PHIL210 University of Michigan Noxious Markets Reading Discussion Write at least 250 words for this question: According to Satz’s approach, why the paramet

PHIL210 University of Michigan Noxious Markets Reading Discussion Write at least 250 words for this question: According to Satz’s approach, why the parameters and restrictions to noxious markets are crucial to protect the standing of a democratic society? 4
Noxious Markets
A B S T R AC T M A R K E T S V E R S U S
N OX I O U S M A R K E T S
What is wrong with markets in everything? What is it about the nature
of particular exchanges that concerns us, to the point that markets in
some goods appear to be clearly undesirable? How should our social
policies respond to such markets? Where and for what reasons is it
appropriate to regulate a market, and when should we seek to block it?
These are the difficult but important questions that this chapter
attempts to answer.
Several brief clarifications about my scope and aims here. First, as is
evident from the discussion thus far, my project does not involve an
overall assessment of “the market system.”1 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 market exchanges: in human body parts, child
labor, toxic waste, sex, and life-saving medicines. Markets in these goods
provoke reservations even among those who are otherwise great enthusiasts about the market system.
Second, I put aside questions concerning the rationing of essentials
in cases of extreme scarcity, “tragic choices,” as they are referred to in the
legal literature.2 These are cases in which no amount of money or effort
will produce enough of urgently needed goods. Market allocations in
tragic choice cases raise distinct considerations from the examples
considered here, as such cases do for all the alternative systems of allocation, including those using lottery, age, or merit.
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Why Some Things Should Not Be for Sale
Let me recap the discussion so far. Chapter 1 focused on the dominant framework of contemporary economics that supports market
interventions only where markets fail to be efficient.3 Proponents of this
approach can be divided between those who believe that perfectly efficient markets are “moral-free zones” to which morality simply does not
apply,4 and those who believe that it is simply not the place of economists to evaluate the morality of differing markets. But when particular
markets fail, this approach does not tend to support the elimination of
those markets. Indeed economic theory is inherently imperialistic about
the scope of the market; as we have seen, the solution to market failure
is often taken to consist in the enlargement of the scope of the market.
(Consider the introduction of markets in pollution to incorporate pollution’s costs to third parties.) There are no theoretically set limits for
the scope of the market. In addition markets and the corresponding idea
of market failures are everywhere conceived of in the same terms. This
stands in sharp contrast to the approach of the classical political
economists that I explored in chapter 2.
Chapter 3 examined important contemporary approaches to the
limits of the market. Drawing on the work of Ronald Dworkin, I critically examined the view that markets have a necessary moral role to play
in egalitarian theory because markets make each of us responsible for
the allocation of effort and resources in our own lives, while at the same
time ensuring that the benefits that we derive from our choices depend
on how important our effort and resources are to others. As we saw,
Dworkin’s theory gives us no reason in principle to set limits to the scope
of the market with respect to goods and services, except perhaps for
paternalistic considerations.
I also explored the prevalent general egalitarian approach that,
although critical of the economist’s exclusive focus on market efficiency and market failure, accepts the legitimacy of relying on markets
in most domains. Proponents would use markets to produce efficient
outcomes and then support ex post transfers of income to achieve their
desired egalitarian distribution.5 Like contemporary economics, its
proponents tend to treat most markets as the same: markets in soybeans are not fundamentally different from markets in body parts. The
basic default strategy employed for dealing with market problems is to
redistribute income and not to block particular markets or to redistribute specific goods in kind. Many proponents of this view also
Noxious Markets
appeal to antipaternalistic considerations for preferring cash to in-kind
transfers.
I also examined specific egalitarian approaches, which ground a distinction in markets—between those that are acceptable and those that
are not—based on the meaning of the goods being traded. The idea here
is that distribution should track our conventional or best understandings of the nature of the goods we seek to distribute. As we saw, these
authors argue that markets corrupt the nature of certain goods, trading
in things that money should not buy.
The theories considered in chapter 1 and chapter 3 have important
insights on which I will draw: market failures (including externalities),
distributional equality, and the importance of access to specific goods are
important considerations in assessing markets.6 Yet my underlying theory
about the limits of markets also differs. I argue for a more nuanced view
of the idea of market failure, one that takes into account how markets
shape our relationships with others in ways that goes beyond the idea of
unabsorbed economic costs. A market exchange based in desperation,
humiliation, or begging or whose terms of remediation involve bondage or
servitude is not an exchange between equals. On my view, lurking behind
many, if not all, noxious markets are problems relating to the standing of
the parties before, during, and after the process of exchange.
