Top Quotes: “What Money Can’t Buy” — Michael Sandel

Introduction

“There are some things money can’t buy, but these days, not many. Today, almost everything is up for sale. Here’s a few examples:

• A prison cell upgrade: $82 per night. In Santa Ana and some other cities, nonviolent offenders can pay for better accommodations — a clean, quiet jail cell away from the cells from nonpaying prisoners
• Access to the carpool lane while driving solo: $8 during rush hour. Minneapolis and other cities are trying to ease congestion by letting solo drivers pay to drive in carpool lanes, at rates that vary according to traffic.
• The services of an Indian surrogate mom to carry a pregnancy: $6,250. Western couples seeking surrogates increasingly outsource the job to India, where the practice is legal and the price is less than one-third the going rate in the U.S.
• The right to immigrate to the U.S.: $500,000. Foreigners who invest $500,000 an create at least ten jobs in an area of high unemployment are eligible for a green card that entitles them to permanent residency.
• The right to shoot an endangered black rhino: $150,000. South Africa has begun letting ranchers sell hunters the right to kill a limited number of rhinos, to give the ranchers an incentive to raise and protect the endangered species.
• The cell phone number of your doctor: $1,500 and up per year. A growing number of ‘concierge’ doctors offer cell access and same-day appointments for patients willing to pay annual fees from $1,500 to $25,000.
• The right to emit a metric ton of carbon into the atmosphere: $18. The EU runs a carbon emissions market that enables companies to buy and sell the right to pollute.
• Admission of your child to a prestigious university: ? Although the price isn’t posted, officials from some stop universities told the Wall Street Journal that they accept some less than stellar students whose parents are wealthy and likely to make substantial financial contributions.”

Not everyone can afford to buy these things. But today there are lots of new ways to make money. If you need to earn some extra cash, here are some novel possibilities:

• Rent out space on your forehead (or elsewhere on your body) to display commercial advertising: $777. Air New Zealand hired thirty people to shave their heads and wear temporary tattoos with the slogan ‘Need a change? Head down to New Zealand.’
• Serve as a human guinea pig in a drug safety trial for a pharmaceutical company: $7,500. The pay can be higher or lower, depending on the invasiveness of the procedure used to test the drug’s effect, and the discomfort involved
• Fight in Somalia or Afghanistan for a private military company: $250 per month to $1,000 per day. The pay varies according to qualifications, experience, and nationality.
• Stand in line overnight on Capitol Hill to hold a place for a lobbyist who wants to attend a congressional hearing: $15-$20 per hour. The lobbyists pay line-standing companies, who hire homeless people and others to queue up.
• If you’re a second grader in an underachieving Dallas school, read a book: $2. To encourage reading, the schools pay kids for each book they read.
• If you’re obese, lose 14 pounds in four months: $378. Companies and health insurers offer financial incentives for weight loss and other kinds of healthy behavior.
• Buy the life insurance policy of an ailing or elderly person, pay the annual premiums while the person is alive, and then collect the death benefit when they die: potentially, millions (depending on the policy). This form of betting on the lives of strangers has become a $30 billion industry. The sooner the stranger dies, the more the investor makes.”

“We live at a time when everything can be bought and sold. Over the past three decades, markets — and market values — have come to govern our lives as never before. We didn’t arrive at this condition through any deliberate choice. It is almost as if it came upon us.”

“As the cold war ended, markets and market thinking enjoyed unrivaled prestige, understandably so. No other mechanism for organizing the production and distribution of goods had proven as successful at generating affluence and prosperity. And yet, even as growing numbers of countries around the world embraced market mechanisms in the operation of their economies, something else was happening. Market values were coming to play a greater and greater role in social life. Economics was becoming an imperial domain. Today, the logic of buying and selling no longer applies to material goods alone but increasingly governs the whole of life. It’s time to ask whether we want to live this way.”

“The years leading up to the financial crisis of ’08 were a heady time of market faith and deregulation — an era of market triumphalism. The era began in the 80s when Reagan and Thatcher proclaimed their conviction that markets, not government, held the key to prosperity and freedom. And it continued in the 90s, with the market-friendly liberalism of Clinton and Blair, who moderated but consolidated the faith that markets are the primary means for achieving the public good.”

“Today, that faith is in doubt. The era of market triumphalism has come to an end. The financial crisis did more than cast doubt on the ability of markets to allocate risk efficiently. It also prompted a widespread sense that markets have become detached from morals and that we need somehow to reconnect them. But it’s not obvious what this would mean, or how we should go about it.

Some say the moral failing at the heart of market triumphalism was greed, which led to irresponsible risk taking. The solution, according to this view, is to rein in greed, insist on greater integrity and responsibility among bankers and Wall Street execs, and enact sensible regulations to prevent a similar crisis from occurring again.

This is, at best, a partial diagnosis. While it’s certainly true that greed played a role in the financial crisis, something bigger is at stake. The most fateful change the unfolded during the past three decades was not an increase in greed. It was the expansion of markets, and of market values, into spheres of life where they don’t belong.

To contend with this condition, we need to do more than inveigh against greed; we need to rethink the role that markets should play in our society. We need a public debate about what it means to keep markets in their place. To have this debate, we need to think through the moral limits of markets. We need to ask whether there are some things money should not buy.”

“The reach of markets, and market-oriented thinking, into aspects of life traditionally governed by nonmarket norms is one of the most significant developments of our time.

Consider the proliferation of for-profit schools, hospitals, and prisons, and the outsourcing of war to private military contractors. (In Iraq and Afghanistan, private contractors actually outnumbered U.S. military troops.)

Consider the eclipse of public police forces by private security firms — especially in the U.S. and Britain, where the number of private guards is more than twice the number of police officers.

Or consider the pharmaceutical companies’ aggressive marketing of prescription drugs to consumers in rich countries. (If you’ve ever seen the TV commercials on the evening news in the U.S., you could be forgiven for thinking that the greatest health crisis in the world is not malaria or river blindness or sleeping sickness, but a rampant epidemic of erectile dysfunction.)

Consider too the reach of commercial advertising into public schools; the sale of ‘naming rights’ to parks and civic spaces; the marketing of ‘designer’ eggs and sperm for assisted reproduction; the outsourcing of pregnancy to surrogate mothers in the developing world; the buying and selling, by companies and countries, of the right to pollute; a system of campaign finance that comes close to permitting the buying and selling of elections.

These uses of markets to allocate health, education, public safety, national security, criminal justice, environmental protection, recreation, procreation, and other social goods were for the most part unheard of thirty years ago. Today, we take them largely for granted.”

“Why worry that we’re moving toward a society in which everything is up for sale? For two reasons: one is about inequality; the other is about corruption. Consider inequality. In a society where everything is for sale, life is harder for those of modest means. The more money can buy , the more affluence (or lack of it) matters.

If the only advantage of affluence were the ability to buy yachts, sports cars, and fancy vacations, inequalities of income wouldn’t matter very much. But as money comes to buy more and more — political influence, good medical care, a home in a safe neighborhood rather than a crime-ridden one, access to elite schools rather than failing ones — the distribution of income and wealth looms larger and larger. Where all good things are bought and sold, having money makes all the difference in the world. That explains why the last few decades have been especially hard on poor and middle-class families. Not only has the gap between rich and poor widened, the commodification of everything has sharpened the sting of inequality by making money matter more.

The second reason we should hesitate to put everything up for sale is more difficult to describe. It’s not about inequality and fairness but about the the corrosive tendency of markets. Putting a price on the good things in life can corrupt them. That’s because markets don’t only allocate goods; they also express and promote certain attitudes toward the goods being exchanged. Paying kids to read books might get them to read more, but also teach them to regard reading as a chore rather than a source of intrinsic satisfaction. Auctioning seats in the freshman class to the highest bidders might raise revenue but also erode the integrity of the college and the value of its diploma. Hiring foreign mercenaries to fight our wars might spare the lives of our citizens but corrupt the meaning of citizenship.

Economists often assume that markets are inert, that they do not affect the goods they exchange. But this is untrue. Markets leave their mark. Sometimes, market values crowd out nonmarket values worth caring about.

