Summer Reading: What Money Can't Buy II

This second of two posts on Michael Sandel's new book, What Money Can't Buy: The Moral Limits of Markets (Farrar Straus, 2012), includes a few fascinating takes on different aspects of government ethics, including preferential treatment, municipal marketing, skyboxes, and the sensitive topic of inappropriate incentives.

A Fresh Way of Looking at Preferential Treatment
Sandel suggests that, instead of allowing a company to effectively sell seats to congressional hearings, it would be possible for Congress to charge admission. He argues that this would not be considered acceptable, because it is unfair and because public hearings are open to the public, not only to those who can afford the going price, which for a front-row seat may be pretty high. A public hearing is not a basketball game.

How would such a scenario play out in local government ethics situations, where there aren't enough meetings people would pay to attend? What if, instead of accepting bribes, police officers were to officially be allowed to accept $1,000 in return for ripping up a DUI ticket? It would be great for the city budget, but people would be up in arms, because it would discriminate seriously in favor of the wealthy. It would not be corrupt in the ordinary sense, because the money would not go into any official's pocket. It would be corrupt in the sense that it would degrade the criminal justice system, turning it into a business and making the public think it was designed to help the wealthy. In effect, it would be similar to a system of "professional courtesy," except that a courtesy system involves a private market in favors rather than a public market in money.

Government ethics tries to protect against private markets that create unfairness and the degradation of government. But making the same markets public is still unacceptable. Allowing a private market is a serious problem, but it is not the only problem. There should not be a market at all with respect to many aspects of a government. And where a market is both acceptable and beneficial, as in bidding out contracts, it has to be done according to clear and strict rules that are fairly and carefully enforced.

Inappropriate Incentives
Putting a price on things can lead to inappropriate incentives, that is, it can cause people to do exactly what the government doesn't want them to do. This is one problem with fines as penalties for misconduct. Sandel uses the example of fining parents to prevent them from failing to pick up their children on time from a day-care center. By fining this irresponsibility, the center puts a price on it:  for so many dollars per hour, a parent can pay for the extended service of a teacher. If the parents have money, this makes sense for them. They are no longer irresponsible; they are simply paying a fee for a service. They are treating a fine, which implies disapproval, as a fee, which implies a market transaction. The result is that late pickups increase rather than decrease.

There is a change not only in incentives, but in norms. What was seen as an obligation to teachers to show up on time and let them go home to take care of their own families, becomes an obligation to pay teachers for staying late.

In the government ethics context, this can be true of fines for late or insufficient financial disclosure or campaign finance forms. If all there is is an administrative fine, officials will calculate whether it is worth the price in order to keep information hidden. The area where this has proven to be most true, despite very high fees, is with PACs that call themselves something else, and are caught, but in the meantime successfully hide where the money is coming from. To some people, it can be worth hundreds of thousands of dollars to keep that information hidden.

This is why fines alone are not a sufficient penalty. They need to be accompanied by censure, acknowledgment of irresponsibility and, in serious cases, a loss of power and rights. An official who pays a fine and admits to only forgetting to include substantial contributions or expenditures is losing very little. It is a transaction, a payment for something of value to him. Getting fined is a cost of political business. And, in fact, many officials who are fined feel so distant from any obligation involved that they don't even pay their fines. And nothing happens to them for it. They lose absolutely nothing, and no norm of responsibility is communicated to other officials. So the misconduct continues to occur. It might even occur more often than it otherwise would.

It is dangerous to talk about this issue, because some people will use it as an excuse not to penalize officials, or even to dispense with an ethics program altogether (people will call this evidence of the popular, but inappropriate, "You can't legislate morality" argument). I believe that the best solution lies in a healthier ethics environment, where the culture does not smile upon irresponsible behavior, that is, where failing to provide adequate and timely disclosure (substantial items and for a substantial amount of time) is not considered negligent, with a wink, but an attempt to hide important information from one's colleagues, opponents, and the public.

Sandel gives an example of an alternative to allowing buy-outs of irresponsible behavior. This is the solution of those who call for a market in the right to pollute. This may be an efficient way to deal with the problem, but it "may make it harder to cultivate the habits of restraint and shared sacrifice that a responsible environmental ethics requires." The same may be applied to government ethics. Fines without a comprehensive ethics program and a healthy ethics environment are not effective. It is no surprise that some ethics commissions, such as South Carolina's and Florida's, are finding it next to impossible to collect their fines.

Instead of respecting the clever gaming of rules, government officials need to speak out against it and to remove responsibility from those who do not feel responsible to the public, in the form of censure and loss of committee assignments, party positions, and even party support. When the misconduct is very serious, it should lead to calls for resignation even from one's own colleagues, making the fine a minor part of the penalty.

