I read Jeremy Waldron's review of Sandel's book "What Money Can't Buy" and have a few thoughts. Unlike Arrow and Debreu, Harvard's Sandel is a fan of incomplete markets. He believes that there are more and more market trades taking place that "are gross". For example, he is grossed out that in Washington DC that a lobbyist can pay a fee to have someone stand in line and wait until they are at the front of the line to attend a Congressional Hearing. By paying someone a fee, the time poor lobbyist can attend a hearing that otherwise would have been prohibitively costly to attend (measured in the opportunity cost of time).
So, Sandel rejects Becker's 1965 work on the value of time. As real wages rise and income inequality increases, the gains to trade from one person renting another person's time goes up. Should we prohibit this? Let me provide an example. Suppose there is a low wage person who makes $8 per hour and there is a lobbyist who values her time at $150 an hour. If you must stand on line for 1.5 hours to guarantee you get a seat at the Congressional Hearing then there is a mutually beneficial trade between these two people. The wage will be any number between $12 and $225. Given their respective alternatives, any payment to the low value of time person between $12 and $225 makes them both better off. This is what markets allow but this is what grosses out Dr. Sandel.
UPDATE: Does society lose when lobbyists attend the meeting? If "yes", then it is certainly possible that there is a negative externality associated with this mutually beneficial trade as the "plutocracy" is perpetuated. But, is this pessimism correct? Would Congressional politics "work better" if a random set of Americans rather than lobbyists sat at the table? If you believe the answer is "yes", what is your evidence for this claim? Lobbyists represent interest groups with a stake in the policy debate. They provide information (which politicians can ignore) and they often represent producers who create output and "American jobs". In the absence of campaign contributions, what criteria would politicians use for judging what are "good policies"?
If you believe that lobbyists have captured politicians and their votes, then you should support smaller government that reduces the impact that lobbyists can have on tilting the playing field toward their clients' desires.
Returning to Dr. Sandel --- Given that time is our scarcest resource, capitalist economies can only make progress if we figure out how to efficiently use it. I hope that Dr. Sandel lives to age 200 but if he doesn't achieve this longevity, doesn't he want to focus his scarce time on the things he does best (i.e teaching Harvard students his stuff) rather than standing in line? If there is somebody who wants to stand in line in his place, why is Dr. Sandel grossed out? He should thank this person and if he really feels so strongly he can offer a tip on top of the going market wage for renting that person's time who stands on line for him. In the same sense, does Dr. Sandel wash his own laundry or does he bring it to a dry cleaner? In this case as well, he is substituting his time for a specialists' time. Yes, the specialist has better capital equipment for doing the job but it is a time substitution not very different than the "concierge line" that he abhors.
I would like to ask him, does he oppose road pricing to reduce traffic congestion? Does he like Cambridge Square traffic congestion? Would he support road pricing? Road pricing is a similar idea it will save time for both the rich and poor but time is more valuable to the high wage people. When the majority of the population is low wage, then congestion pricing will not be enacted by the median voter because she prefers a $0 out of pocket expense for driving (ignoring gas ) and losing time as congestion slows everyone down.
Sandel also appears to believe that participating in markets changes our preferences. If you are paid for giving blood, you no longer offer it for free.
This idea appears nowhere in any economics textbook I know of and I would like to know what his evidence is for this claim. How does capitalism "warp" us? Is this a repeat of Galbraith's ideas that we are pawns of Madison Avenue? In my world, we know ourselves and our goals. We know our resource constraint and we go to the market to purchase goods that help us achieve our life goals while fully aware of the tradeoffs we face. If you know that you don't know about the tradeoffs you face, then you can hire a consultant (or ask your mom) for a second opinion.
Am I picking on Harvard's Michael Sandel? I don't think so. Apparently he is the leading moral philosopher of our age. He holds an endowed chair at Harvard and the NY Times appears to love him. But, he needs to take Greg Mankiw's econ 10 class! Read his debate with Eric Maskin over the morality of pollution permits. Finally, for my friends who study environmental economics -- he rejects the Coase Theorem's core logic. He appears to argue that it is immoral to locate a noxious facility in a geographic area and compensate those who accept the dump. Interesting! but inefficient.