Of course, people disagree about what values are worth caring about, and why. So to decide what money should — and should not — be able to buy, we have to decide what values should govern the various domains of social and civic life. Here’s a preview of the answer I hope to offer: when we decide that certain goods may be bought and sold, we decide, at least implicitly, that it’s appropriate to treat them as commodities, as instruments of profit and use.”

“We don’t allow children to be bought and sold on the market. Even if buyers did not mistreat the children they purchased, a market in children would express and promote the wrong way of valuing them. Children are not properly regarded as consumer goods but as beings worthy of love and care. Or consider the rights and obligations of citizenship. If you’re called to jury duty, you may not hire a substitute to take your place. Nor do we allow citizens to sell their votes, even though others might be eager to buy them. Why not? Because we believe that civic duties should not be regarded as private property but should be viewed instead as public responsibilities. To outsource them is to demean them, to value them in the wrong way.

These examples illustrate a broader point: some of the good things in life are corrupted or degraded if turned into commodities. So to decide where the market belongs, and where it should be kept at a distance, we have to decide how to value the goods in question — health, education, family life, nature, art, civic duties, and so on. These are moral and political questions, not merely economic ones. To resolve them, we have to debate, case by case, the moral meaning of these goods and the proper way of valuing them.

This is a debate we didn’t have during the era of market triumphalism. As a result, without quite realizing it, without ever deciding to do so, we drifted from having a market economy to being a market economy.

The difference is this: a market economy is a tool — a valuable and effective tool — for organizing productive activity. A market society is a way of life in which market values steep into every aspect of human endeavor. It’s a place where social relations are made over in the image of the market.”

The Financial Crisis

“The spectacular failure of financial markets did little to dampen the faith in markets generally. In fact, the financial crisis discredited government more than the banks. In 2011, surveys found that the American public blamed the federal government more than Wall Street financial institutions for the economic problems facing the country — by a margin of more than two to one.

The financial crisis had pitched the U.S. and much of the global economy into the worst economic downturn since the Great Depression and left millions of people out of work. Yet it did not prompt a fundamental rethinking of markets. Instead, its most notable political consequence in the U.S. was the rise of the Tea Party movement, whose hostility toward government and embrace of free markets would have made Reagan blush. In the fall of 2011, the Occupy Wall Street movement brought protests to cities throughout the U.S. and around the world. These protests targeted big banks and corporate power, and the rising inequality of income and wealth. Despite their different ideological orientations, both the Tea Party and Occupy Wall Street activists gave voice to populist outrage against the bailout.”

Line Standers

“Even where you’re not allowed to buy your way to the head of the line, you can sometimes hire someone else to queue up on your behalf. Each summer, NYC’s Public Theater puts on free outdoor Shakespeare performances in Central Park. Tickets for the evening performances are made available at 1pm and the line forms hours in advance.

In 2010, when Al Pacino starred in The Merchant of Venice, demand for tickets was especially intense. Many New Yorkers were eager to see the play but didn’t have time to stand in line. This predicament gave rise to a cottage industry — people offering to wait in line to secure tickets for those willing to pay for the convenience. The line standers advertised their services on Craigslist and other sites. In exchange for queuing up and enduring the wait, they were able to charge their busy clients as much as $125 per ticket for the free performances.

The theater tried to prevent the paid line standers from plying their trade, claiming ‘it’s not in the spirit of Shakespeare in the Park.’ The mission of the Public Theater, a publicly subsidized, nonprofit enterprise, is to make great theater accessible to a broad audience drawn from all walks of life. Andrew Cuomo, NY’s attorney general at the time, pressured Craigslist to stop running ads for the tickets and line-standing services. ‘Selling tickets that are meant to be free,’ he stated, ‘deprives New Yorkers of enjoying the benefits that this taxpayer-supported institution provides.’”

“In DC, the line-standing business is fast becoming a fixture of government. When congressional committees hold hearings on proposed legislation, they reserve some seats for the press and make others available to the general public on a first-come, first-served basis. Depending on the subject and the size of the room, the lines for the hearings can form a day or more in advance, sometimes in the rain or in the chill of winter. Corporate lobbyists are keen to attend these hearings, in order to chat up lawmakers during breaks and keep track of legislation affecting their industries. But the lobbyists are loath to spend hours in line to assure themselves a seat. Their solution: pay thousands of dollars to companies that hire people to queue up for them.

The line-standing companies recruit retirees, message couriers, and, increasingly, homeless people to brave the elements and hold a place in the queue. The line standers wait outside, then, as the line moves, they proceed inside the halls of the congressional office buildings, queuing up outside the hearing rooms. Shortly before the hearing begins, the well-heeled lobbysists arrive, trade places with their scruffily attired stand-ins, and claim their seats in the hearing room.

The line-standing companies charge the lobbyists $36-$60 per hour for the queuing service, which means that getting a seat in a committee hearing can cost $1,000 or more. The line standers themselves are paid $10-$20 per hour. The Washington Post has editorialized against the practice, calling it ‘demeaning’ to Congress and ‘contemptuous of the public.’ Senator Claire McCaskill has tried to ban it, without success.”

“Queuing for pay is not only an American phenomenon. Line-standing business has become routine at top hospitals in Beijing. The market reforms of the last two decades have resulted in funding cuts for public hospitals and clinics, especially in rural areas. So patients from the countryside now journey to the major public hospitals in the capital, creating long lines in registration halls. They queue up overnight, sometimes for days, to get an appointment ticket to see a doctor.

The appointment tickets are a bargain — only 14 yuan (about $2). But it isn’t easy to get one. Rather than camp out for days and nights in the queue, some patients, desperate for an appointment, buy tickets from scalpers. The scalpers make a business of the yawning gap between supply and demand. They hire people to line up for appointment tickets and then resell the tickets for hundreds of dollars — more than a typical peasant makes in months Appointments to see leading specialists are especially prized — and hawked by the scalpers as if they were box seats for the World Series. The LA Times described the ticket-scalping scene outside the reg hall of a Beijing hospital: ‘Dr. Tang. Dr. Tang. Who wants a ticket for Dr. Tang? Rheumatology and immunology.’

There’s something distasteful about scalping tickets to see a doctor. For one thing, the system rewards unsavory middlemen rather than those who provide the care. Dr. Tang could well ask why, if a rheumatology appointment is worth $100, most of the money should go to scalpers rather than to him, or his hospital. Economists might agree and advise hospitals to raise their prices. In fact, some Beijing hospitals have added special ticket windows, where the appointments are much more expensive and the lines much shorter. This high-priced ticket window is the hospital’s version of the no-wait premium pass at amusement parks or the fast-track lane at the airport.

But regardless of who cashes in on the excess demand, the scalpers or the hospital, the fast track to the rheumatologist raises a more basic question: Should patients be able to jump the queue for medical care simply because they can afford to pay extra?”

“Although U.S. hospitals aren’t thronged with scalpers, medical care often involves a lot of waiting. Doctor appointments have to be scheduled weeks, sometimes months, in advance. When you show up for your appointment, you may have to cool your heels in the waiting room, only to spend a hurried ten or fifteen minutes with the doctor. The reason: Insurance companies don’t pay primary care doctors much for routine appointments. So to make a decent living, physicians in general practice have rosters of three thousand patients or more, and often rush through 25–30 appointments per day.

Many patients and doctors are frustrated with this system, which leaves little time for doctors to get to know their patients or to answer their questions. So a growing number of physicians now offer a more attentive form of care known as ‘concierge medicine.’ Like the concierge at a five-star hotel, the concierge physician is at your service around the clock. For annual fees ranging from $1,500 to $25,000, patients are assured of same-day or next-day appointments, no waiting, leisurely consultations, and 24-hour access to the doctor by email or cell phone. And if you need to see a top specialist, your concierge doctor will pave the way.

To provide this attentive service, concierge physicians sharply reduce the number of patients they care for. Physicians who decide to convert their practice into a concierge service send a letter to their existing patients offering a choice: sign up for the new, no-wait service for an annual retainer fee, or find another doctor.