I will also argue in this chapter that some markets are noxious and
need to be blocked or severely constrained if the parties are to be equals
in a particular sense, as citizens in a democracy. In making this argument
I draw on the writings of Adam Smith and the other classical political
economists discussed in chapter 2. Recall that these thinkers recognized
that markets require certain background conditions—specification of
and enforcement of entitlements and property rights—in order to support relations of freedom and equality. The markets of the classical political economists were populated not by the abstract individuals with given
wants that tend to characterize contemporary economic theory, but by
landless peasants and wasteful landlords and by impoverished workers
who stood in asymmetrical power relations with their employers. Moreover agents’ preferences, capacities, and relationships were understood to
be shaped by the structure and nature of particular markets. Like these
theorists, the approach to markets I defend recognizes market heterogeneity and stresses the need to consider other values besides efficiency and
distributional equality narrowly conceived. But, as I argued in chapter 3,
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Why Some Things Should Not Be for Sale
I think we should reject the main contemporary alternative arguments
for limiting markets based on the social meaning of goods. As I see it, a
major problem with noxious markets is not that they represent inferior
ways of valuing goods (as those who link the limits of markets to social
meanings claim) but that they undermine the conditions that people
need if they are to relate as equals. At any rate, so I shall argue.
N OX I O U S M A R K E T S : T H E B A S I C PA R A M E T E R S
I begin with a characterization of four parameters in terms of which we
can differentiate the markets that people find especially objectionable
from other types of markets. Several of these parameters are internal to
the perspective of economics in that scoring high on them will often
undermine efficiency. However, there are also political and moral rationales for limiting noxious markets. That is why the addition of more
markets is not always the appropriate response to a noxious market. In
some cases our goal should be to curtail a particular noxious market,
not to make it work better.7
The first two parameters characterize the consequences of particular
markets.
1. Some markets produce extremely harmful outcomes. That is, the
operation of some markets leads to outcomes that are deleterious, either
for the participants themselves or for third parties.8 Consider market
exchanges that lead to the depletion of the natural resource base of a
country or to the fueling of a genocidal civil war. Or consider a stock
market transaction that wipes out a person’s resources.
Of course, many markets have harmful outcomes without eliciting
our revulsion; we think that the ups and downs of prices come with the
territory. But some market outcomes are so negative, so extremely
harmful that they almost always evoke a strong reaction. How harmful
is that? Following up on a suggestion by Ravi Kanbur, we might consider
as a natural starting point for answering this question a market whose
operation leaves a person destitute.9 For example, a grain market whose
operation leaves some people starving because they cannot afford the
price at which grain is set through supply and demand is bound to make
us feel uncomfortable.
Noxious Markets
Yet markets can also be extremely harmful to individuals in ways that
go beyond destitution. Amartya Sen usefully distinguishes between two
types of interests that people have: welfare interests concern a person’s
overall good, and agency interests concern a person’s ability to participate in deciding matters that bear on that good.10 These interests are
interdependent, but they are distinct. (A benign dictator, for example,
could meet all my basic welfare interests.) We can define a set of basic
interests for people, interests in minimum levels of well-being and
agency, and define extremely harmful market outcomes as outcomes
that leave these basic interests unsatisfied. The idea of basic interests is
meant to capture the idea that there are universal features of an adequate and minimally decent human life, a “line beneath which no one is
to be allowed to sink.”11
2. In addition to leading to extreme individual harms, certain markets can also be extremely harmful for society. The operation of these
markets can undermine the social framework needed for people to
interact as equals, as individuals with equal standing. There are, of
course, running disagreements among philosophers concerning the
meaning of “interact as equals,” as well as the scope of this ideal. I take
the content of this ideal to be given by the preconditions necessary for
individuals to make claims on one another and interact without having
to beg or to push others around. Markets help enable this ideal, as the
basis of market claims is reciprocal self-interest of the parties.12 But they
can also undermine it. Consider markets that operate to undermine the
capacities that a person needs to claim her rights or to participate in
society; this is a problem with child labor markets and bonded labor,
cases I discuss in the third part of this book. Or consider that particular
markets may condition people to be docile or servile, shape them into
passive accepters of a status quo. Whereas contemporary economics sees
the capacities and preferences of agents in a market as givens, particular
markets—think of media, education, and caregiving—shape us. Moreover they may shape us in ways that are in tension with a society of
equals.
A special case is a market that is harmful for the standing of the
parties as equal citizens in a democracy. This case ratchets up from the
more minimal notion of equal standing: it has to do with the equality of
individuals as co-deliberants and co-participants in making laws that
apply to themselves. This kind of equality presupposes additional
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Why Some Things Should Not Be for Sale
constraints on markets and their scope. Recall James Tobin: “Any good
second year graduate student in economics could write a short examination paper proving that voluntary transactions in votes would increase
the welfare of the sellers as well as the buyers.”13 Nevertheless the legitimacy of the democratic process depends on the prohibition of such
transactions. I will discuss this case later in this chapter.
