In this post, I’ll summarize Stanford political philosopher Debra Satz’ account of noxious markets. (Satz 2010; unsourced page number citations will be to this book.) This will serve as preparatory work for a post applying her account to commercialized science (probably, specifically, the “funder effect”).

(Please note that this series is an experiment in publicly posting sections of a paper as I write them. I look them over briefly for typos and the like, but my ideas here are still in development.)

Satz’ account is designed to apply to specific, contextually-embedded markets. “Specific” contrasts with (a) generic markets, the kind of thing you learn about in Intro to Microeconomics, (b) the unified global market comprising all transactions (insofar as this exists), and (c) market societies, that is, societies in which the market is the dominant social institution, that is, capitalist societies, both abstract and particular. As she puts it,

[M]y project does not involve an overall assessment of “the market system.” Markets allow people to accomplish many important social and individual tasks under modern conditions of interdependence and diversity. The point of my inquiry is not to raise general questions about the market system or about markets in the abstract. Rather, I am concerned here with the differing characteristics of very particular [sic] market exchanges: in human body parts, child labor, toxic waste, sex, and life-saving medicines. (91)

For example, she considers whether specific markets in women’s reproductive labor and sexual labor, child labor, voluntary slavery, and kidneys are noxious. Furthermore, these markets are treated as embedded in broader social contexts. For example, the examples listed two sentences ago are considered in the context of industrializing economies, the highly unequal global distribution of wealth, and the vulnerability of extremely poor individuals and households. Furthermore, her account is designed to apply even to perfect markets and Pareto-optimal distributions: a market that is working efficiently in the economists’ sense can still be noxious. (See Wikipedia for an overview) Specifically, the fact that both parties consented to the transaction does not imply that it was not noxious. (Satz seems to use the common simplifying assumption that any transaction directly involves exactly two agents.) In these three respects (and some details covered below), Satz’ work can seen as drawing on and broadening the scope of the literature on exploitation. (See the Stanford Encyclopedia entry) I would also classify her account as egalitarian liberal: egalitarian in that it considers substantive equality to be a primary criterion of justice, and liberal on the grounds that is it not (or is not intended to be) socialist (specifically, it is not or is not intended to be anti-capitalist or critical market societies).

Satz’ account focuses on four “parameters” or “dimensions,” and provides rough guidelines for refining intuitions rather than strictly necessary or sufficient conditions: “High scores along one of these dimensions, or several of them together, can make any market appear ‘noxious’ to us.” (98) These four dimension are organized into two categories, one dealing with the consequences of markets and the other dealing with the sources or “underlying condition” of agents in markets:

  1. Sources
    1. Very weak or highly asymmetric knowledge and agency (96)
    2. Extreme vulnerability of one of the transacting parties (97)
  2. Consequences
    1. Harmful outcomes for the participants or third parties (94)
    2. Harmful outcomes for society

So, a specific market that features all four of these to some extent is noxious. Or, a specific market that features only one but to an egregious extent – say, egregious exploitation – would also seem to qualify as noxious.

I’ll discuss each of the four dimensions in turn.

Weak agency

Satz does not seem to give a clear definition of “weak agency” or “agency failure,” but instead gives various examples, primarily information asymmetries and externalities (“the market has serious indirect effects on people who are not involved in the market transactions,” 97). Both kinds of agency failures are related to market failures in the familiar economists’ sense.

Asymmetric knowledge describes a situation in which one of the parties in the transaction has significantly less (relevant) information than the other. A cliche example would be a used car salesman who knows that the car he’s selling to the ignorant customer has a faulty transmission. Or, more noxious, an infant formula manufacturer who knows she’s selling products contaminated with melamine. In a perfect market, all agents have perfect information about all of the available goods.

Externalities refer to costs and benefits that are not represented in the transaction (for example, in the cost paid by the buyer). Satz’ examples of externalities seem to primarily deal with agents whose interests are simply not represented in the transaction at all: children in labor markets, future generations, and “markets involving the production, purchase, and dissemination of information that fail to present relevant alternative points of view about a pressing political issue” (97). Externalities in this sense seem to amount to barriers to enter the market. Future generations, for example, have no way to enter contemporary negotiations that set the price of carbon emissions, and so no way to have the harms they suffer from climate change represented in the price paid today to emit carbon. (In this sense, climate change is a market failure!)

