that injustice. Instead I should not use an injustice to further my ends in part because I should recognize that you are entitled to greater control over what you are selling than you currently have as a victim of injustice.

Second, when one participant’s ends are clearly more urgent and weighty than another’s, like if you are only selling me something to pay for your child’s chemotherapy, then participating in an exchange “reflects a misunderstanding of the values at play.” She therefore concludes: “those of us who are not subjected to injustice or struggling to survive should be very troubled by most of our market transactions.  These transactions involve us in a blindness to the ends of others that is not justifiable.”

As someone with Kantian leanings, I especially enjoyed reading this post. But it left me with some questions:

1) How is this not the case for a lot of (if not all) market exchanges? It seems like even ordinary exchanges, e.g. most employment arrangements, are motivated by the need to provide for our basic needs or the basic needs of those we love. Of course there are other reasons to work, but I imagine that some people wouldn’t work if they could ensure that their needs were satisfied even if those same people love their jobs. And insofar as at least some taxation is unjust, but we must work more to pay those taxes, then some of our market exchanges are also premised on an injustice. If I am an employer, does the fact that my employee is only working for me as much as she is because she is a victim of injustice or so that she will not struggle to survive mean that my transaction is unjustifiable to the extent that this is true? In this way, the account seems over-inclusive.

2) Say that it is true that a transaction is not justifiable if one participant in the transaction is struggling to survive or a victim of injustice. Does it follow that I should not participate in the transaction? Even if there were something objectionably ‘blind to the ends of others’ when someone participates in a transaction instead of addressing the underlying injustice or need, as Matt Zwolinski often points out, this is rarely the relevant counterfactual. Instead, most people who encounter victims of injustice or those in great need don’t do anything at all. In this way participants in voluntary exchanges may do more to further the ends of others than anyone else, even if those participants could do more.

3) Japa argues that the duties to refrain from certain market transactions—duties that we have to people who are victims of injustice or those who are struggling to survive—needn’t be explained by duties of beneficence. Instead she references Kyla Ebels-Duggan’s Kantian account of love, which argues that we should share in our loved one’s ends rather than in aiming to promote their happiness. But most market exchanges do not involve loved ones, and in these circumstances it’s not clear that the same special duties apply. It might even be a mistake to aim to further or share in a stranger’s ends if that distance means that you are not well-suited to fully understand their ends beyond what they express to you, which in this case is an exchange.

4) In at least some exchanges, both participants in the exchange are either desperate or the victim of injustice. For example, Ann might sell a kidney to Bill only because Ann needs to pay for her daughters chemotherapy, and Bill may purchase the kidney only because he will die without it. In these desperate circumstances, there may be no other way for Ann or Bill to further their ends. But Ann and Bill do not treat each other in ways that misunderstand the values at play because presumably the values at play are comparable. Yet why would the permissibility of Bill buying something from Ann at a given price depend on whether Bill is as desperate as Ann or not? Would this view imply that whether exchanges are problematic depends not only on the circumstance of each participant but also on the degree of inequality between the participants? If so, does this mean that it is generally problematic for people who are well-off to enter into exchanges, but not for the badly off?

  • swizzard

    If it’s unjust to engage in a market-type transaction with someone who is on the pointy end of unjust conditions, then is the implication that charity is the only moral way of interacting with such people? Considering #3, also, the suddenly the only moral position seems to be handing out money and goods to anyone who potentially looks subject to unjust conditions, since, e.g., giving a deprived woman money to feed her children in exchange for her kidney (or basically anything else) is immoral, and not doing anything is immoral. Right?

  • ben

    Instead, most people who encounter victims of
    injustice or those in great need don’t do anything at all. In this way
    participants in voluntary exchanges may do more to further the ends of others than anyone else, even if those participants could do more.

    Exactly,
    a voluntary exchange with a vulnerable/suffering person still furthers
    that person’s ends, even if potentially not as much
    as it would if they were in a better bargaining position.

    When “refraining” from the transaction, otoh, they would not be helped at all.

    Refraining
    from using one’s bargaining power to the full extent (i.e. settling on
    an artificially disadvantageous price) would help them, of course, but
    that would just be a form of charity, and it’s not clear why the moral
    duty to supply people in need with charity rests on those who happen to
    enter into contract with them (rather then on society as a whole).

  • Jameson Graber

    Aren’t market norms a little broader than her post seems to indicate? Consider a bake sale to help raise funds for charity. Because people are aware of the end behind the sale, they pay more. On a global scale, we can think of examples like “fair trade” coffee (of which I’m sure many commenters will be skeptical, but let’s just think of the principle). Many customers who are well off are quite willing to pay extra if they feel they have helped others achieve their ends. So it seems like one of the ways you could fix these problems is not by backing out of the market, but simply by adding information into the transaction. You might say that’s just mixing charity into the market, but what’s wrong with that?

