I think monetisation of some markets may well be a good thing in certain circumstances, perhaps especially in cases where a previously monetised market has been replaced by a government-imposed one. But the article was about being wary of over-monetisation or ignoring other factors that may affect it.

This misunderstands something fundamental – markets have no purpose, they just are. Markets are a natural outcome of human interaction.

Now, you can try to twist markets to give them this purpose, and that is what is happening here.
Paying people to give blood does not create a market, it changes an existing market. Previously people gave their time and blood for ‘free’, they received nothing of tangible value in return, but they did gain. Each individual gained in different ways, for some it might be the feeling of doing good, another might cynically like the time off work. Others may be in it for the cookies, to look good in the eyes of others or for other bizarre (to me) reasons.

It is still an exchange, just not a monetary exchange.

Unfortunately, it cannot be quantified, so people ignore it and don’t call it a market.

The economic liberal in me rejects the managerialist attempts to monetise already existing markets. The social liberal in me reacts similarly. No wonder economic liberals get a bad name if some claim the title and then seek to monetise everything and simply become technocrats who think that monetising something makes it efficient.

Interesting theory about the correlation between the size of a society and the effect of the moral incentives. Perhaps this suggests that globalisation in and of itself has a ‘crowding out’ effect just like markets do? Or does it also suggest that in a larger or more globalised society there’s less to fear in terms of using markets that may crowd out pre-existing social effects.

Joe,
Perhaps we’re already seeing this? With the carbon-trading example, I’d suggest that many of the bigger polluters will be those more impervious to moral condemnation, and so we’re unlikely to see much crowding out. Sandel himself admitted that his views on Carbon-trading had changed and that he saw the benefits of the market.

I also suspect that morals associated with protecting the environment aren’t as deep or widespread as many others, so there’s less of that moral disincentive to crowd out through the use of a market in the first place. It could also be that “green” moral disincentives won’t be as fast-acting as market ones, so if you were to look for a fast-acting green policy, your best bet is the use of a market as opposed to waiting for everyone to find their own anti-environmental activities totally unacceptable.

I notice that most evironmentalism seems to be about moral condemnation rather than market incentives, which works for some people and not for others. Perhaps we can expect society to become more stratified into those who integrate environmentalism into their personal morality and those who don’t. Each stratum, interacting mostly with itself would reinforce its values reasonably well. But relations between the strata are bound to be difficult, with evil freeloaders on one side and smug pious gits on the other.

I think this implies that the market incentive approach is needed, even if it does undermine the morality of the environmentalist. But the incentives will have to be pretty severe to influence us creatures of habit.

The greater difficulty now is that communities are less strong. The medieval parallel doesn’t work because even if one obtained an indulgence for the sin, one only avoided the divine penalty, not any other consequences (whether legal or social). The corollary was royal pardons – whilst those protected someone from punishment in the temporal courts, criminals still had to seek absolution from the church for the sin involved. However, in both cases any social stigma attached to the wrong remained in place and may have affected social relations. That was probably a very meaningful deterrent for many people.

In a much larger society, that social stigma doesn’t work anywhere near so effectively. Furthermore, if one is conscious of this fact, the realisation dawns that social stigma from people with whom one has few dealings have no meaningful effect. As such, unless there are market based incentives, one has no pressure at all to behave. In effect, one calls society’s bluff.

For such individuals one has to use market incentives as one of the few means of influencing their behaviour.