One way in which we might deal with barriers to market entry is to set up principal-agent schemes: the agents who cannot directly participate in the market (because of high barriers to entry – they are nonverbal or don’t exist yet, for instance) can be represented by other agents who can directly participate (because of lower barriers to entry). (The out-of-market agents are the principals and their representatives are the agents. The equivocal use of “agent” will only happen in this paragraph.) For example, parents are assumed to represent the interests of their children. However, “[t]his is less easy than one might think. Not only can it be costly to transmit information, but the principal can have opposing interests to the agent.” (77) For example, ineliminable uncertainty about the effects of climate change limit our ability to represent the interest of future generations in the contemporary carbon emissions market; and our interest in cheap energy now tends to frustrate attempts to represent their interests.

Satz claims that weak agency cannot be reduced to harm:

Although the majority of troubling markets characterized by weak agency involve extremely harmful outcomes, it is possible to be concerned by such markets even in the absence of harms. In this category would fall product markets that target young children; markets involving the production, purchase, and dissemination of information that fail to present relevant alternative points of view about a pressing political issue; and markets whose products are based on deception, even when there is no serious harms. (97)

This leads to a nice contrast between Satz’ account and welfare economics. From the latter perspective, a perfect market is good because it produces a Pareto-optimal distribution; weak agency is bad because, as a deviation from a perfect market, is tends not to produce a Pareto-optimal distribution. Thus the welfare economics perspective is thoroughly consequentialist. On Satz’ account, a market with a great deal of weak agency is noxious even if the distribution that resulted were Pareto-optimal. More generally, it will be noxious independent of any consequences. Hence her account is non-consequentialist. (Applied ethicists and non-philosophers writing in applied ethics often work with a dichotomy between consequentialist and deontic ethical theories. Strictly speaking, a deontic account would be one in which ethics is cast in terms of rights. Note that Satz’ account does not seem to be deontic in this sense: asymmetric information does not seem to violate anyone’s rights.)

Vulnerability

Satz explicitly relates vulnerability in the market to the risk of exploitation:

When people come to the market with widely varying resources or widely different capacities to understand the terms of their transactions, they are unequally vulnerable to one another. In such circumstances the weaker party is at risk of being exploited. (97)

As Hallie Liberto points out in a current work-in-progress, exploitation is usually understood in terms of fairness: the impoverished kidney-seller is exploited because it’s not fair for him to only get $150 in return. Her proposed definition understands exploitation in terms of vulnerability:

A wrongfully exploits B when and only when (1) A wrongfully extracts benefits from B at some cost to B, and (2) B would not participate in the extraction, with its specific terms, if it were not for some vulnerability experienced by B with respect to A, and (3) the particular vulnerability experienced by B contributes to the wrongness of A’s extraction. (Liberto, 20)

So the impoverished kidney-seller is exploited because he wouldn’t make the deal if he were impoverished and his impoverishment contributes to the wrongness of only paying him $150 for his kidney.

In the context of markets, this account of exploitation is somewhat like, but not strictly the same as, barriers to market exit (another familiar kind of failure to realize a perfect market). In traditional Marxist accounts of exploitation, proletarians are vulnerable to having surplus labor extracted from them precisely because they cannot exit the labor market: they will literally die of starvation and exposure if they do not sell their labor. G.A. Cohen pointed out that this is not quite right, especially as we move into the twentieth century: workers have the option of becoming entrepreneurs. (Cohen, part III) However, this escape from exploitation is by no means a sure thing; arguably still involves exploitation (in the form of paying back the small business loan); and, while it may be viable for individual proletarians, it is (probably) not viable for the proletariat as a class. Proletarians on the labor market are vulnerable, even though in the strict sense they are free to exit the market.

Harmful outcomes for individuals

The other two dimensions of noxious markets deal explicitly with consequences, especially harmful consequences. Unless I missed something, Satz does not do much to indicate how she understands harm (and benefit). However, she relates Adam Smith’s “interest[] in the role of markets in enabling substantive freedoms, … and not only in their role in satisfying preferences” to Amartya Sen’s work in the capabilities approach (50; also 95). Later, she speaks favorably of Elizabeth Anderson’s argument that “giving money, even a great deal of money, to a child who has not been educated will not compensate for her lack of education, even if cash is what she (as an adult) now herself prefers …. [I]t does not turn her into a citizen who can participate competently and meaningfully in democratic self-governance.” (101) Anderson has explicitly developed this as an argument for the capabilities approach. (Anderson)

So, while it may not be clear precisely which version of the capabilities approach Satz might endorse, it is clear that she disagrees with welfare economists’ use of subjective preferences and other economists’ use of wealth as exhaustive measures of well-being.

