Saturday, 12 May 2012

* What Money Can't Buy
We are moving towards a world where everything is up for sale, from standing in line to the right to pollute – and that's bad for all of us, says Michael Sandel in this extract from his new book, What Money Can't Buy
Nobody likes to queue. It's long been known that, in fancy restaurants, a handsome tip to the maître d' can shorten the wait on a busy night. Such tips are quasi-bribes and handled discreetly. No sign in the window announces immediate seating for slipping the host a bank note. But in recent years, selling the right to jump the queue has come out of the shadows and become a familiar practice.

Long queues at airport security checkpoints make air travel an ordeal. But not everyone has to wait. Those with first- or business-class tickets can use priority lanes that take them to the front of the queue for screening. British Airways calls it Fast Track, a service that also lets high-paying passengers go first at passport and immigration control. But most people can't afford to fly first class, so the airlines have begun offering economy passengers the chance to buy queue-jumping privileges as an à la carte perk – at Luton Airport, for example, customers can pay £3 to go to the head of the security queue.

Critics complain that a fast track through airport security should not be for sale. Security checks, they argue, are a matter of national defence, not an amenity like extra leg room or early boarding privileges; the burden of keeping terrorists off aeroplanes should be shared equally by all passengers. The airlines reply that everyone is subjected to the same level of screening; only the wait varies by price. As long as everyone receives the same body scan, they maintain, a shorter wait in the security line is a convenience they should be free to sell.

Amusement parks have also started selling the right to avoid queues. Traditionally, visitors may spend hours waiting to board the most popular rides and attractions. Now, Alton Towers and other theme parks offer a way to avoid the wait: for anything from £10 to £85 a person, Alton Towers will sell you a Fastrack pass that lets you go to the head of the queue on selected rides. At Thorpe Park an Unlimited Fastrack ticket costs £70, while at Legoland £70 will pay for an Ultimate Q-Bot, reserving your place in a virtual queue for your favourite rides with 95% less wait time. Interestingly, amusement parks often obscure these special privileges they sell. To avoid offending ordinary customers, some parks usher their premium guests through back doors and separate gates; others provide an escort to ease the way of VIP guests as they cut in. This need for discretion suggests that paid queue-jumping – even in an amusement park – tugs against a nagging sense that fairness means waiting your turn.

If you're put off by queue jumping at amusement parks, you might opt instead for a tourist sight, such as the London Eye. For £18.90 (£9.90 for children), you can ride in one of 32 glass capsules and enjoy a spectacular view of the city. Unfortunately, there can be a long wait for a capsule, so for £28 a person, you can buy a Fast Track ticket that offers priority boarding. Shelling out £115.20 for a family of four may seem a steep price, but as the ticketing website points out, Fast Track tickets are ideal for customers "who want to make the most of their day".

To an economist, long queues for goods and services are wasteful and inefficient, a sign that the price system has failed to align supply and demand. Letting people pay for faster service at airports and amusement parks improves economic efficiency by letting people put a price on their time.

Even where you're not allowed to buy your way to the head of the queue, you can sometimes hire someone else to wait on your behalf. Each summer, New York City's Public Theatre puts on free outdoor Shakespeare performances in Central Park. Tickets for the evening performances are made available at 1pm, and the queue forms hours in advance. In 2010, when Al Pacino starred as Shylock in The Merchant Of Venice, demand was especially intense.

Many New Yorkers were eager to see the play but didn't have time to queue. This predicament gave rise to a cottage industry – people offering to wait in line to secure tickets for those willing to pay for the convenience. The line-standers advertised their services on various websites. In exchange for queueing up and enduring the wait, they were able to charge their busy clients as much as $125 (£77) a ticket for the free performances.

In China, the business of paying people to queue has become routine at top hospitals. There, the market reforms of the last two decades have resulted in funding cuts for public hospitals and clinics, especially in rural areas. So patients from the countryside now journey to the major public hospitals in Beijing, creating long waits in registration halls. They queue overnight, sometimes for days, to get an appointment ticket to see a doctor.

The appointment tickets are a bargain – only 14 yuan (about £1.20) – but it isn't easy to get one. Rather than camp out for days and nights, some patients, desperate for an appointment, buy tickets from touts. The touts hire people to queue for appointment tickets and then resell them for hundreds of pounds – more than a typical peasant makes in months.

There is something distasteful about touting tickets to see a doctor. For one thing, the system rewards unsavoury middlemen rather than those who provide the care. Doctors could well ask why, if appointments are worth so much, most of the money should go to touts rather than to them, or to the hospitals. Economists might agree and advise hospitals to raise their prices. In fact, some Beijing hospitals have added special ticket windows, where the appointments are more expensive and the queues much shorter.