One of the first concierge practices, and one of the priciest, is MD Squared, founded in 1996 in Seattle. For a fee of $15,000 per year for an individual ($25,000 for a family), the company promises ‘absolute, unlimited, and exclusive access to your personal physician.’ Each doctor only serves fifty families. As the company explains on its site, the ‘availability and level of service we provide absolutely necessitates that we limit our practice to a select few.’ An article in Town & Country magazine reports that the MD Squared waiting room ‘looks more like the lobby of a Ritz-Carlton than a clinical doctor’s office.’ But few patients even go there. Most are ‘CEOs and business owners who don’t want to lose an hour out of their day to go to the doctor’s office and prefer instead to receive care in the privacy of their home or office.’

Other concierge practices cater to the upper middle class. MDVIP, a for-profit concierge chain based in Florida, offers same-day appointments and prompt service (answering your calls by the second ring) for $1,500 to $1,800 per year, and accepts insurance payments for standard medical procedures. Participating physicians cut their patient rolls to 600, enabling them to spend more time with each patient. The company assures patients that ‘waiting will not be a part of their healthcare experience.’ According to the New York Times, an MDVIP practice in Boca Raton sets out fruit salad and sponge cake in the waiting room. But since there’s little if any waiting, the food often goes untouched.

For concierge doctors and their paying customers, concierge care is everything medicine should be. Doctors can see eight to twelve patients per day, rather than thirty, and still come out ahead financially. Physicians affiliated with MDVIP keep two-thirds of the annual fee, which means a practice with 600 patients makes $600,000 per year in retainer fees alone, not counting reimbursements from insurance companies. For patients who can afford it, unhurried appointments and round-the-clock access to a doctor are luxuries worth paying for.

The drawback, of course, is that concierge care for a few depends on shunting everyone else onto the crowded rolls of other doctors. It therefore invites the same objection leveled against all fast-track schemes: that it’s unfair to those left languishing in the slow lane.”

Incentives

“Each year, hundreds of thousands of babies are born to drug-addicted mothers. Some of these babies are born addicted to drugs, and a great many of them will suffer child abuse or neglect. Barbara Harris, the founder of a charity called Project Prevention, has a market-based solution: offer drug-addicted women $300 cash if they will undergo sterilization or long-term birth control. More than 3,000 women have taken her up on the offer since she launched the program in 1997.

Critics call the project ‘morally reprehensible,’ a ‘bribe for sterilization.’ They argue that offering drug addicts a financial inducement to give up their reproductive capacity amounts to coercion, especially since the program targets vulnerable women in poor neighborhoods. Rather than help the recipients overcome their addiction, critics complain, the money subsidizes it. As one flyer for the program states, ‘Don’t Let Pregnancy Ruin Your Drug Habit.’”

“We often associate corruption with illicit payoffs to public officials. But corruption also has a broader meaning: we corrupt a good, an activity, or a social practice whenever we treat it according to a lower norm than is appropriate to it. So, to take an extreme example, having babies in order to sell them for profit is a corruption of parenthood, because it treats children as things to be used rather than beings to be loved. Political corruption can be seen in the same light: when a judge accepts a bribe to render a corrupt verdict, he acts as if his judicial authority were an instrument of personal gain rather than of public trust. He degrades and demeans his office by treating it according to a lower norm than is appropriate to it.

The broader notion of corruption lies behind the charge that the cash-for-sterilization scheme is a form of bribery. Those who call it bribery are suggesting that, whether or not the deal is coercive, it is corrupt. And the reason it is corrupt is that both parties — the buyer (Harris) and the seller (the addict) — value the good being sold (the childbearing capacity of the addict) in the wrong way. Harris treats drug-addicted and HIV-positive women as damaged baby-making machines that can be switched off for a fee. Those who accept her offer acquiesce in this degrading view of themselves. This is the moral force of the bribery charge. Like corrupt judges and public officials, those who get sterilized for money sell something that should not be up for sale. They treat their reproductive capacity as a tool for monetary gain rather than a gift or trust to be exercised according to norms of responsibility and care.”

“More and more, financial incentives are seen as a key to educational improvement, especially for students in poorly performing urban schools. A recent Time cover put the question bluntly: ‘Should Schools Bribe Kids?’ Some say it all depends on whether the bribes work.

Roland Fyer, Jr., an economics professor at Harvard, is trying to find out. Fryer, an African American who grew up in tough neighborhoods in Florida and Texas, believes that cash incentives may help motivate kids in inner-city schools. Backed by foundation funding, he has tested his idea in several of the largest school districts in the U.S. Beginning in 2007, his project paid out $6.3 million to students in 261 urban schools with predominantly black and Latinx populations from low-income families. Different incentive schemes were used in each city:

• In NYC, participating schools paid fourth graders $25 to score well on standardized tests. Seventh graders could earn $50 per year. The average seventh grader made a total of $232.
• In DC, schools paid middle school students cash rewards for attendance, good behavior, and turning in their homework. Conscientious kids could make up to $100 every two weeks. The average student collected about $40 in the biweekly payoff and a total of $533 for the school year.
• In Chicago, they offered ninth graders cash for getting good grades in their courses: $50 for an A, $35 for a B, and $20 for a C. The top student could make a handsome haul of $1,875 for the school year.
• In Dallas, they pay second graders $2 for each book they read. To collect the cash, students have to take a computerized quiz to provide they’ve read the book.

The cash payments yielded mixed results. In NYC, paying kids for good test scores did nothing to improve their academic performance. The cash for good grades in Chicago led to better attendance but no improvement on standardized tests. In Washington, the payments helped some students (Latino boys and students with behavioral problems) achieve higher reading scores. The cash worked best with the Dallas second graders, the kids who got paid $2 per book wound up with higher reading comprehension scores at the end of the year.

Fryer’s project is one of many recent attempts to pay kids to do better in school. Another such program offers cash for good scores on AP exams. In 1996, Texas launched the AP Incentive Program, which pays students $100-$500 (depending on the school) for earning a passing grade (3 or higher) on the exams. Their teachers are also rewarded, with $100-$500 for each student who passes the exam, plus additional salary bonuses. The incentive program, which now operates in sixty Texas high schools, seeks to improve the college readiness of minority and low-income students. A dozen states now offer financial incentives to students and teachers for success on AP tests.

Some incentive programs target teachers rather than students. Although teachers’ unions have been wary of pay-for-performance proposals, the idea of paying teachers for the academic achievement of their students is popular among voters, politicians, and some educational performers. Since 2005, school districts in Denver; NYC; DC; Gullford County, NC; and Houston have implemented cash incentive schemes for teachers. In 2006, Congress established the Teacher Incentive Fund to provide pay-for-performance grants for teachers in low-achieving schools. The Obama administration increased funding for the program. Recently, a privately funded incentive program in Nashville offered middle school math teachers cash bonuses of up to $15,000 for improving the test scores of their students.

The bonuses in Nashville, sizable though they were, had virtually no impact on students’ math performance. But the AP incentive programs in Texas and elsewhere have had a positive effect. More students, including students from low-income and minority backgrounds, have been encouraged to take AP courses. And many are passing the standardized tests that qualify them for college credit. This is very good news. But it does not bear out the standard economic view about financial incentives: the more you pay, the harder students will work, and the better the outcome. The story is more complicated.

The AP incentive programs that have succeeded offer more than cash to students and teachers; they transform the culture of schools and the attitudes of students toward academic achievement. Such programs provide special training for teachers, lab equipment, and organized tutoring sessions after school and on Saturdays. One tough urban school in Worcester, MA, made AP classes available to all students, rather than to a preselected elite, and recruited students with posters featuring rap stars, ‘making it cool for boys with low-slung jeans who idolize rappers like Lil Wayne to take the hardest classes.’ The $100 incentive for passing the AP exam at the end of the year was a motivator, it seems, more for its expressive effect than for the money itself. ‘There’s something cool about the money,’ one successful student told the New York Times. ‘It’s a great extra.’ The twice-weekly after-school tutoring sessions and eighteen hours of Saturday classes provided by the program also helped.