Furthermore, Satz’ concern with harmful is not limited to either the immediate consequences of a single transaction or the distribution of harms and benefits in a timeless economic equilibrium. For example, in line with her favorable references to Anderson, one of Satz’ argument against many forms of child labor is the harmful it effects they are likely to have on these children when they are adults: “The costs of child labor can extend far into the future, having, for example, long-term adverse effects on the child’s health.” (158) “[C]hildren who work and do not go to school will likely lack the capacities that they need – literacy, numeracy, broad knowledge of personal and social alternatives, communication skills – to effectively exercise their agency as adults.” (165)

Harmful outcomes for society

This dimension might be misread as drawing attention to some kind of supraindividual entity, society “as such” or “in itself.” But it’s clear that what Satz means by “society” is something more like “the relations among individuals.” Her initial gloss of this dimension, for example, says that “The operation of these markets can undermine the social framework needed for people to interact as equals, as individuals with equal standing.” In the following paragraph, she worries about “the equality of individuals as co-deliberants and co-participants in making laws that apply to themselves.” (95, her emphasis)

The child labor example illustrates one of the social harms that Satz considers most important, hierarchical attitudes:

Child labor can undermine the possibility of a society of equals. Uneducated, illiterate adults will often form a servile social caste, excluded from participating in society’s main institutions …. [B]ecause most of Indiana’s labor force come from the lower classes and is involved in performing menial tasks, the upper-class elite has not thought that education for poor children was necessary. (162)\ \

Baldev, a bonded laborer who managed to free himself through a windfall inheritance from a relative …. places little value on his ability to make decisions, exhibition a condition that, following the philosopher Thomas Hill, I will call servility. A servile person not only refuses to press his rights in certain cases, but does not see himself as having rights in the first place. (185)

Similarly, in her discussions of markets for reproductive labor (that is, surrogate motherhood) and sexual labor (that is, prostitution), Satz worries about the possibility that such markets would reinforce patriarchal hierarchical attitudes:

Pregnancy contracts involve substantial control over women’s bodies …. On my view, what makes this control objectionable … is not the intrinsic feature of women’s reproductive labor, but rather the way such control specifically reinforces a long history of group-based inequality …. The fact that pregnancy contracts, like military contracts, give someone control over someone else’s body is not the main issue; rather the issue is that in contract pregnancy the body that is controlled belongs to a woman, in a society that historically has subordinated women’s interests to those of men, primarily through its control over women’s sexuality and reproduction. (128-9)\ \

[P]rostitution represents women as objects for male use. As I indicated earlier, prostitutes are far more likely to be victims of violence than other professions; they are also far more likely to be raped than other women. A prostitute’s “no” does not, to the male she services as well as to other mean, mean no. (149)

More generally, Satz recognizes and is concerned about the endogenous nature of preferences, attitudes, and expectations. Economists (and not a few political philosophers; see her discussion of Dworkin on 66-76) standardly treat individuals’ preferences as given outside or prior to the market, that is, as exogenous. But this is clearly false. First, speaking about the market as a whole for a moment, the entire raison d'être of the advertising industry is to manipulate – even create ex nihilo – consumer preferences.

Second, markets in specific goods can – I would say “tend to” – produce the expectation that all instances of these goods are available for a market transaction. Call this the market expectation effect. Satz glosses a striking instance of this argument, Scott Anderson’s argument against legalizing prostitution:

[I]f prostitution was viewed as just another job analogous to other forms of employment, then presumably sex could be included as part of any number of jobs. Women who did not wish to have sex on demand might find that their employment options were limited and that they were less employable on the labor market. (149)

Indeed, women might find that in many social situations they would be expected to be sexually available “for the right price”; and this might reinforce misogynistic attitudes that all (heterosexual) sexual relationships are essentially prostitutional – that married men pay their wives for sex through a house and clothes and so on.