There are actually two values here that get in the way of responsible behavior. One is the idea that there is a monetary value on keeping important information secret. The other is the idea that it is okay to game government ethics, and the failure to acknowledge one of the most basic facts of government ethics:  that its rules are minimum guidelines, that loopholes and clever arguments are not appropriate. Of all people, lawyers should most be expected to distinguish between ethics laws and other laws, such as tax laws and criminal laws. They should be able to understand, and to communicate to those they advise and to the public, that government ethics is not a place where loopholes should be sought out and taken advantage of, where cleverness is out of place. I have seen lawyers say and do this, but I have seen many more instances where lawyers act as if there was no distinction, as if ethics laws were no different than tax laws, and officials had no greater duties to the public than any other citizen.

If lawyers, especially government lawyers and private lawyers hired by officials, could be trained to see the difference and, when they ignored it, shamed into admitting that their advice was wrong and inappropriate, a sea change could occur in government ethics. And yet how often are lawyers trained in government ethics? They are more likely to be the trainers and the advisers, even when they lack a basic understanding of the field. And they are as likely, or more, to get involved in an ethics scandal as anyone else.

A Fascinating Example of An Incentive Tainting a Community Decision
More and more frequently, monetary incentives are being employed in all aspects of life, from rewarding schoolchildren for good grades to rewarding businesses for not moving their factories out of town. Here's an example from Sandel's book that shows clearly how much monetary incentives can taint a community decision, undermining the idea that community is about sharing rather than purchasing.

In 1993, before a referendum in a Swiss village regarding the placement of a nuclear waste repository in the community, economists polled the villagers. Although no one wanted the repository there, 51% of residents said they would accept it. Their focus was on their civic duty, which outweighed concerns about risks, at least for a small majority of the residents. Then the villagers were asked how they would feel if the national legislature was to offer each resident an annual payment of $8,700 (greater than the median monthly income) in return for allowing the repository to be built there. This incentive did not increase the percentage who said they would accept the repository. In fact, it cut the acceptance rate from 51% to only 25%.

The civic obligation of these citizens was enough for them to agree to something dangerous to themselves. But the offer of money felt like a bribe; it was inappropriate and felt demeaning.

With government ethics enforcement, it is a matter of disincentives rather than incentives. In poor ethics environments especially, where the pride in fulfilling the fiduciary obligation of government officials and employees to put the community first is insufficient for them to deal with their conflicts and file their forms responsibly, disincentives are sadly necessary. But a fine, which is a concrete acknowledgment of an official's irresponsible behavior, can be insufficient when it is treated as a fee, especially if it is not accompanied by an admission of wrongdoing and apology, public and private disapproval, and an appropriate loss of status.

Ethical Behavior as a Scarce Resource or the Result of Practice
Sandel contrasts two views of ethical behavior. The economist Kenneth Arrow has argued that because ethical behavior is a scarce resource, it needs to be economized. For example, if everyone gave blood, this may lessen their other charitable giving. Since blood can be purchased, it is best that society not depend on volunteers. Aristotle, on the other hand, argued that virtue is something we cultivate through practice:  "we become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts." Aristotle would likely argue today that ethical behavior is not like our energy in an athletic event, which has a limit, but more like the building up and maintaining of muscles, which we do over time through exercise.

Skyboxes
Sandel makes a good argument that could be applied to solve a typical government ethics problem. He says that American sports stadiums have, through skyboxes, become increasingly stratified, like gated communities. Before, it was simply a matter of better seats, but those sitting in box seats dealt with the same weather, were openly seen by the public, had no bar or other luxuries. The wealthy and connected are now less likely to share the same experience, even have to go through the same entrances or park in the same places, as everyone else. This is damaging to a community.

Recognizing this, is it ever right that government officials and employees sit in skyboxes, not to mention have skyboxes at their disposal?

Municipal Marketing
Sandel discusses the relatively new form of advertising known as "municipal marketing." It includes advertising on public beaches, benches, subways, school buses, police cars, and in cultural landmarks, parks, schools, even in jails (bail bondsmen and defense attorneys). It also includes exclusive deals with Coke or Pepsi (rarely with the local soft drinks company). And it includes naming rights to sports fields, lifeguard patrols, and even schools. It's a great way to bring in additional revenue, but at what cost, in terms of degrading community resources, in terms of what it says about the community's willingness to fund its own services, and in terms of preferential treatment and the corruption that comes from the recognition that everything in government has a price?

Sandel believes we need to ask whether we want a community where everything is up for sale. Too often, municipal marketing is accepted as a clever way to keep taxes from going up, and that's it. There are generally objections, and therefore discussions, usually when the marketing is public and tied to children (e.g., school buses) or when the content is objectionable (e.g., R-rated movies, family planning services, or political ads). The idea itself needs to be debated in a responsible manner.

Click here to go to part I of this review.

Robert Wechsler
Director of Research-Retired, City Ethics

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