The next two parameters characterize the sources of particular markets, the underlying condition of the market agents:
3. Some markets are characterized by very weak or highly asymmetric
knowledge and agency on the part of market participants. The Pareto
efficiency results assume that agents are fully aware of the consequences
of their actions and have complete information about the goods
exchanged.14 But, as is widely noted by economists and others, in most
circumstances these assumptions do not hold. Agency failures can occur
because some of the direct participants lack important knowledge or
because the market has serious indirect effects on people who are not
involved in the market transactions.15 If one or both of the parties to a
contract are mistaken about the material facts or about the future consequences of their contract, we cannot assume that the exchange is a Pareto
improvement.
All real markets, of course, involve imperfect information. But in
some cases this imperfect information is apt to produce extremely
harmful consequences. This may be most likely in cases where is a significant time lag between the initiation and the completion of a transaction.16 It is hard to predict one’s future preferences. Consider the case of
a woman selling her ability to have a child. In this case we might suspect
that a woman who has never been pregnant cannot really know the consequences of selling the right to the child she bears.
Of course the fact that a contract has potential risks for an agent does
not mean that the contract should not bind the agent, or else most contracting would fail. Nevertheless information failures are relevant to our
assessment of particular markets in the face of harmful outcomes; in
particular such failures serve to block justifications of a market transaction that appeal simply to the fact that it was chosen. Thus if agency is
weak in surrogacy contracts, and a surrogate is now devastated by the
thought of giving up the child she has borne, we will be less likely to
think that we can justify enforcement of the contract simply on the basis
that there was an agreement.
Noxious Markets
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 harm.17
Agency problems also arise in markets in which one of the affected
parties is not directly involved in the transaction but depends on
others to transact for her. In such cases we cannot be certain that the
party herself actually benefits from the transaction. In the majority of
cases of child labor, for example, parents are transacting on behalf of
the children whose time and labor are traded. Many forms of child
labor give little or no benefit to the working child and in some cases
significantly interfere with the child’s ability to grow up into a healthy
functioning adult.18 Other markets in which some of the affected
parties are not directly involved as participants include markets in a
nation’s important scarce natural resources (such as timber in a rain
forest), which can affect subsequent generations and others around
the globe.
4. Some markets reflect the underlying extreme vulnerabilities of one
of the transacting parties. Rousseau wrote that no citizen should “be
wealthy enough to buy another, and none poor enough to be forced to
sell himself.”19 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. For example,
when a desperately poor person agrees to part with an asset at a fire sale
price, even if the exchange improves his well-being we are rightly concerned with the fact that his circumstances made him willing to accept
an offer for his asset that no one with a decent alternative would ever
accept. When a person enters a contract from a position of extreme vulnerability he is likely to agree to almost any terms that are offered. Other
examples of markets that exploit the vulnerability of transacting agents
include markets in urgently needed goods where there is only a small set
of suppliers and markets where the participants have highly unequal
needs for the goods being exchanged.20
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Why Some Things Should Not Be for Sale
Some markets not only reflect the different and unequal underlying
positions of market agents but may also exacerbate them by the way they
operate. For example, in Bangladesh a recent famine arose when the
price of the main food, rice, rose very rapidly and became too expensive
for the poor to purchase. By contrast, rich households were insulated
from the risks of rising prices because they generally receive rice from
their tenants as payment for the use of land so that they have rice for
their own needs and surplus to sell.21
So we have two dimensions regarding the source of a market and
two dimensions regarding the consequences of a market that can
be used to think about the acceptability of particular markets (see
Table 1).
High scores along one of these dimensions, or several of them
together, can make any market appear “noxious” to us. Consider the
market in diamonds, whose sale is used to fund brutal civil wars. Many
people find such a market abhorrent. On the analysis offered here, the
best way to understand our negative reaction to this market has to do
with its extremely harmful outcome—prolonging a bloody civil war in
which thousands or tens of thousands die, hence the term “blood
diamonds”—and with the weak agency of so many who are affected by
the markets that fuel that war.22 Our discomfort with such markets
doesn’t seem to have anything to do with the social meaning of diamonds and little to do with the underlying income inequality of buyers
and sellers.
TABLE 1. What Makes a Market Noxious?
Source: Weak Agency
Source: Vulnerability
Inadequate information about the nature
of and/or consequences of a market;
others enter the market on one’s behalf
Markets in a desperately needed good with
limited suppliers; markets with origins in
poverty and destitution; markets whose
participants have very unequal needs for
goods being exchanged
Outcome: Extreme Harms for Individual
Outcome: Extreme Harms for Society
Produces destitution; produces harm to
the basic welfare and/or agency interests
of the individual
Promotes servility and dependence;
undermines democratic governance;
undermines other regarding motivations
Noxious Markets
At the same time, although in theory markets in any good can become
noxious, markets in some goods are much more likely to score higher
than others on these parameters. Consider the case of markets in goods
that no one but the desperate would ever exchange. Some people think
that desperation is a characteristic feature of kidney markets, a case I
discuss in chapter 9.
A number of these parameters are easily incorporated within the
approaches of contemporary economics; for example, concerns with
harmful outcomes and information failures can be captured in the perspectives of welfare and neoclassical economics. Several authors,…
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