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Morals and Markets Armin Falk & Nora Szech Morals and Markets Armin Falk & Nora Szech

Morals and Markets Armin Falk & Nora Szech - PowerPoint Presentation

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Morals and Markets Armin Falk & Nora Szech - PPT Presentation

Toon Van Camp Table of contents 2 We have to ask where markets belongand where they dont Michael Sandel 3 Basic observation The trading of products often has negative externalities on a third party ex child labor but people ID: 787950

mouse market markets values market mouse values markets trade moral experiment receive morally treatment price option money neutral prices

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Slide1

Morals and Markets

Armin Falk & Nora Szech

Toon Van Camp

Slide2

Table of contents

2

Slide3

“We have to ask where markets belong—and where they don’t.”

Michael Sandel

.3

Slide4

Basic observation:

The trading of products often has negative externalities on a third party (ex: child labor) but people go against their own moral standards and trade anyways.

1. The question:

do markets erode morals?

4

Slide5

2. Basic Hypothesis: Markets tend to erode moral values

A trade

involves 2 people: the guilt is shared which means that both parties interacting feel less guilt.

Market interaction reveals information on

social norms

: “if other people trade an item it has to be ok for me to trade it as well”.

The

existence of a market for something

in itself might mean that trading something is

morally acceptable.

Markets

provide a strong framing and focus on materialistic aspects such as bargaining, negotiation, and competition. They may

divert attention

from the adverse consequences of the trade.

In a multilateral market with multiple sellers the notion of being pivotal may be diffused: unless you care about what you are selling you could say “ if I don’t sell it, someone else will”.5

Slide6

3. The experiment

The mouse paradigm: participants could decide to save a mouse’s life and receive no money or to earn money but to accept the killing of a mouse.Three

different market conditions: 1) The individual market 2) The bilateral market 3) The multilateral market

6

Slide7

3. The experiment

1) The individual market: Choice between

option A and option BIn option A the mouse survives but the participant gets no money

In option B

the mouse dies and the participant gets 10€

7

Slide8

3. The experiment

2) The bilateral marketDouble auction market:One buyer and one seller

bargain over the killing of a mouse over the course of 10 periodsThere is a total of 20€ that the two parties can split up between themselves.

If a trade is made the

buyer

receives 20€ - the price agreed upon by the seller and the mouse is killed.

If no trade is made

both players

receive nothing but the mouse is

saved

8

Slide9

3. The experiment

3) The multilateral marketSame conditions as in the bilateral market but:There are 7 buyers

and 9 sellersEach seller had one mouse

9

Slide10

3. The experiment

To provide a more detailed effect of markets on morals, another individual treatment was set-up: the price-list treatment.

This treatment informs us about how much money subjects would need to receive in the individual condition to yield a similarly high killing rate as in markets.Individuals are asked to choose between option A ( saving the mouse and receiving no money) or option B receiving X amount of money which

increases by 2.5€ with each refusal of option B

up to 50€.

A: Save the mouse

A: Save the mouse

A: Save the mouse

A: Save the mouse

B: receive 5€

B: receive 7.50€

B: receive 10€

B: receive 12.50€

10

Slide11

3. The experiment

The final step of the experiment was to compare the decay in moral versus morally neutral values.Hypothesis:

the decay in moral values is greater than the decay of private consumption values.

New test

: sellers received a

coupon for gift shop

that they could sell

This new test was carried out in the

three different market conditions of before

and in the

price list treatment

.

Thus conditions were identical and the difference was that the trade involved an

opportunity cost of not consuming rather than a moral cost.

11

Slide12

4. The results: Main test

12

Slide13

4. The results:

price list treatment

In the bilateral market, 72.2% of sellers were willing to trade for prices below or equal to 10€. In the price list treatment, a similar willingness to kill (71.9%) was only reached for monetary amounts of 47.50 euros

In the

Multilateral market

, 75.9% of sellers were willing to trade for prices

below or equal to 10€.

In the

price list treatment

, a similar willingness to kill would require a

monetary reward of 50€.

13

Slide14

4. The results: decay in moral vs morally neutral values

14

Slide15

In the mouse treatments, there is a strong negative effect of market interaction.

For a given amount, people reveal a higher willingness to kill in a market than in the individual condition.There is also a difference in the price dynamic between multilateral mouse and coupon markets. In the mouse market, prices start at a lower level and tend to slope downwards.

In the coupon market the prices show no significant trend.Therefore, we can conclude that moral values decline significantly more than values that are morally neutral.

15

4. The results:

decay in moral vs morally neutral values

Slide16

5. Conclusions

Markets do indeed erode morals: in presence of a

market people are far more easily willing to give up on their values than when there is no market.Moral values decline faster

than

morally neutral values

:

in a market, prices for moral values

decline very fast

as a result of social learning and endogenous social norm formation. However, prices for morally neutral values

do not really vary

.

This experiment confirms the need to

ban

markets for “repugnant” activities

This experiment shows there is a need to think about where markets are appropriate.16

Slide17

Questions?

17