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One of the most striking tendencies of our time is the expansion of markets and market-oriented reasoning into spheres of life traditionally governed by non-market norms. . . . Since marketizing social practices may corrupt or degrade the norms that define them, we may need to ask what non-market norms we want to protect from market intrusion. . . . This is a question that requires public debate about competing conceptions of the right way of valuing goods. Markets are useful instruments for organizing productive activity. But unless we want to let the market rewrite the norms that govern social institutions, we need a public debate about the moral limits of markets.15

Sandel would draw those limits much more tightly than has been the case in the recent past. His book gives some examples from medicine, where the clash between morals and markets can appear acute. For example, should blood or human organs ever be bought and sold? Another example is provided by rationing in wartime. Conventional economics would appear to suggest that rationing is always a bad idea because by preventing the people who value a certain item the most from buying it, rationing creates inefficiency. Some people value the item less than others but all end up with the same amount. Besides, rationing encourages “black markets” to form, so there is unfairness anyway, as well as inefficiency. However, efficiency is trumped by wider considerations—longer-term ones—such as the greater importance of fairness and social capital when war puts a society under great strain.

What conclusions can we draw? That often efficiency will be the primary purpose of an economic institution or set of arrangements, and in that case a market mechanism is an unparalleled way of achieving it. This is especially true in the most advanced economies, which are large and complex, making markets not only the most efficient but the only viable way of organizing large swaths of the economy.

That market mechanisms are not abstractions, however, but living social institutions that can be better or worse designed to achieve desired outcomes. Governments set the rules shaping the way markets operate and can do so in ways which try to overcome market failures.

And that sometimes efficiency will not be the overriding social aim, in which case markets are not a sufficient mechanism for making and putting into effect social choices. But that raises the question of when efficiency and markets should rule, and when by contrast other considerations matter more. There is no definitive answer. It will depend on circumstances. However, the circumstances are changing. The changing structure of the economy is affecting the way markets should be organized.

HOW MARKETS FAIL

Two decades after the crisis of communism, capitalism seems to be in crisis. Or so it is widely believed. To mark the twentieth anniversary of the fall of the Berlin Wall—and around the first anniversary of the onset of the massive financial crisis—the BBC’s World Service commissioned a survey about capitalism covering more than twenty-nine thousand people in twenty-seven countries. Only in two countries—the United States and Pakistan—did more than a fifth of respondents agree that capitalism is working well. Across all twenty-seven countries, only 11 percent thought the system works well as it stands, while 23 percent said it is fatally flawed—rising to 43 percent in France and 38 percent in Mexico. Clear majorities everywhere except Turkey said they wanted government to be more active in regulating markets. In twenty-two countries large majorities said they wanted to see a redistribution of wealth, amounting to 67 percent of the whole sample.16

Whatever one’s view on the causes of the financial and economic crisis, such a weight of popular opinion cannot be ignored. Even if you think capitalism is working pretty well despite the crisis—and after all, there have been many crises in financial markets over the centuries—it has to be acknowledged