  • Jameson Graber

    On the other hand, I do think there are legitimate concerns about market transactions with people who find themseves in sudden, dire distress. The issue is that they may make decisions which they would not have made had they had full control of their rational faculties, and those decisions can be irreversable. But that seems ultimately a matter of regulating the transaction, not forbidding it.

    • Jessica Flanigan

      Do you think the same thing about people who find themselves in a sudden health crisis? Should we assume that patients with severe illnesses do not have full control of their rational capacities so we should regulate their irreversible decisions? This seems like it would violate their rights of informed consent, and we believe in these rights because it seems doubtful that distress generally undermines people’s capacities.

      • Jameson Graber

        Well, when you bring up “informed” consent you’re talking about regulation. My fiancée is a doctor at a hospital where I live in France, and let me tell you, those consent forms better always be filled out! Normal market transactions don’t really require all that administrative incantation, but in this case, it seems pretty important to have it.

        As for what undermines people’s capacities, I have heard a lot about this book: http://www.amazon.com/gp/product/0805092641/ref=as_li_ss_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=0805092641&linkCode=as2&tag=bleedheartlib-20

        Its results appear to pose some critical questions concerning market transactions and the poor.

        • Sean II

          The two funniest words in modern medicine are “informed consent”.

          It’s not just that the overwhelming majority of patients lack scientific literacy and /or a helpful knowledge of Greek roots. The bigger problem is that patients understand health care in childishly un-economic terms. It leads to conversations like this:

          Doctor: “Okay, ma’am, we have to make a decision. Option A is we can keep your husband here and start thrombolytics right now to try and dissolve the clot. Think of that like using Drano to unclog a sink. Option B is we go with percutaneous coronary intervention. Never mind the words, think of it like calling a plumber to snake out a drain. The problem is we can’t do that here, so we’ll have to transfer your husband to another facility which will take 47 minutes from door to door.”

          Patient’s Wife: “Okay, I don’t understand what you said. Just do whatever’s the right thing.”

          You see what I mean? People are accustomed to think in terms of “safe vs unsafe”, “right treatment vs. wrong treatment”, etc. They just don’t get the concept of trade offs. Politics and morality have taught them to think in dichotomous categories, and they aren’t about to stop thinking that way in the middle of an emergency.

          • Jameson Graber

            I don’t know if people really believe in such sharp dichotomies. Their dependence on doctors for making the right call usually comes down to what you just said–they don’t understand the options. It’s pretty hard to compare trade-offs if you don’t know what they really are. To me it sounds more likely for the patient’s wife to say, “Do whatever you think is better,” rather than, “Do whatever’s the right thing.” To a certain extent, this dependence on expertise is both natural and desirable, just as with anything else–you’re paying the doctor for the knowledge you don’t have.

            But you’re right to suggest that politics poisons medicine. The role of the expert in modern medicine is becoming not so much to sell his expertise but rather to give the patient what is his *right* to have. By that logic, the entire relationship between doctors and patients will have to be mediated by the state, which will just fill the system with endless paperwork that has no attachment to reality.

  • Dan Carroll

    In most circumstances, market competition would drive the marginal cost and marginal price to the “efficient” level, alleviating concerns about exploitation. Thus a person who is the victim of injustice could sell their product or service and obtain a “fair” price. However, there are limited circumstances where exploitation occurs such that the seller (or buyer) experiences a temporary monopoly either through deceit and coercion (loan shark) or through unusual conditions (natural disaster) and is able to extract extra normal profits. While the conventional economic argument about price gouging in a natural disaster suggests that the incentive to provide greater supply outweighs the potential for exploitation (and that the actual exploitation is far more limited than usually believed), it is that sentiment that motivates legislation against it, particularly with respect to basic necessities like water where demand is already inelastic. In other markets, such as organ markets, the risk is for intermediaries to extract coercive profits from desperate people due to both inelastic supply and inelastic demand, as well as the inability of buyers and sellers to obtain good information as to value. While we could debate the specifics of each of these examples, those are mostly empirical questions. The basic principle is one of limited circumstances where victims are forced by circumstances or injustice to engage in market transactions in such a way that they don’t receive normal market driven outcomes.

  • Les Kyle Nearhood

    Fairness = letting adults make their own decisions. Unfairness = Politicians, bureaucrats, or academics second guessing and controlling others. It may seem a simplistic formula but it is one I have arrived at by years of observation.