In a recent paper, Paul Thompson has insightfully discussed another form of the market expectation effect. Thompson’s interest is when a market becomes technologically possible – by contrast, Satz takes the existence of a market to be primarily a legal question. He begins with an illustrative vignette:

Imagine yourself sitting on a hilltop, relaxing in the shade of a lone apple tree on a warm mid-autumn afternoon. You have collected all the apples that were lying on the ground and from branches that were within reach and placed them in a bag that you brought along with you. Now, you are simply enjoying the autumn breeze and the call of songbirds, when you see a stranger coming up the hill who is also carrying a bag. After exchanging greetings, the person tells you that they are in search of apples, but they notice that you have beaten them to the harvest. “Can I buy half a dozen from you?” the person asks. Evidently, the apples in your bag manifest at least some minimal characteristics of the commodity form….\ \

If my thought experiment had the approaching stranger inquire about buying the view from the hilltop, the sound of the birds or the warmth of the breeze, the narrative arc would have taken an altogether different direction. We would be wanting to know more about the curious norms at work in this scenario. “Do you mind if I sit under your apple tree?” might have been a natural enough question, but “Can I buy the sound of those birds from you?” would not….\ \

Or maybe this question only seems unnatural to those of us whose imaginations are limited by the technological capabilities of a bygone era…. [A]s someone who still carries a device I refer to as a “cell phone” that I use almost exclusively to make and receive communications that I still anachronistically refer to as “telephone calls,” it does not occur to me that I might be carrying something that could record the sound of the birdsongs and that I might, for a fee, Email this recording to the stranger so that she could use them as a ringtone or as musical accompaniment for the photograph she is taking of the view from the hilltop on her own pocket device. Perhaps, the birdsongs do avail the commodity form when these possibilities are envisioned, and perhaps were I a bit more up to date, I would respond quite naturally to the query “Can I buy the sound of those birds from you?” with my own question: Is there an app for that? (Thompson, 88-90)

Without portable recording devices, the birdsong cannot be stored, transported, or distributed; it is ephemeral. This is not the same as calling it a public good, in the economists’ sense. To be a public good in this sense, a good must be nonrivalrous and nonexcludable. That is, use by one agent doesn’t prevent other agents from using or enjoying it (nonrivalrous) and it is difficult (or impossible) to prevent other agents from using or enjoying it (nonexcludable). The live birdsong is just as nonrivalrous and nonexcludable as it was before: Thompson’s enjoyment doesn’t prevent the stranger from enjoying it, and it’s difficult to prevent her from enjoying it. (He would have to fence off the entire hilltop, say.) And this doesn’t change depending on whether or not there are portable recorders around. The portable recording device makes it possible to store the birdsong indefinitely, transport it away from the hilltop, and distribute it among various consumers. Without this possibility, there’s no more of a market for birdsong than there is for dreams. The market expectation effect is then that, when it is possible to handle the birdsong in this way, there will be a market for it.

Thompson’s example may point out a specific-and-also-general form that the market expectation effect takes in a market society: when it is technologically feasible to offer something on a market, then in a market society it will be so offered. Perhaps this could even serve as a functional characterization of a market society, namely, as a society in which there’s a market for anything precisely insofar as it’s technologically possible to put it on the market.

We might generalize the market expectation effect, in a way that turns us back to vulnerability. Consider a situation in which child labor goes from illegal to legal, and suppose many but by no means all impoverished families put their children on the labor market. As a result of the increased labor supply and the lower wages paid to child laborers, many kinds of low-wage labor previously done by adults will be either unavailable – all that work is now done children – or available only at significantly lower wages. Thus, in order to maintain the same income, all impoverished families will have to put their children on the labor market. A small number of children on the labor market has the effect of putting all (impoverished) children on the labor market, not by virtue of a change in attitudes or subjective expectations but by virtue of the impersonal operations of supply and demand.

This concludes my summary of Satz’ account. In a future post, I plan to apply her account to commercialized science.

References

  • Elizabeth Anderson, “Justifying the Capabilities Approach to Justice,” in Robeyns and Brighouse, eds., Measuring Justice: Primary Goods and Capabilities, Cambridge UP, ISBN 9780521884518

  • G.A. Cohen, History, Labour, and Freedom, Clarendon Press, ISBN 0-19-824779-6

  • “Exploitation,” Stanford Encyclopedia of Philosophy, http://plato.stanford.edu/entries/exploitation/

  • Hallie Liberto, “The Normative Source of Exploitation” (draft manuscript)

  • “Perfect Market,” Wikipedia, http://en.wikipedia.org/wiki/Perfect_market

  • Debra Satz, Why Some Things Should Not Be For Sale: The Moral Limits of Markets, Oxford UP, ISBN 978-0-19-989261-7

  • Paul Thompson, “'There’s an App for That’: Technical Standards and Commodification by Technological Means,” Philosophy of Technology (2012) 25:87–103

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