When an economist looked closely at the AP incentive program in low-income Texas schools, he found something interesting: the program succeeded in boosting academic achievement but not in a way that the standard ‘price effect’ would predict (the more you pay, the better the grades). Although some schools paid $100 for a passing grade on the AP test, and others paid as much as $500, the results were no better in schools that offered the higher amounts. Students and teachers were ‘not simply behaving like revenue maximizers,’ wrote the author of the study.

So what was going on? The money had an expressive effect — making academic achievement ‘cool.’ That’s why the amount was not decisive. Although only AP courses in English, math, and science qualified for the cash incentives at most schools, the program also led to higher enrollment in other AP courses, such as history and social studies. The AP incentive programs have succeeded not by bribing students to achieve but by changing attitudes toward achievement and the culture of schools.”

“Healthcare is another area where cash incentives are in vogue. Increasingly, doctors, insurance companies, and employers are paying people to be healthy — to take their meds, quit smoking, lose weight. You might think that avoiding disease or life-threatening ailments would be motivation enough. But, surprisingly, that’s often not the case. One-third to one-half of patients fail to take their meds as prescribed. When their conditions worsen, the overall result is billions of dollars a year in additional health costs. So doctors and insurers are offering cash incentives to motivate patients to take their meds.

In Philly, patients prescribed warfarin, an anti-blood clot medication, can win cash rewards ranging from $10 to $100 for taking the drug. (A computerized pillbox records whether they take the drug and tells them whether they won that day.) Participants in the incentive scheme make an average of $90 a month for adhering for their prescriptions. In Britain, some patients with bipolar disorder or schizophrenia are paid $22 to show up for their monthly injection of antipsychotic drugs. Teenage girls are offered $68 in shopping vouchers to receive vaccinations that protect against an sexually transmitted virus that can cause cervical cancer.

Smoking imposes big costs on companies that provide health insurance to their workers. So in 2009, GE began paying some of its employees to quit smoking — $750 if they could quit for as long as a year. The results were so promising that GE has extended its offer to all its U.S. employees. Safeway offers lower health-insurance premiums to workers who don’t smoke and who keep their weight, blood pressure, and cholesterol under control. A growing number of companies use some combination of carrots and sticks to motivate employees to improve their health. 80% of big U.S. companies now offer financial incentives for those who participate in wellness programs. And almost half penalize workers for unhealthy habits, typically by charging them more for health insurance.”

“If health bribes work, worries about corrupting good attitudes toward health may seem hopelessly high-minded. If cash can cure us of obesity, why cavil about manipulation? One answer is that a proper concern for our physical well-being is a part of self-respect. Another answer is more practical: absent the attitudes that sustain good health, the pounds may return when the incentives end.

This seems to have happened in the paid weight-loss schemes that have been studied so far. Cash to quit smoking has shown a glimmer of hope. But even the most encouraging study found that more than 90% of smokers who were paid for kicking the habit were back to smoking six months after the incentives ended. In general, cash incentives seem to work better at getting people to show up for a specific event — a doctor’s appointment or an injection — than at changing long-term habits and behaviors.

Paying people to be healthy can backfire, by failing to cultivate the values that sustain good health. If this is true, the economist’s question (‘Do cash incentives work?) and the moralist’s question (‘Are they objectionable?) are more closely connected than first appears. Whether an incentive ‘works’ depends on the goal. And the goal, properly conceived, may include values and attitudes that cash incentives undermine.”

“A friend of mine used to pay his young children $1 each time they wrote a thank-you note. (I could usually tell by reading the notes that they were written under duress.)”

“A law professor proposed the following: Let an international body assign each country a yearly refugee quota, based on national wealth. Then let nations buy and sell these obligations among themselves. So, for example, if Japan is allocated 20,000 refugees per year but doesn’t want to take them, it could pay Russia, or Uganda, to take them in. According to standard market logic, everyone benefits. Russia or Uganda gains a new source of national income, Japan meets its refugee obligations by outsourcing them, and more refugees are rescued than would otherwise find asylum.

There’s something distasteful about a market in refugees, even if it leads to more refugees finding asylum. But what exactly is objectionable about it? It has something to do with the fact that a market in refugees changes our view of who refugees are and how they should be treated. It encourages the participants — the buyers, the sellers, and also those whose asylum is being haggled over — to think of refugees as burdens to be unloaded or as revenue sources, rather than as human beings in peril.

One might acknowledge the degrading effect of a market in refugees and still conclude that the scheme does more good than harm. But what the example illustrates is that markets are not mere mechanisms. They embody certain norms. They presuppose — and promote — certain ways of valuing the goods being exchanged. Economists often assume that markets do not touch or taint the goods they regulate. But this is untrue. Markets leave their mark on social norms. Often, market incentives erode or crowd out nonmarket incentives.

A study of some childcare centers in Israel shows how this can happen. The centers faced a familiar problem: parents sometimes came late to pick up their children. A teacher had to stay with the children until the tardy parents arrived. To solve this problem, the center imposed a fine for late pickups. What do you suppose happened? Late pickups actually increased. Introducing the monetary payments changed the norms. Before, parents who came late felt guilty; they were imposing an inconvenience on the teachers. Now parents considered a late pickup as a service for which they were willing to pay. They treated the fine as if it were a fee. Rather than imposing on the teacher, they were simply paying them to work longer.”

Fines and Fees

“When people treat fines as fees, they flout the norms that fines express. Often, society strikes back. Some affluent drives consider speeding tickets the price they pay for driving as fast as they please. In Finland, the law leans hard against that way of thinking (and driving) by basing fines on the income of the offender. In 2003, Jussi Salonjoa, the 27-year-old heir to a sausage business was fined 170,000 euros (about $217,000 at the time) for driving 80km per hour (50 mph) in a 40km/hr (25 mph) zone. Salonoja, one of the richest men in Finland, had an income of 7 million euros per year. The previous record for the most expensive speeding ticket was held by Anssi Vanjoki, a Nokia exec. In 2002, he was fined 116,000 euros for speeding through Helsinki on his Harley. A judge reduced the fine when Vanjoki showed that his income had dropped, due to a downturn in Nokia’s profits.

What makes the Finnish speeding tickets fines rather than fees is not only the fact that they vary with income. It’s the moral opprobrium that lies behind them — the judgment that violating the speed limit is wrong. Progressive income taxes also vary with income, and yet they are not fines; their purpose is to raise revenue, not penalize income-producing activity. Finland’s $217k speeding ticket shows that society not only wants to cover the costs of risky behavior; it also wants the punishment to fit the crime — and the bank balance of the perp.”

“Consider this controversy over the sometimes blurry line between a fine and a fee: in China, the fine for violating the government’s one-child policy is increasingly regarded by the affluent as a price for an extra child. The policy, put in place more than three decades ago to reduce China’s population growth, limits most couples in urban areas to one child. (Rural families are allowed a second child if the first is a girl.) The fine varies from region to region but reaches about $31,000 in major cities — a staggering figure for the average worker but easily affordable for wealthy entrepreneurs, sports stars, and celebrities. One account from a Chinese news agency tells of a pregnant woman and her husband in Guangzhou who ‘strutted in’ to their local birth control office, threw the money on the desk, and said, ‘Here’s 200,000 yuan. We need to take care of our future baby. Please do not come to disturb us.’”

“Family-planning officials have sought to reassert the punitive aspect of the sanction by increasing fines for affluent offenders, denouncing celebrities who violate the policy and banning them from appearing on TV, and preventing business execs with extra kids from receiving government contracts. ‘The fine is a piece of cake for the rich,’ explained Zhai Zhenwu, a professor of sociology. ‘The government had to hit them harder where it really hurt, at their fame, reputation, and standing in society.

The authorities regard the fine as a penalty and want to preserve the stigma associated with it. They don’t want it to devolve into a fee. This is not mainly because they’re worried about affluent parents having too many children; the number of wealthy offenders is relatively small. What’s at stake is the norm underlying the policy. If the fine were merely a fee, the state would find itself in the awkward business of selling the right to have extra children to those able and willing to pay for it.”

