For-Profit Corruption

I am sympathetic to the concerns Michael Sandel raises. His focus on corruption as a justification for constraining market arrangements goes beyond the standard issues of distributive justice.

I’d like to offer a friendly amendment to his account by distinguishing two ways in which markets can corrupt the goods they provide: constitutive and instrumental.

Constitutive corruption can arise in the case of a good whose value is at least partially an expression or embodiment of the reasons and motives for providing it in the first place. Merit prizes are one example: an award is debased if offered for any other reason than to recognize the merits it purports to reward. Gifts, too, are not mere consumer items but valued as expressions of the attitudes of the givers toward the recipients.

In the case of instrumental corruption, the value of a good is independent of the reasons and motives people have for providing it. For instance, we can define the requirements of an adequate blood supply without referring to the reasons and motives of the donors. Instrumental corruption by market distribution arises when the providers have a financial incentive to compromise the quality of the good, or to inflate its price unnecessarily.

Sandel points to the mounting evidence showing that financial incentives can produce this instrumental corruption, undermining the efficient, low-cost provision of certain goods. I agree with his suggestion that better results may be obtained by appealing to other motivations, and I urge expanding our understanding of the range of those motivations. Not all lie on a spectrum between self-interest and altruism. Trust, reciprocity, and group solidarity are important alternatives. Professionalism—the desire to do a good job according to standards developed by others in one’s field—offers another motivation often crowded out by excessive use of financial incentives.

From a domestic policy perspective, concerns about corruption arise most seriously in education, health care, and criminal justice. In education, high-stakes testing causes instrumental corruption by inducing teachers to teach to the test while sacrificing educational objectives that are not measured and incentivized. This fits the deskilled, routinized, micromanaged corporate model of classroom instruction that has been introduced into many schools. The main motivational factor being crowded out by the market model of education is not altruism but rather professionalism.

Worst of all, the profit motive is corrupting the justice system.

Similar points can be made about the reduction of primary care medicine to the production of objective measures such as blood-pressure readings, with financial incentives geared to these narrow outcomes. Here we find not only instrumental corruption—the neglect of unmeasured components of health—but also constitutive corruption, which arises because health care isn’t just about producing physical improvements. It’s about care. This includes building and maintaining the trusting relationships among health care providers, patients, and their families through which all cope—socially, psychologically, and morally—with the implications of disease. A “Taylorized” form of primary care medicine premised on assembly line–style speedup of patients through the system sacrifices trusting relationships between medical professionals and patients in favor of quantitative health outputs.

Perhaps worst of all, the profit motive is constitutively corrupting the justice system. Criminal forfeiture laws allow police to seize and keep property allegedly used in the commission of a crime or as proceeds of criminal activity, without due process. These laws skew enforcement efforts toward the sorts of crimes—drug possession and prostitution—that provide opportunities to seize people’s valuable goods. Forfeiture laws also provide an incentive to confiscate the property of the poor, who cannot afford the costly procedures required to challenge wrongful seizures.

The rise of for-profit prisons has even more ominous implications. The private prison industry was secretly involved in drafting Arizona’s harsh anti-immigrant law to boost demand for its immigrant detention centers. The Corrections Corporation of America has offered to help relieve the fiscal crises of 48 states by buying their prisons—provided the states sign a contract to keep them 90 percent full for the next twenty years, regardless of the crime rate.

It is high time we rethink the crude logic of financial incentives. They are often useful. But Sandel is right to argue that excessive reliance on incentives corrupts our practices.