But regardless of who cashes in on the excess demand – the touts or the hospital – the fast track system raises a more basic question: should patients be able to jump the queue for medical care simply because they can afford to pay extra? In airports, amusement parks and hospital waiting rooms, the ethic of the queue – "first come, first served" – is being displaced by the ethic of the market – "you get what you pay for".

And this shift reflects something bigger: the growing reach of money and markets into new spheres of life. Consider the proliferation of private schools and hospitals, and the outsourcing of war to private military contractors. Consider the eclipse of public police forces by private security firms – especially in Britain and the US, where the number of private guards is more than twice the number of public police officers.

Consider, too, the reach of commercial advertising into schools; the sale of "naming rights" to parks and civic spaces; the marketing of "designer" eggs and sperm for assisted reproduction; the outsourcing of pregnancy to surrogate mothers in the developing world; the buying and selling, by companies and countries, of the right to pollute.

Why worry that we are moving towards a society in which everything is up for sale? For two reasons: one is about inequality; the other is about corruption. In a society where everything is for sale, life is harder for those of modest means. The more money can buy, the more affluence (or the lack of it) matters. But also, putting a price on the good things in life can corrupt them. Paying children to read books might get them to read more, but it might also teach them to regard reading as a chore rather than a source of intrinsic satisfaction. Sometimes, market values crowd out nonmarket values worth caring about.

For years, Switzerland had been trying to find a place to store radioactive nuclear waste. Although the country relies heavily on nuclear energy, few communities wanted nuclear waste to reside in their midst. One location designated as a potential nuclear waste site was the small mountain village of Wolfenschiessen, in central Switzerland. In 1993, shortly before a referendum on the issue, some economists surveyed the residents of the village, asking whether they would vote to accept a nuclear waste repository in their community, if the Swiss parliament decided to build it there. Although the facility was widely viewed as an undesirable addition to the neighbourhood, a slim majority (51%) of residents said they would accept it.

Apparently their sense of civic duty outweighed their concern about the risks. Then the economists added a sweetener: suppose parliament proposed building the nuclear waste facility in your community and offered to compensate each resident with an annual monetary payment. Then would you favour it?

The result: support went down, not up. Adding the financial inducement cut the rate of acceptance in half, from 51 to 25%. What's more, upping the ante didn't help. When the economists increased the monetary offer, the result was unchanged. The residents stood firm even when offered yearly cash payments as high as £5,300 a person, well in excess of the median monthly income. Similar if less dramatic reactions to monetary offers have been found in other places where communities have resisted radioactive waste repositories. So what was going on in the Swiss village? Why would more people accept nuclear waste for free than for pay?

For many villagers, willingness to accept the nuclear waste site reflected public spirit – a recognition that the country as a whole depended on nuclear energy and that the nuclear waste had to be stored somewhere. If their community was found to be the safest storage site, they were willing to bear the burden. Against the background of this civic commitment, the offer of cash felt like a bribe, an effort to buy their vote. In fact, 83% of those who rejected the monetary proposal explained their opposition by saying they could not be bribed.

You might think that adding a financial incentive simply reinforces whatever public-spirited sentiment already exists, thus increasing support for the nuclear waste site. After all, aren't two incentives – one financial, the other civic – more powerful than one? Not necessarily.

Financial incentives have also been found to crowd out public spirit in settings less fateful than those involving nuclear waste. Each year, on a designated "donation day", Israeli high school students go door-to-door to solicit donations for worthy causes – cancer research, aid to disabled children, and so on. Two economists did an experiment to determine the effect of financial incentives on the students' motivations.

They divided the students into three groups. One group was given a brief motivational speech about the importance of the cause and sent on its way. The second and third groups were given the same speech but also offered a monetary reward based on the amount they collected – 1% and 10%, respectively. The rewards would not be deducted from the charitable donations; they would come from a separate source.

Before, parents who came late felt guilty; they were imposing an inconvenience on the teachers. Now parents considered a late pickup as a service for which they were willing to pay. They treated the fine as if it were a fee. Rather than imposing on the teacher, they were simply paying for him or her to work longer.

Not only that: when, after about 12 weeks, the day-care centres eliminated the fine, the new, elevated rate of late arrivals persisted. Once the monetary payment eroded the moral obligation to show up on time, the old sense of responsibility proved difficult to revive. Sometimes, offering payment for a certain behaviour gets you less of it, not more.

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