“Oddly enough, some Western economists have called for a market-based approach to population control strikingly similar to the fee-based system the Chinese officials are trying to avoid. These economists have urged countries that need to limit their population to issue tradable procreation permits. In 1964, the economist Kenneth Boulding proposed a system of marketable procreation licenses as a way of dealing with overpopulation. Each woman would be issued a certificate (or two, depending on the policy) entitling her to have a child. She would be free to use the certificate or sell it at the going rate. Boulding imagined a market in which people eager to have children would purchase the certificates from (as he indelicately put it) ‘the poor, the nuns, the maiden aunts, and so on.’

The plan would be less coercive than a system of fixed quotas, as in a one-child policy. It would also be economically more efficient, since it would get the goods (in this case, children) to the consumers most willing to pay for them. Recently, two Belgian economists revived Boulding’s proposal. They pointed out that, since the rich would likely buy procreation licenses from the poor, the scheme would have the further advantage of reducing inequality by giving the poor a new source of income.

Some people oppose all restrictions on procreation, while others believe that reproductive rights can legitimately be restricted to avoid overpopulation. Set aside for the moment that disagreement of principle and imagine a society that was determined to implement mandatory population control. Which policy would you find less objectionable: a fixed quota system that limits each couple to one child and fines those who exceed the limit, or a market-based system that issues each couple a tradable procreation voucher enabling the bearer to have one child?

From the standpoint of economic reasoning, the second policy is clearly preferable. The freedom to choose whether to use the voucher or sell it makes some people better off and no one worse off. Those who buy or sell vouchers gain (by making mutually advantageous trades) and those who don’t enter the market are no worse off than they would be under the fixed quota system; they can still have one child.

And yet there’s something troubling about a system in which people buy and sell the right to have kids. Part of it is the unfairness of such a system under conditions of inequality. We hesitate to make children a luxury good, affordable by the rich but not the poor. If having children is a central aspect of human flourishing, then it’s unfair to condition access to this good on the ability to pay.

Beyond the fairness objection is the question of bribery. At the heart of the market transaction is a morally disquieting activity: parents who want an extra child must induce or entice other prospective parents to sell off their right to have a kid. Morally, it’s not much different from buying a couple’s only child after it has been born.

Economists might argue that a market in children, or in the right to have them, has the virtue of efficiency: it allocates kids to those who value them most highly, as measured by the ability to pay. But trafficking in the right to procreate promotes a mercenary attitude toward children that corrupts parenthood. Central to the norm of parental love is the idea that one’s children are inalienable; it’s unthinkable to put them up for sale. So to buy a child, or the right to have one, from another prospective parent is to cast a shadow over parenthood as such. Wouldn’t the experience of loving your children be tainted if you acquired some of them by bribing other couples to remain childless? Might you be tempted, at least, to hide this fact from your children? If so, there’s reason to conclude that, whatever its advantages, a market in procreation permits would corrupt parenthood in ways that a fixed quota, however odious, would not.”

“The distinction between a fine and a fee is also relevant to the debate over how to reduce greenhouse gases and carbon emissions. Should government set limits on emissions and fine companies that exceed them? Or should government create tradable pollution permits? The second approach says in effect that emitting pollution is not like littering but simply a cost of doing business. But is that right? Or should some moral stigma attach to companies that spew excessive pollution into the air? To decide this question, we need not only to calculate costs and benefits; we have to decide what attitudes toward the environment we want to promote.

At the Kyoto conference on global warming (1997), the U.S. insisted that any mandatory worldwide emissions standards would have to include a trading scheme, allowing countries to buy and sell the right to pollute. so, for example, the U.S. could fulfill its obligations under the Kyoto Protocol by either reducing its own greenhouse gas emissions or paying to reduce emissions someplace else. Rather than tax gas-guzzling Hummers at home, it could pay to restore an Amazonian rainforest or modernize an old coal-burning factory in a developing country.

At the time, I wrote an op-ed arguing against the trading scheme. I worried that letting countries buy the right to pollute would be like letting people pay to litter. We should try to strengthen, not weaken, the moral stigma attached to despoiling the environment. I also worried that, if rich countries could buy their way out of the duty to reduce their own emissions, we would undermine the sense of shared sacrifice necessary to future global cooperation on the environment.”

“One way of reducing pollution is by government regulation: require automakers to meet higher emissions standards; ban chemical companies and paper mills from dumping toxic waste into waterways; require factories to install scrubbers on their smokestacks. And if the companies fail to abide by the standards, fine them. That’s what the U.S. did during the first generation of environmental laws in the early 70s. The regulations, backed by fines, were a way of making companies pay for their pollution. They also carried a moral message: ‘Shame on us for spewing mercury and asbestos into lakes and streams and for befouling the air with choking smog. It’s not only hazardous to our health; it’s no way to treat the earth.’

Some people opposed the regulations because they dislike anything that imposes higher costs on industry. But others, sympathetic to environmental protection, sought more efficient ways of achieving it. As the prestige of markets grew in the 80s, and as economic ways of thinking deepened their hold, some environmental advocates began to favor market-based approaches to saving the planet. Don’t impose emissions standards on every factory, they reasoned; instead, put a price on pollution and let the market do the rest.”

“The moral issue here is not bribery but the outsourcing of an obligation. It arises more acutely in a global setting than a domestic one. Where global cooperation is at stake, allowing rich countries to avoid meaningful reductions in their own energy use by buying the right to pollute from others (or paying for programs that enable other countries to pollute less) does damage to two norms: it entrenches an instrumental attitude toward nature and it undermines the spirit of shared sacrifice that may be necessary to create a global environmental ethic.”

“In the 90s and early 2000s, some wildlife conservation groups and South African biodiversity officials began to consider using market incentives to protect endangered species. If private ranchers were allowed to sell hunters the right to shoot and kill a limited number of black rhinos, the ranchers would have an incentive to breed the, care for them, and fend off poachers.

In 2004, the South African government won approval from the Convention on International Trade in Endangered Species to license five black rhino hunts. Black rhinos are notoriously dangerous and difficult animals to kill, and the chance to hunt one is highly prized among trophy hunters. The first legal hunt in decades commanded a handsome fee: $150,000, paid by an American hunter in the financial industry. Subsequent customers included a Russian petroleum billionaire, who paid to kill three black rhinos.

The market solution seems to be working. In Kenya, where the hunting of rhinos is still prohibited, the population of black rhinos has fallen from 20,000 to about 600, as land is cleared of native vegetation and converted to agriculture and cattle farming. However, in South Africa, where landowners now have a monetary incentive to devote large ranches to wildlife, the black rhino population has begun to rebound.”

Gift Giving

“In 2001, the New York Times published a story about a company in China that offers an unusual service: if you need to apologize to someone — an estranged lover or business partner with whom you’ve had a falling out — and you can’t quite bring yourself to do so in person, you can hire the Tianjin Apology company to apologize on your behalf. The motto of the company is, ‘We say sorry for you.’ According to the article, the professional apologizers are ‘middle-aged men and women with college degrees who dress in somber suits.’”

“Waldfogel has conducted surveys to measure how much value the inefficient practice of gift giving destroys. He asks gift recipients to estimate the monetary value of the gifts they’ve received, and the amount they would have been willing to pay for them. His conclusion: ‘We value items we receive as gifts 20% less, per dollar spent, than items we buy for ourselves.’ This 20% figure enables Waldfogel to estimate the total ‘value destruction’ brought about, nationwide, by holiday gift giving: ‘Given the $65 billion in U.S. holiday spending per year, that means we get $13 billion less in satisfaction than we would receive if we spent that money in the usual way — carefully, on ourselves. Americans celebrate the holidays with an orgy of value destruction.’”

“The trend toward the monetizing of holiday gifts gathered momentum in the 90s, when growing numbers of shoppers began giving gift certificates. In the late 90s, the shift to plastic gift cards with magnetic strips accelerated the trend. From 1998 to 2010, annual sales of gift cards increased almost eightfold, to more than $90 billion. According to consumer surveys, gift cards are now the most popular holiday gift request.”

