Virginia Postrel’s indispensable Twitter feed points us to a fascinating interview with Duke sociologist Kieran Healy. He begins by suggesting that the distinction between gift-giving and market exchange isn’t as clear-cut as is commonly understood:
Incentives are not incompatible with the kind of moral obligations associated with donation. We may wish for a bright line between virtuous gifts and selfish markets, but the boundary is constantly crossed, in both directions.
For example, gifts can be easy vehicles for getting people in your debt, or obtaining something for free, and people calculate very precisely what the “right” amount to spend on a present is when birthdays or holidays come around. On the other hand, markets routinely have strongly moralized aspects, as we take care to pay people in ways that signal our esteem for them. We discreetly reimburse people for their time, or give them an honorarium, say, rather than paying them in cash by the hour.
A lawful market in organs would probably be considered more legitimate if it resembled a gift exchange, as we see already taking place in the case of human eggs, where the language of donation predominates even though the eggs are bought and sold and prices are widely advertised. However, even today, with the exception of kidneys, you can’t get a transplant unless you have the insurance to pay for it, despite others’ willingness to donate their organs. So why should people feel any obligation to give to a system that serves those who need it so poorly?
Later in the article, Healy discusses the “magical thinking” that underscores our system of credit:
“Compare how credit-worthiness is considered in the consumer credit market versus that of business credit,” he says. “A business gains credit, fails, and goes bankrupt, and we write this off as simply a bad investment or due to the vagaries of demand and supply. But if a person does the same, it’s often seen as a moral failing. Not being credit-worthy is something akin to not being trustworthy.”
Moral standards of market exchange for individual and commercial credit have different bases and different implications. “But,” Healy says, “the credit crisis brought the two uncomfortably close together, as banks ‘rationally’ wrote off investments while they excoriated borrowers for walking away from the ‘solemn obligation’ of their mortgages.”
The trend in modern society to quantify value through scores and rankings, on everything from movies to colleges to physicians, is not necessarily bad or good, Healy says. He seeks to determine the sources and social impacts of these trends.
The interview concludes on an extremely important point, which defenders of a market economy would do well to keep in mind:
In the end, standards and ratings work because they help simplify the information cascade that we deal with each day. But their ubiquity does not necessarily mean they are accurate. “Ranking systems need not be any good,” Healy says. “What matters is that such tests are accepted as legitimate, even by those who try to game them. This makes it all the more important that those who follow ratings peel back the curtain to see exactly what these standards are based upon.”
We’re living through a moment in which the legitimacy of many aspects of our financial system are under sustained attack. One approach is to defend the financial system in toto, despite its manifest failures. Another is to seek to enhance its legitimacy through reform. And then another is to use the perceived illegitimacy of the financial system as the entering wedge of a broader attack on the market economy.