A new book sets one of the Right's favourite ideas against anotherby Diane Coyle / August 20, 2018 / Leave a comment
Half a decade ago Michael Sandel, the political philosopher, struck a chord with his bestseller What Money Can’t Buy: The Moral Limits of Markets. Sandel gave multiple examples of money buying what it ought not: the right to name nursery schools, prison cell upgrades, a fast track through airport security and more. Published while the financial crisis was still fresh in memory and shortly after Occupy Wall Street, Sandel’s argument that the market had gone too far seemed to resonate with the left. But a decade on from the crisis, the verdict that there is too much market is challenged by a book that argues for more—far more.
In Radical Markets: Uprooting Capitalism and Democracy for a Just Society, Eric Posner and Glen Weyl assert that markets have not spread nearly far enough. The book has several eye-catching proposals: that digital companies should pay for personal data; voting credits that would allow people to pay to cast multiple votes on the issues they care most about. But most significantly it argues that everybody would have to state their valuation of everything they own (with exceptions for small items of sentimental value) and pay a wealth tax on the total. To keep things honest, someone who put a higher value on one of those possessions would have the right to purchase it. No individual would have any property rights. In effect, all property would be held in common and there would be a perpetual market in everything.
Setting aside the practical challenges, Posner and Weyl argue that this system has many advantages. It is a redistributive wealth tax (as the rich own the most), and raises a large amount of revenue, perhaps enough to support a generous universal basic income. It is also economically efficient, allocating property to the people who value it most.
This is free market thinking but not as we know it. Most economists see property rights as the solution whereas Posner and Weyl see them as the problem. Since Ronald Coase, the Nobel Prize-winner revered by free marketeers, property rights have been seen as essential to enable transactions.
“Hume wisely wrote, property is ‘a convention enter’d into by all the members of society to bestow stability'”
In contrast, Radical Markets argues that individual property rights create a form of monopoly power, entrenching inequality. Its proposals draw inspiration from a different tradition in economics, known as market design. This sees markets as processes of exchange governed by rules rather than simply as monetary transactions. It can fix markets that aren’t working properly and create them from scratch where they’re missing. This thinking has been applied in auctions of government bonds and even of different parts of the radio spectrum. It has also been used in money-free exchanges such as matching kidney donors to recipients.
In general, economists are fans of extending market processes to more domains, seeing carbon markets, for instance, as a more effective way of reducing CO2 emissions, or online platforms as a more efficient means of matching supply and demand. But the ideas advocated in Radical Markets clearly go further.
The book is thought-provoking. But it commits the error Sandel identified, of taking markets too far. It would be good to end the veto some property owners have over new house building by limiting their ownership rights. But somewhere there is a social limit. As the wise David Hume wrote in his Treatise of Human Nature, property is “a convention enter’d into by all the members of society to bestow stability on the possession of… goods, and leave everyone in the peaceable enjoyment of what he may acquire by his fortune and industry.” Efficiency is not the only criterion for the economic good.