“My favorite example of the commodification of gift giving is a recently patented system for electronic regifting. A Times article describe it as: Suppose your aunt sends you a fruitcake for Christmas. The fruitcake company sends you an email informing you of the thoughtful gift and gives you the option of accepting delivery, exchanging it for something else, or sending the fruitcake to an unsuspecting person on your gift list. Since the transaction takes places online, you don’t have to bother repacking the item and taking it to the post office. If you opt for regifting, the new recipient is offered the same options. So it’s possible that the unwanted fruitcake could ricochet its way indefinitely through cyberspace.”

Adoption & Prostitution

“It would be possible to create a market in babies up for adoption. But should we? Those who object offer two reasons: One is that putting children up for sale would price less affluent parents out of the market, or leave them with the cheapest, least desirable children (the fairness argument). The other is that putting a price tag on children would corrupt the norm of unconditional parental love; the inevitable price differences would reinforce the notion that the value of a child depends on their race, sex, intellectual promise, physical abilities or disabilities, and other traits (the corruption argument).

It’s worth taking a moment to clarify these tow arguments for the moral limits of markets. The fairness objection points to the injustice that can arise when people buy and sell things under conditions of inequality or dire economic necessity. According to this objection, market exchanges are not always as voluntary as market enthusiasts suggest. A peasant may agree to sell his kidney to feed his starving family, but his agreement may not really be voluntary. He may be unfairly coerced, in effect, by the necessities of his situation.”

“According to the degradation objection, prostitution is a form of corruption that demeans women and promotes bad attitudes toward sex. This objection doesn’t depend on tainted consent; it would condemn prostitution even in a society without poverty, even in cases of upscale prostitutes who liked the work and freely chose it.

Each objection draws on a different moral ideal. The fairness argument draws on the ideal of consent or, more precisely, the ideal of consent carried out under fair background conditions. One of the main arguments for using markets to allocate goods is that markets respect freedom of choice. They allow people to choose for themselves whether to sell this or that good at a given price.

But the fairness objection points out that some such choices aren’t truly voluntary. In order to know whether a market choice is a free choice, we have to ask what inequalities in the background conditions of society undermine meaningful consent. At what point do inequalities of bargaining power coerce the disadvantaged and undermine the fairness of the deals they make?”

Cash Payoffs

“For years, Switzerland, which relies heavily on nuclear energy, had been trying to find a place to store radioactive nuclear waste. 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, asking whether they’d vote to accept the repository in their community if parliament decided to build it there. Although the facility was widely viewed as an undesirable addition to the neighborhood, a slim majority (51%) said they’d accept it. Apparently their sense of civic duty outweighed their concern about the risks. Then the economists added a sweetener: suppose parliament proposed building it and offered to compensate each resident with an annual monetary payment. Then would you favor it?

The result: support went down, not up. Adding the financial inducement cut the rate of acceptance in half, from 51% to 25%. What’s more, upping the ante didn’t help. When economists increased the 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 respositories.

Standard economic analysis suggests that offering people money to accept a burden would increase their willingness to do so. But 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 site reflected public spirit — a recognition that the country as a whole depended on nuclear energy and that the waste had to be stored somewhere. If the 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 felt like a bribe, an effort to buy their vote. In fact, 83% of those who rejected the monetary proposal explained their opposition by saying they couldn’t be bribed.”

“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, 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.”

“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% and 10%, respectively. The rewards would not be deducted from the donations; they would come from a separate source.

The unpaid students collected 55% more in donations than those who were offered a 1% commission. Those who were offered 10% did considerably better than the 1% group, but less well than the students who were not paid at all. (The unpaid collected 9% more than those on the high commissions.)

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.’ But there’s also a lesson here about how money crowds out norms. Paying students to do a good deed likely 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.”

“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 or public-spiritedness are great bargains. They motivate socially useful behavior that would otherwise cost a lot to buy. But to view moral and civic norms simply as cost-effective ways of motivating people ignores the intrinsic value of the norms. Relying solely on cash payments to induce residents to accept a nuclear waste facility is not only expensive; it’s 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 not only adds to the fundraising cost; it also dishonors their public spirit and disfigures their moral and civic education.”

“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. The AARP asked a group of lawyers if they’d 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’d provide the advice 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.

A growing body of work in social psych offers a possible explanation for this commercialization effect. These studies highlight the difference between intrinsic motivation (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. 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, healthcare, the workplace, voluntary associations, civic life, and other settings in which intrinsic motivations or moral commitments matter.”

Life Insurance

“Michael Rice, 48, an assistant manager at a Walmart, was helping a customer carry a TV to her car when he had a heart attack and died a week later. An insurance policy on his life paid out about $300,000. But the money didn’t go to his wife and two children. It went to Walmart, which had purchased the policy on Rice’s life and named itself as the beneficiary.

According to Mrs. Rice, neither she nor her husband had any idea that Walmart had taken out a policy on him. When she learned of the policy, she sued Walmart, claiming that the money should go to the family, not the company. Her attorney argued that corporations should not be able to profit from the death of their workers: ‘It’s absolutely reprehensible for a giant like Walmart to be gambling on the lives of its employees.’

A Walmart spokesman acknowledged that the company held life insurance policies on hundreds of thousands of its employees. But he denied that this amounted to profiting from death. ‘It’s our contention that we didn’t benefit from the death of our associates,’ he said, ‘We had a considerable investment in these employees’ and came out ahead ‘if they continued to live.’ In the case of Michael Rice, the spokesman argued, the insurance payout was not a welcome windfall but compensation for the cost of training him and, now, of replacing him.”

“It has long been common practice for companies to take out insurance on the lives of their CEOs and top execs, to offset the significant cost of replacing them if they die. In the parlance of the insurance business, companies have an ‘insurable interest’ in their CEOs that’s recognized in law. But buying insurance on the lives of rank-and-file workers is relatively new. Such insurance is known in the business as ‘janitors insurance’ or ‘dead peasants insurance.’ Until recently, it was illegal in most states; companies were not considered to have an insurable interest in the lives of their ordinary workers. But during the 80s, the insurance industry successfully lobbied most state legislatures to relax insurance laws, allowing companies to buy policies on all their employees.

By the 90s, major companies were investing millions in corporate-owned life insurance (COIL) policies, creating what amounted to a multibillion-dollar death futures industry. Among the companies that bought policies on their workers were AT&T, Nestle, P&G, and Disney. Companies were drawn to this morbid form of investment by favorable tax treatment. As with conventional whole life insurance policies, the death benefits were tax-free, as was the yearly investment income the policies generated.

Few workers were aware that their companies had put a price on their heads. Most states didn’t require a company to inform employees when it bought insurance on their lives, or to ask workers’ permission to do so. And most COLI policies remained in effect even after a worker quit, retired, or was fired. So corporations were able to collect death benefits on employees who died years after leaving the company, keeping track of the mortality of their former employees through the Social Security Administration. In some states, companies could even take out life insurance and collect death benefits on the children and spouses of their employees.

This practice was especially popular among big banks, including BOA and Chase. In the late 90s, some banks explored the idea of going beyond their employees and taking out insurance on the lives of their depositors and credit card holders.”

“After the 9/11 terror attacks, some of the first life-insurance payouts went not to the victims’ families, but to their employers.”

“By the early 2000s, COLI policies covered the lives of millions of workers and accounted for 25–30% of all life insurance sales. In 2006, Congress sought to limit ‘janitors insurance’ by enacting a law that required employee consent and limited company-owned insurance to the highest-paid one-third of a firm’s workforce. But the practice continued. In 2008, U.S. banks alone held $122 billion in janitors insurance. The spread of it throughout corporate America had begun to transform the meaning and purpose of life insurance from a safety net to a strategy of corporate finance.”

“Texas lawmaker Warren Chisum led a successful effort to reinstate criminal penalties for sodomy in Texas, opposed sex ed, and voted against programs to help AIDS victims. In 1994, Chisum proudly proclaimed that he’d invested $200,000 to buy the life insurance policies of six AIDS victims. ‘My gamble is that it’ll make not less than 17% and sometimes considerably better,’ he told the Houston Post, ‘If they die in one month, you know, they [the investments] do really good.’