  • Japa Pallikkathayil

    Thanks for these really interesting and helpful questions. My thinking on this
    topic is still in the very early stages and so I’m really grateful for the feedback. Here are some thoughts about the questions:

    1) It is worthwhile here to treat the injustice case and the survival case
    separately. I do think that there is something morally troubling about using market norms in the face of any kind of injustice and that may well mean that all of our market transactions should be troubling. (And I actually think that it is not surprising that fully living up to the demands of morality requires a background of justice, but I won’t try to say more about that now). The post may have been
    misleading, though, because the main example was of an isolated case of
    injustice. And in that case, it does seem to me that moving away from market norms and moving toward a more collaborative interaction is the right response. But systematic or pervasive injustice, of the sort I mention toward the end of the post, may call for a different response. That is, I think this kind of injustice
    should also unsettle our use of market norms but it is less obvious what we are
    required to do in light of this. Rather than adjusting our attitudes towards particular participants in particular transactions, we may instead need to adjust our attitudes towards our institutions more generally. So, it may be that we are permitted to engage in market transactions in the familiar way in the face of pervasive in justice, but that if we do so we acquire a new source of obligation to work for institutional change. Anyway, that’s an example of the general strategy – injustice should unsettle our use of market norms but the way it unsettles their use may differ depending on the kind of injustice in question.

    Regarding the survival case. I think you are right to press on what counts as struggling to survive. It is true that I need a job to be able to afford a place to live and food to eat. But it doesn’t seem plausible to me to describe myself as
    struggling to survive. I think there is an intuitive distinction here that needs to be drawn out. I am not sure how to do that yet and would welcome any suggestions.

    2) Two things here. First, I don’t want to claim that we should never engage in transactions with people who are struggling to survive or the victims of injustice. In the post I was primarily putting pressure on the terms on which we transact and whether the terms that would have been the result of abiding by market norms are appropriate. (And as per the clarification above, there may even be cases in which the market terms are appropriate so long as one responds to the problem in another way.) Second, though, I appreciate the worry that I seem to be impugning interactions that do actually help those in need. And I’d hate
    to advocate making others’ lives worse for the sake of keeping clean hands, so
    to speak. But I do think it is important to notice that not all ways of helping are morally benign. Suppose I happen upon someone who is on the brink of starving to death. I feed and nurse him back to health but then enslave him for the rest of his life. He may regard himself better off my slave than dead – but this would still be a morally impermissible way of interacting with him.

    3) Ebels-Duggan’s account of love is, I think, intended to be broader than the love we have for those we are close to – it is an attitude we are supposed to have generally towards others. I would probably not describe the attitude she has in mind in terms of love but rather in terms of respect. I agree that the language
    of sharing ends might be a bit too strong for what I am looking for – regarding
    others’ ends as reason giving might be more apt for my purposes. But what I really wanted to draw on from her piece is that taking on the attitude of a benefactor can be dangerous and I think it is often more appropriate to aim to work with others rather than treat them as passive beneficiaries.

    4) You are right to point out that in the post I was combining two problems that ought to be distinguished, one about relative circumstances and one about absolute circumstances. The problem of misunderstanding the values in play only obtains if the circumstances of the two parties are significantly different. I’m actually inclined to think, though, that the absolute circumstances matter too and they call out for a particular kind of engagement even among those who are all badly off. I don’t yet have much to say about what kind of engagement this is – it may amount to just a difference in the attitude toward the transaction rather than
    the terms. My thinking is still very much in flux about this and I am very interested in what others think.

    • I don’t think ‘market norms’ has a current interpretation in Econ. such that this statement is meaningful- ‘it may be that we are permitted to engage in market transactions in the familiar way in the face of pervasive in- justice, but that if we do so we acquire a new source of obligation to work for institutional change.’
      This is because there is always a missing market which it is permissible to institute such that the perceived ‘pervasive in-justice’ disappears. Since there is a implicit market for any given market which becomes explicit if information costs change sufficiently and since the information contained in implicit markets themselves get reflected in actual markets (becaue they contribute to ‘derived demand’ or ‘joint supply’) no ‘scandal’ for ‘Market norms’ arises- at least for current Economic conceptions of the Market.
      Specifically in
      1) there are 2 separate issues- information asymmetry (for which there will always be a Welfare improvement through better Mechanism Design) and the problem of meta-preferences (for which there is an Impossibility type result by reason of the underlying impredicativity).
      2) the existing Economics of ‘repugnancy markets’ suggests that Philosophers have no business in this neck of the woods because the ways forward are highly pragmatic.
      3) can be subsumed under the rubric of Ken Binmore’s sort of Evolutionary Game Theory or Mechanism Design which aims to’ de-Kant’ the subject
      4) Before speaking of absolute and relative circumstances one needs to understand the difference between what is algorithmically computable and verifiable. After all Markets are a way to compute a certain type of solution. Just saying that they cant compute something else proves nothing because no one can show that they are computable at all.

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