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Let us increase society's tolerance to the use of money

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Raghuram Rajan
Last Updated : May 14 2016 | 9:47 PM IST
In a very interesting recent book, Harvard philosopher Michael Sandel points to the range of things money can buy in modern society. He seems to want to make us angry at the growing dominance of the market. Professor Sandel worries not just about the corrupting nature of some exchanges as they are monetised but also questions their effectiveness; For instance, do kids really develop a love of reading if they are bribed to read books? He is also concerned about unequal access to money, which makes trades using money inherently unequal. More generally, Sandel fears that the expansion of anonymous monetary exchange breaks down social cohesion, and argues for reducing money's role in society.

While Sandel's concerns are not entirely new, his examples are worth reflecting on. For instance, some companies pay the unemployed to stand in line for free public tickets to Congressional hearings in the United States. They then sell the tickets to lobbyists and corporate lawyers, who have a business interest in the hearing but are too busy to stand in line. Clearly, public hearings are an important element of participatory democracy. All citizens should have equal access. So selling access seems a perversion of democratic principles.

The problem of scarcity
The fundamental problem, though, is scarcity. We cannot accommodate everyone in the room who might have interest in a particularly important hearing. So we have to "sell" entry. We can either allow people to use their time to bid for seats - the one who stands the longest wins the seat - or we can auction seats for money. The former seems fairer, because all citizens seemingly start with equal endowments of time - we all start with 24 hours in a day. But is a single mother with a high-pressure job and three young children as equally endowed with spare time as a student on summer vacation? And is society better off if she, the chief legal counsel in a large corporation, spends much of her time standing in line for hearings?

Whether it is better to sell entry tickets for time or for money thus depends on what we hope to achieve. If we want to increase society's productive efficiency, people's willingness to pay with money is a reasonable indicator of how much they will gain if they have access to the hearing. Auctioning seats for money makes sense - the lawyer contributes more to society by preparing briefs than standing in line. On the other hand, if it is important that young impressionable citizens see how their democracy works, if it is important that we build social solidarity by making corporate executives stand in line with jobless teenagers, perhaps we should force people to bid with their time by standing in line, and make entry tickets non-transferable. And if we think that both objectives should play some role, perhaps we should turn a blind eye to some operators hiring those with spare time to stay in line in lieu of busy lawyers, so long as they do not corner all the seats.

What about the sale of human organs, another example Sandel worries about? Something seems wrong when a lung or a kidney is sold for money. However, we celebrate the kindness of a stranger who donates a kidney to a young child. So, clearly, it is not the transfer of the organ that outrages us - we do not think the donor is misinformed about the value of their kidney or is being fooled into parting with it. Nor, I think, do we have concerns about the scruples of the person selling the organ - after all, they are parting irreversibly with something that is very dear to them for a price that few of us would agree to.

Context is vital
I think part of our discomfort has to do with the circumstances in which the transaction takes place. What kind of society do we live in if people have to sell their organs to survive? But while a ban on organ sales may make us feel better, does it really make society better off? Possibly, if it makes society work harder to make sure people are never driven to the circumstances that would make them contemplate a sale. Possibly not, if it allows society to turn its back on the underlying problem, either moving the trade underground, or forcing people in dire circumstances to resort to worse remedies.

But I also think part of our unease has to do with what we perceive as an unequal exchange. The seller is giving up part of her body in an irreversible transaction. The buyer is giving up only money - perhaps earned on a lucky stock trade or through an overpaid job. If that money was earned by selling a portion of a lung, or by painful savings accumulated after years of back-breaking work, we might consider the exchange more equal. But the central virtue of money is precisely its anonymity. We need know nothing about the rupee we get to be able to use it. But because money's anonymity obscures its provenance, it may be socially less acceptable as a medium of payment for some objects.

Professor Sandel makes us think. But he seems to move too quickly to prescribe banning monetary transactions, when his real concern is perhaps with the unfair distribution of money. What he also seems to ignore are the virtues of anonymity. In a free market, all it takes to buy what you want is money. You do not need a pedigree, a great family history, the right table manners, or the right fashionable clothing or looks. It is because money has no odour, because it is the great equaliser, that so many people across history have been able to acquire resources and invested them to make the world we live in. Indeed, making it easy for Dalits to start businesses may do more for their social status because money empowers than many other forms of affirmative action. Rather than prohibiting the use of money and wealth, let us think about increasing society's tolerance for its use.
Edited excerpt from Reserve Bank of India Governor Raghuram Rajan's lecture at the Shiv Nadar University, in Greater Noida, on May 7

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First Published: May 14 2016 | 9:47 PM IST

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