Some accused him of voting for policies from which he stood to profit personally. But this charge was misdirected; his money was following his convictions, not the other way around. This was no classic conflict of interest. It was actually something worse — a morally twisted version of socially conscious investing.

Chisum’s brazen glee for the ghoulish side of viaticals was the exception. Few viatical investors were motivated by animus. Most wished good health and long life for people with AIDS — except for the ones in their portfolios.”

Stadiums

“The selling of stadium naming rights is now so commonplace that it’s easy to forget how recently the practice came into vogue. It arose at about the same time that ballplayers began selling their autographs. In 1988, only three sports stadiums had naming rights deals, totaling a mere $25 million. By 2004, there were 66 deals, worth a total of $3.6 billion. This accounted for more than half of all the arenas and stadiums in pro baseball, football, basketball, and hockey. By 2020, over 100 companies had paid to name a big league stadium or arena in the U.S. In 2011, MasterCard bought the naming rights to the former Beijing Olympics basketball arena.

Corporate naming rights don’t end with a sign on the stadium gate; increasingly, they extend to the words that broadcasters use in describing the action on the field. When a bank bought the right to name the Diamondbacks’ stadium Bank One Ballpark, the deal also required that the team’s broadcasters call each Arizona home run a ‘Bank One blast.’ Some teams have sold naming rights to pitching changes. When the manager heads to the mound to bring in a new pitcher, some broadcasters are contractually obligated to announce the move as an ‘AT&T call to the bullpen.’”

“As stadiums become less like landmarks and more like billboards, their public character fades. So, perhaps, do the social bonds and civic sentiments they inspire.

The civic teaching of sports is eroded even more powerfully by a trend that’s accompanied the rise of corporate naming rights — the proliferation of luxury skyboxes. In the 60s, the difference between the most expensive and cheapest seats was $2. In fact, for the most of the 20th century, ballparks were places where corporate execs sat side by side with blue-collar workers, where everyone waited in the same lines to buy hot dogs, and where the rich and poor alike got wet if it rained. In the last few decades, however, this has changed. The advent of skybox suites high above the field of play has separated the affluent and the privileged from the common folk in the stands below.

Although luxury boxes first appeared in the Astrodome in 1965, the skybox trend began when the Cowboys installed luxury suites at Texas Stadium in the 70s. Corporations paid hundreds of thousands of dollars to entertain execs and clients in posh settings above the crowd. During the 80s, more than a dozen teams followed the Cowboys’ lead, cosseting well-heeled fans in glass-enclosed perches in the sky. In the late 80s, Congress cut back on the tax deduction that companies could claim for skybox expenses, but this didn’t stem the demand for the climate-controlled retreats. Revenues from luxury suites were a financial windfall for the teams an drove a stadium construction boom in the 90s.

Public Naming Rights & Advertising

“In 2011, bills were filed in the Florida legislature that would permit the sale of naming rights and commercial advertising along state-owned nature trails. State funding for the greenway system of bicycle, hiking, and canoe trails had been cut in recent years, and some lawmakers saw advertising as a way to compensate for this. A company called Government Solutions Group acts as a broker for deals between state parks and corporate sponsors. The CEO points out that state parks are an ideal advertising venue. Those who visit state parks are ‘excellent consumers,’ with high incomes, she explains. In addition, the park setting is a ‘very quiet marketing environment,’ with few distractions. ‘It’s a great place to reach people; they’re in the right state of mind.’”

“In the early 2000s, many cash-strapped cities and towns were tempted by an offer that seemed too good to be true. A company in North Carolina was offering new, fully equipped police cars, complete with flashing lights and backseat jail bars, for $1 per year. The offer came with a small condition: the cars would be covered, NASCAR-style, with ads and commercial logos.

Some police departments and city officials considered the ads a small price to pay for police cruisers that would otherwise cost about $28k each. More than 160 municipalities in 28 states signed up. The company offering the cars signed contracts with interested towns, then pitched the advertising space to local and national companies. The company insisted the ads would be in good taste — no alcohol, tobacco, firearms, or gaming ads would be accepted. Its site illustrated the concept with a photo of a police car with McDonald’s golden arches across the hood. Among the company’s clients were Dr. Pepper, NAPA Auto Parts, Tabasco, the U.S. Postal Service, the U.S. Army, and Valvoline. The company also planned to approach banks, TV companies, car dealerships, security companies, and radio and TV stations as potential advertisers.

The prospect of ad-festooned police cars prompted controversy. Editorial writers and some law enforcement officers opposed the idea, on several grounds. Some worried about the risk of police favoritism toward police car sponsors. Others thought a police department brought to you by McDonalds, Dunkin Donuts, or the local hardware store demeaned the dignity and authority of law enforcement. Still others argued that the plan reflected badly on government itself and on the willingness of the public to fund essential services. ‘Some things are so fundamental to the orderly operations of a society,’ wrote the columnist Leonard Pitts, Jr., ‘so intrinsic to its dignity, that they have traditionally been entrusted only to people hired and equipped by all of us, collectively, in the interest of the common good. Law enforcement is one of those functions. Or at least, it used to be.

A city councilman in Omaha said he didn’t like the idea at first but was swayed by the savings. And he offered an analogy: ‘Our stadium has ads on the fences and corridors, so does our civic auditorium. As long as it’s done tastefully, ads on police cars are no different.’ Stadium naming rights and corporate sponsorships, it turned out, were morally contagious, or at least suggestive. By the time the police car controversy arose, they had prepared the public mind to contemplate further incursions of commercial practices into civic life.

In the end, however, the company did not deliver any police cars. In the face of public opposition, including a campaign to dissuade national advertisers from participating, it apparently gave up, and it has since gone out of business. But the idea of advertising on police cars has not disappeared.”

“As far as I know, no one has tried to sell advertising on fire trucks. But in 2020, KFC entered into a sponsorship deal with the Indianapolis Fire Department to promote the launch of a new menu item — ‘fiery’ grilled chicken wings. The deal included a photo shoot with the fire department and the placing of KFC logos on fire extinguishers at city rec centers. In another Indiana town, KFC paid for a similar promo in exchange for the right to put KFC logos on fire hydrants.”

“Advertising has also invaded the two institutions most central to civil authority and public purpose: jails and schools. In 2011, the Erie County Holding Center in Buffalo began running ads on a TV screen that defendants see moments after their arrest. The bail bonds and defense lawyer commercials sell for $40 per week with a one-year commitment. They run along with info from the holding center about rules and visiting hours. The ads also appear on a screen in a lobby used by family and friends waiting to visit the inmates. The county government receives a third of the advertising revenue, which will boost county coffers by $8,000-$15,000/year.

The ads sold out quickly. The head of the ad company that set up the arrangement explained its appeal: ‘What do people want when they’re in the holding center? They want to get out. And they don’t want to get convicted. So they want bail. And an attorney.’ The ads and the audience were a perfect fit. ‘You want to advertise to someone exactly when they want to make their decision. That is the case here. This is the ultimate captive audience.’”

Channel One streams ad campaigns to a captive audience of a different kind: the millions of teens required to watch it in classrooms across the country. The commercial-sponsored twelve-minute news program was launched in 1989 to offer schools free TV sets, video equipment, and a satellite link in exchange for an agreement to show the program every day and to require students to watch it, including the two minutes of commercials it contained. Although New York banned Channel One from its schools, most states did not, and by 2000, Channel One was seen by eight million students in 12,000 schools. Since it reached more than 40% of the nation’s teens, it was able to charge advertisers such as Pepsi, Snickers, Clearasil, Gatorade, Reebok, Taco Bell, and the U.S. Army premium rates, about $200,000 per 30 second spot (comparable to ad rates on network TV).

A Channel One exec explained its success at a youth marketing conference in 1994: ‘The biggest selling point to advertisers [is that] we are forcing kids to watch two minutes of commercials. The advertiser gets a group of kids who cannot go to the bathroom, who cannot change the station, who cannot listen to their mom yell in the background, who cannot be playing Nintendo, who cannot have their headsets on.’

The founder sold Channel One some years ago and is now starting a for-profit private school. His former company is no longer the potent force it once was. Since its peak in the early 2000s, Channel One has lost about a third of its schools and many of its major advertisers. But it succeeded in shattering the taboo against commercials in the classroom. Today, public schools are awash in advertising, corporate sponsorships, product placement, even naming rights.”

“The presence of commercialism in classrooms is not altogether new. In the 20s, Ivory Soap donated bars to schools for soap-carving competitions. The placing of company logos on scoreboards and ads in high school yearbooks has long been a common practice. But the 90s brought a dramatic increase in corporate involvement in schools. Companies flooded teachers with free videos, posters, and ‘learning kits’ designed to burnish corporate images and emblazon brand names in the minds of children. They called them ‘sponsored educational materials.’ Students could learn about nutrition from curricular materials supplied by Hershey’s or McDonald’s, or study the effects of an Alaska oil spill in a video made by Exxon. P&G offered an environmental curriculum that explained why disposable diapers were good for the earth.

In 2004, Scholastic distributed free curricular materials about the energy industry to 66,000 fourth-grade teachers. The curriculum, called the ‘United States of Energy,’ was funded by the American Coal Foundation. The industry-sponsored lesson plan highlighted the benefits of coal but made no mention of mining accidents, toxic waste, greenhouse gases, or other environmental effects. When press accounts reported widespread criticism of the one-sided curriculum, Scholastic announced that it would scale back its corporate-sponsored publications.

Not all corporate-sponsored freebies promote ideological agendas. Some simply plug the brand. In one well-known example, Campbell sent out a free science kit that purported to teach the scientific method. With the use of a slotted spoon (included in the kit), students were shown how to prove that Campbell’s Prego spaghetti sauce was thicker than Ragu, a rival brand. General Mills sent teachers a science curriculum on volcanoes called ‘Gushers: Wonders of the Earth.’ The kit included free Gushers samples and the teacher’s guide suggested that students bite into the Gushers and compare the effect to a geothermal explosion. A Tootsie Roll kit showed how third graders could practice math by counting Tootsie Rolls. For a writing assignment, it recommended that children interview family members about their memories of Tootsie Rolls.

The surge in advertising in schools reflects the increased buying power of children and their growing influence on family spending. In 1983, U.S. companies spent $100 million advertising to children. In 2005, they spent $16.8 billion. Since children are in school most of the day, marketers work aggressively to reach them there. Meanwhile, inadequate funding for education has made public schools only too willing to welcome them.”

“In 2001, an elementary school in New Jersey became the nation’s first public school to sell naming rights to a corporate sponsor. In exchange for a $100,000 donation from a local supermarket, it renamed its gym the ShopRite of Brooklawn Center. Other naming rights deals followed. The most lucractive were for high school football fields, ranging from $100k to $1 million. In 2004, a new public high school in Philly aimed high. It announced a price list of available naming rights: $1 million for the performing arts pavilion, $750k for the gym, $50k for the science labs, and $5 million to name the school itself. A high school in Massachusetts offered naming rights to the principal’s office for $10k.

Many school districts have gone for straight-out advertising — in every conceivable space. In 2011, a Colorado school district sold ad space on report cards. A few years earlier, a Florida elementary school issued report cards in jackets bearing a promotion for McDonald’s. The ad was actually part of a ‘report card incentive’ scheme that offered children with all As and Bs, or fewer than three absences, a free Happy Meal. Local opposition led to cancellation of the promotion.

By 2011, seven states had approved advertising on the sides of school buses. School bus ads began in the 90s in Colorado, whose schools were also among the first to accept advertising indoors. In Colorado Springs, ads for Mountain Dew adorned school hallways, and ads for Burger King decorated the sides of school buses. More recently, schools in Minnesota, Pennsylvania, and elsewhere have allowed advertisers to install massive ‘super-graphic’ ads on walls and floors, shrink-wrapped over lockers, locker room benches, and cafeteria tables.”

“The rampant commercialization of schools is corrupting in two ways. First, corporate-sponsored curricular material is ridden with bias, distortion, and superficial fare. A study by Consumers Union found, not surprisingly, that nearly 80% of sponsored educational materials are slanted toward the sponsor’s product or point of view. But even if corporate sponsors supplied objective teaching tools of impeccable quality, commercial advertising would still be a pernicious presence in the classroom, because it is at odds with the purpose of schools. Advertising encourages people to want things and to satisfy their desires. Education encourages people to reflect critically on their desires, to restrain or to elevate them. The purpose of advertising is to recruit consumers; the purpose of public schools is to cultivate citizens.

It isn’t easy to teach students to be citizens, capable of thinking critically about the world around them, when so much of childhood consists of basic training for a consumer society. At a time when many children come to school as walking billboards of logos and labels and licensed apparel, it’s all the more difficult — and important — for schools to create some distance from a popular culture steeped in the ethos of consumerism.

But advertising abhors distance. It blurs the boundaries between places and makes every setting a site for selling. ‘Discover your own river of revenue at the schoolhouse gates!’ proclaimed a brochure promoting a marketing conference for school advertisers. ‘Whether it’s first-graders learning to read or teens shopping for their first car, we can guarantee an introduction of your product and your company to these students in the traditional setting of the classroom.!’

As the marketers storm the schoolhouse gates, cash-strapped schools, reeling from recession, property tax caps, budget cuts, and rising enrollments, feel no choice but to let them in. But the fault lies less in our schools than in us citizens. Rather than raise the public funds we need to educate our children, we choose to instead sell their time and rent their minds to Burger King and Mountain Dew.”

Conclusion

“Imprinting things with corporate logos changes their meaning. Markets leave their mark. Product placement spoils the integrity of books and corrupts the relationship of author and reader. Tattooed body ads objectify and demean the people paid to wear them. Commercials in classrooms undermine the educational purpose of schools.

These are contestable judgments. People disagree about the meaning of books, bodies, and schools, and how they should be valued. In fact, we disagree about the norms appropriate to many of the domains that markets have invaded — family life, friendship, sex, procreation, health, education, nature, art, citizenship, sports, and the way we contend with the prospect of death. But that’s my point: once we see that markets and commerce change the character of the goods they touch, we have to ask where markets belong — and where they don’t. And we can’t answer this question without deliberating about the meaning and purpose of goods, and the values that should govern them.

Such deliberations touch, unavoidably on competing conceptions of the good life. This is terrain on which we sometimes fear to tread. For fear of disagreement, we hesitate to bring our moral and spiritual convictions into the public square. But shrinking from these questions does not leave them undecided. It simply means that markets will decide them for us. This is the lesson of the last three decades. The era of market triumphalism has coincided with a time when public discourse has been largely empty of moral and spiritual substance. Our only hope of keeping markets in their place is to deliberate openly and publicly about the meaning of the goods and social practices we prize.

In addition to debating the meaning of this or that good, we also need to ask a bigger question, about the kind of society in which we wish to live. As naming rights and municipal marketing appropriate the common world, they diminish its public character. Beyond the damage it does to particular goods, commercialism erodes commonality. The more things money can buy, the fewer the occasions when people from different walks of life encounter one another. We see this when we go to a baseball game and gaze up at the skyboxes, or down from them, as the case may be. The disappearance of the class-mixing experience once found at the ballpark represents a loss not only for those looking up but also for those looking down.

Something similar has been happening throughout our society. At a time of rising inequality, the marketization of everything means that people of affluence and people of modest means lead increasingly separate lives. We live and work and shop and play in different places. Our children go to different schools. It’s not good for democracy, nor is it a satisfying way to live.

Democracy does not require perfect equality, but it does require that citizens share in a common life. What matters is that people of different backgrounds and social positions encounter one another, and bump up against one another, in the course of everyday life. For this is how we learn to negotiate and abide our differences, and how we come to care for the common good.

And so, in the end, the question of markets is really a question about how we want to live together. Do we want a society where everything is up for sale? Or are there certain moral and civic goods that markets do not honor and money cannot buy?”